Showing their value

A bull market can disguise the most mediocre money managers, but it takes a crisis to prove one’s worth

ý Karl Leinberger, chief investment officer at Coronation, has lived through a number of market crashes in his two-decade career in the industry.

But the 2020 Covid-19 market crash is right up there with the most intense he’s ever witnessed.

“There’s been a lot of industry debate about whether this crisis was worse than the global financial crisis of 2008,” he says. “I feel it’s pretty similar, and that they were similarly demanding. While some say the global financial crisis was just a banking and liquidity crisis and that it was not as damaging for ordinary businesses, I feel they’re remembering it a little too fondly. Just like this one, everyone was hit and the (legitimate at the time) fear was that it would result in prolonged depression.”

There was no sense, in January, that investments would be in this position at the half-year stage. Last year, as the Boston Consulting Group pointed out, total assets under management globally grew 15%, to $89-trillion.

In Africa, assets under management grew

11% to $1.4-trillion.

But then Covid-19 hit, and the bottom fell out of the market. On the JSE, for example, the all share index had tumbled 24.8% by the end of March. The Dow Jones industrial index in the US endured its worst start yet to a year, dropping 23.2%.

Smaller retail investors panicked, selling whatever they could. It was, perhaps, a natural emotional response.

Coronation, and many other large SA asset managers, waited. Not that it was easy.

Leinberger says while investment professionals would have hoped not to have lived through two such crises in 12 years, the fact is that the experience of 2008 probably helped.

“There was a two-week period where we had a complete paralysis of three or four systemically important markets, and at the time, it felt a lot like the 2008 crisis. Equity markets were tanking, bond markets were paralysed,