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Institutional Update Q4 2016

Hendrik du Toit CEO, Investec Asset Management

Investing for a better tomorrow

Hendrik du Toit CEO, Investec Asset Management

Investec Asset Management at 25
Investing for a better tomorrow


Towards the future

The world has changed profoundly over the past quarter century. Although the fundamentals of investment remain essentially the same, the investment process has become a lot faster. The data revolution has not only speeded up analysis but also transformed the nature of the active manager’s challenge. Managers no longer simply need to find more data and create better intelligence than their competitors, they must see through a surfeit of data to find superior insight.

Our clients have also changed. Today, asset owners are much better informed and more knowledgeable about asset management processes. Their priorities are also changing with the ageing demographics of their stakeholders who are also demanding more attention to the environmental and social impact of how their savings are invested, and require greater oversight of their investments.

As the actors have changed so has the setting. Investment managers are facing several new challenges that will shape the way we allocate capital in the future: global disruptions, changes in the markets and the need for sustainable development.

The way forward

  1. Attention to environmental, social and governance (ESG) issues
    Investing in a sustainable future will be one of the major trends of the coming years. As a firm, we believe that playing a role in financing sustainable development is a central part of our mission of “doing the right thing.” The imperative to invest sustainably was also underlined on a global level in 2015. The Paris Agreement on Climate Change and the United Nations’ Sustainable Development Goals, which were agreed to by the majority of the countries on the planet even (if they are not yet fully ratified), are clarion calls for the world to work together to take action.
  2. Active ownership
    As we sharpen our focus on ESG and face greater scrutiny from our clients, we believe that when we invest in the equity of companies we should be active shareholders. The Quality team, for example, typically conducts several hundred meetings each year with management teams to ensure they are comfortable with their decision-making processes.
  3. Dealing with low rates and disinflation
    We believe that really knowing the intricacies of the securities you own is vital in this time of great change, as we move from a relatively inflationary regime to a disinflationary, and in some cases deflationary, regime. This new investment environment has changed the rules of the game in terms of the behaviour of different asset classes.
  4. Adapting to changes in emerging markets
    One of the big changes in financial markets has been the emergence of emerging markets into the mainstream. This shift has material consequences for the investment strategies we employ. As countries develop and become higher quality, with stronger monetary and fiscal policies, they start trading more like developed markets. As a result, a static investment process that focuses purely on credit risks, for example, will struggle to outperform on the more developed side of emerging markets.

Being prepared

What unique insight do we have?

Investec Asset Management is one of the first firms to have developed a global mainstream fund management business from emerging market roots. We believe that our journey to this point has taught us that we must adapt to the environment as we find it, not how we would like it to be.

The disruptions of the last 25 years have taught us is that as global financial markets become more integrated more than ever we need to build diversified and resilient portfolios to preserve and grow our clients’ capital. But doing so doesn’t mean shying away from taking on appropriate risk. In a complex and uncertain investment environment we need to search more broadly for opportunities, adapt our strategies and processes where necessary. We need to keep evolving. This doesn’t mean throwing out all the old models, but working from a stable core of investment beliefs.

So what do the next 25 years hold? No one has a crystal ball, but we believe that whatever happens it is important that we focus on doing the right thing for our clients, by acting in a way that reflects their values and aspirations as well as our own. We need to make sure that we steward our clients’ money safely and that means adapting to market changes and disruptions. We also have a responsibility to think about the long term and leaving a better future for the savers of today.

A view from the CEO

"We need to preserve and grow wealth for future generations. We need to lengthen our investment horizons beyond the next quarter and find innovative opportunities that will drive future economic growth and productivity"

Hendrik du Toit CEO, Investec Asset Management

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