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Finding opportunities
amid volatility

February 2019
By Natalie Phillips, Deputy Managing Director

2018 turned out to be a rollercoaster ride for financial markets. Over the year we saw record highs in global equities, but Fed tightening, trade wars and political uncertainty took their toll on growth expectations and risk assets. Investors had a bruising year, experiencing widespread negative returns across a broad set of markets and asset classes. It is in difficult times like these that the importance of a sound investment strategy and strong investment partner show their worth. We have a 27-year track record of partnering with our clients through challenging markets and helping them meet their goals. We believe our investment teams are well placed to tackle what we expect to be another volatile year.

Our newsletter contains a wealth of insight from my colleagues and kicks off with Jeremy Gardiner’s views on the current environment and what to expect in the year ahead. He believes SA investors could be rewarded for their patience if the Fed leaves interest rates unchanged, US-China trade tensions ease and we get some political stability.

Co-Head of Quality, Clyde Rossouw, reflects on difficult markets. Despite local and global headwinds, Clyde still believes there are attractive investment opportunities after 2018’s de-rating of equities.

One of the biggest risks facing pensioners is running out of money. A lack of retirement savings and recent poor investment returns have left many pensioners and their advisors anxious about the future. Some key questions are: How should pensioners invest their capital and what level of income can they afford to draw? How does volatility impact retirement? Advisor Services Director, Jaco van Tonder, has written a series of articles addressing these issues. In this edition, he looks at how a combination of strong long-term real returns together with lower portfolio volatility (as evidenced by our Investec Opportunity Fund) can make a significant difference in funding sustainable income levels.

Staying with retirement savings, Sales Manager, Paul Hutchinson, looks at the potential retirement and estate planning tax benefits of tax-free savings accounts and how they can complement living annuities in a tax-efficient manner to improve after-tax income.

The changes to offshore investment limits for retirement funds were welcomed by the industry. Rüdiger Naumann, Portfolio Manager of our Balanced strategy, and I highlight the benefits of a holistic approach to managing the offshore component of a multi-asset portfolio and the risks of investing in stand-alone solutions.

Asset management is a people business and Client Director, Phelisa Ngonyama, talks about her role and shares her thoughts on mentorship and diversity. Her advice to her teenage self that it is “okay to have a little chaos in your life”, seems appropriate after the challenges of 2018.

2019 promises to be a big year for us, with our demerger and listing scheduled for the third quarter. The common question we get is whether we will be a boutique manager once we are independent from Investec Group. While size isn’t a reflection of success, the answer is an emphatic no. As Willis Towers Watson set out in their report The world’s largest 500 asset managers in December last year, we are almost double the size of the second largest asset manager in South Africa.

World’s largest 500 asset managers (SA managers)

Rank Company AUM
116 Investec $140bn
178 Sanlam $73bn
223 Old Mutual $53bn
231 Coronation $50bn
236 Stanlib $49bn
289 Alexander Forbes* $33bn
293 Allan Gray** $32bn
357 Absa $22bn

Source: Willis Towers Watson. Total discretionary assets under management, as at 31.12.17.
*As of 31.03.17. **The AUM is $69bn if Orbis Investments is included. (Orbis is not classified as an SA market manager).

The French have a saying “plus ça change, plus c’est la même chose” which loosely translates to “the more things change, the more they stay the same”. The economy and markets may change, but what remains constant is our commitment to helping you achieve your investment objectives. The stability of our management, investment and client teams should also provide you with comfort in navigating the challenges ahead.

Thank you for your continued support – we look forward to partnering with you for many years to come.

Natalie Phillips
Deputy Managing Director

Important information

All information provided is product related and is not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information without appropriate professional advice after a thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security. Collective investment scheme funds are generally medium to long term investments and the manager, Investec Fund Managers SA (RF) (Pty) Ltd, gives no guarantee with respect to the capital or the return of the fund. Past performance is not necessarily a guide to future performance. The value of participatory interests (units) may go down as well as up. Funds are traded at ruling prices and can engage in borrowing and scrip lending. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. A schedule of charges, fees and advisor fees is available on request from the manager which is registered under the Collective Investment Schemes Control Act. Additional advisor fees may be paid and if so, are subject to the relevant FAIS disclosure requirements. Performance shown is that of the fund and individual investor performance may differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. There are different fee classes of units on the fund and the information presented is for the most expensive class. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Where the fund invests in the units of foreign collective investment schemes, these may levy additional charges which are included in the relevant Total Expense Ratio (TER). A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The ratio does not include transaction costs. The TER of the Investec Opportunity Fund (A) class is 1.50%. The current TER cannot be regarded as an indication of the future TERs. Additional information on the funds may be obtained, free of charge, at The Manager, PO Box 1655, Cape Town, 8000, Tel: 0860 500 100. The scheme trustee is FirstRand Bank Limited, PO Box 7713, Johannesburg, 2000, Tel: (011) 282 1808. Investec Asset Management (Pty) Ltd (“Investec”) is an authorised financial services provider and a member of the Association for Savings and Investment SA (ASISA).

This document is the copyright of Investec and its contents may not be re-used without Investec’s prior permission. Investec Asset Management (Pty) Ltd is an authorised financial services provider. Issued, February 2019.