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.

Finweek English Edition - - FUND FOCUS - Leon Kok is an in­de­pen­dent writer on pub­lic pol­icy and in­vest­ment mar­kets.

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.

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