Investing in a complex world
With current investor confidence lows and a market that has been lacklustre, deciding where to invest in 2019 is not easy. In this edition, we take a look at funds to consider given the current uncertainty.
this year started on a high as various commentators talked up the Ramaphosian “New Dawn” following Jacob Zuma’s gross misrule, which nearly brought the country to its knees. No doubt President Cyril Ramaphosa faces huge challenges, but little comfort can be expected in SA in 2019 unless he radically repositions on a host of structural issues; accelerates the fight against corruption and ANC patronage; and, at the very least, continues to reduce the size of his Cabinet, which costs the country R163m in salaries alone.
Irregular public expenditure this year, for instance, is a monstrous R51bn and an indictment on ministerial commitment and competence. Sadly, there is far too much talk and too little action.
The International Monetary Fund (IMF), in fact, was spot on in its latest warning that SA’s economic growth will not exceed 2% in the medium term because of continued ruinous management and policy uncertainty. It expects growth to be at 1.4% in 2019, down from its April projection of 1.7%, and has set out a comprehensive list of what’s required.
Among major middle-income countries in subSaharan Africa, SA has the lowest projected growth rate for this year, after Cameroon and Zambia, which are both projected to come in at 3.8%.
The difficulties of forecasting the prospects for the JSE All Share Index for next year are not surprising, given the current low levels of investor confidence and the market having remained relatively flat since June 2014. More than half of investible shares have declined by 18% or more this year alone.
True, not all of this value destruction is domestic. Some 60% of the MSCI Global Index is currently in bear territory, though fortunately annualised inflows into the major US mutual funds remain fairly stable at around $260bn.
A significant domestic bolt-hole featured in this edition is Ross Biggs’ Prudential Dividend Maximiser Fund, which has returned an annualised 18.4% during the past 15 years and shown how investors can benefit from an investment approach that focuses on companies offering both a sustainable dividend yield and long-term growth in dividends.
A further highlight is Newlands-based investment house PPS Investments’ launch of three new Regulation 28 compliant single management funds – in partnership with three of the country’s most reputable boutique asset managers – to augment its existing suite of funds. As custom-built expert-managed boutique funds, they promise significant advantages over larger funds in the general realm of asset management. They’re worth looking at.
On the broader African front, we run a fascinating review on Cavan Osborne’s R3.6bn Old Mutual African Frontiers Fund. You may be sceptical of African prospects in general, but note that Osborne’s fund generated a 14.3% return in US dollars during the past year. It’s worthy of consideration by more aggressive high-net-worth investors, institutions and trusts seeking high returns off low bases.
Prospects for global shares may seem questionable to some, but our regular offshore market commentator, Paul Hansen, isn’t overly perplexed, forecasting global growth next year of between 3% and 3.5%, depending on how long the current slowdown in Europe, China, and next, the US lasts. He believes unreservedly that sound global equity funds are the place to be. And if indeed you do wish to diversify offshore with a sound safety net and tax-efficiency, you might look at Liberty’s recently introduced Advanced Global Equity T1 Portfolio. Also profiled in this edition, it’s a structured product that’s simple, fully transparent and allows investors to see what they get.
Other interesting features come from Investec’s Paul Hutchinson and Coronation’s Christo Lineveldt. Both relate to smart retirement income provision. Hutchinson tells of his investment house’s insightful findings in a recent in-depth study, and Lineveldt outlines how headwinds can convert to tailwinds in appropriate portfolios over the longer term.
Finally, I take this opportunity to thank both our institutional sponsors and readers at large for their wonderful support during the past year. They’ve contributed enormously to investor interests across the spectrum.
No less important, thank you too to the finweek team for their committed, high-quality and indispensable work. Wishing all a wonderful festive season. ■ is an independent writer on public policy and investment markets.