Outlook on the markets brightens
No matter where in the market cycle we find ourselves, investors with extra cash in hand will always look for places to put their money. In this edition, a number of fund managers discuss their investment approach.
thegood news this quarter is that both the domestic and global economies are looking somewhat better than a year ago with the local situation boosted by higher commodity prices, an easing drought, a stronger rand, lower inflation and the expectation of reduced interest rates in the second half of 2017.
On the global front, as Old Mutual senior economist Johann Els points out, growth has picked up pace significantly since 2015, although it is still slow. Pleasing is that we’re seeing increased synchronised growth led by the US, Japan, China and select emergingmarket economies.
Of course, South Africa remains haunted by political uncertainty, but many still see it as a reasonably good story relative to many of its peers.
In this edition, Allan Gray’s Tamryn Lamb emphasises the need for investors to be at least 30% invested offshore, warns that the relationship between economic growth and stock returns can be tenuous, and argues the case for a bottom-up approach to equities investing.
Stanlib’s Kent Grobbelaar also presents the case for offshore exposure, pointing to the rand having lost 90% of its value relative to the US dollar in nominal terms since the 1970s. He believes that the best approach is a multi-specialist one that grows your money across borders, overcoming any blind spots lurking in a single market.
And if you have the stomach for high-risk investing, you might consider Feroz Basa’s Old Mutual Global Emerging Market Fund that returned 24% last year in US dollar terms and is currently ranked seventh out of 197 international funds in its peer group. Basa presents good reasons for investing in this fund.
Likewise, his colleagues Saliegh Salaam and Grant Watson tell us about their very successful approach to equities in their Old Mutual Alpha Fund, a strategy that has worked extremely well for them. They’ve generated an annualised 14% during the past five years.
Their approach, of course, would probably be an anathema to Investec Asset Management’s John Green or Coronation’s Karl Leinberger. Both tell of their affirmatively long-term approaches. Green points particularly to Investec’s recent Raging Bull Awards, reflecting the house’s ability to manage risk within its multi-asset portfolios. They’ve delivered excellent risk-adjusted returns.
No less important, if you’re a retiree or similar, I strongly implore you to reflect on Pieter Hugo’s run-down on Prudential’s darling in the South African fund industry, the R38bn Prudential Inflation Plus Fund. It gives clients a much smoother ride than they’d get in a typical balanced or equity fund and has consistently featured in the top quartile of its peer group.
Incidentally, Prudential recently won the Morningstar SA “Best House, Larger Fund Range” award for its powerful longterm returns emanating from its core equity portfolios.
We hope you enjoy this edition.
If you have the stomach for high-risk investing, you might consider Feroz Basa’s Old Mutual Global Emerging Market Fund that returned 24% last year in US dollar terms.