PPS Investments Roadshow

From 21 – 31 August, PPS Investments hosted their annual roadshow. The theme for this year was Investing in volatile markets for shared success which took place in six locations.

The event started in Durban, followed by Pretoria, Johannesburg, Gqeberha, Bloemfontein, and ended in Cape Town.
Unlike previous years, the 2023 event took the form of a panel discussion, MCed by PPS Investments Executive of Retail Distribution, Raziq Christians, and moderator by Portfolio Manager, Luigi Marinus.

The panelists included:
• David Crosoer, Chief Investment Officer at PPS Investments
• Richard Carlyle, Equity Investment Director and Portfolio Strategy Manager at Capital Group
• Stephen Hurwitz, Investment Analyst at 360ne
• Tumi Loate, Investment Analyst at 36One
• Unathi Loos, Deputy Head of SA Equity & Multi Asset at Ninety One
• Luis Niemand, Director at Ninety One

We invited three of our partnership fund managers to share their insights on the current market conditions and the impact of interest rate hikes, geopolitical risks and ESG in investment management processes.

Key takeouts from our sessions include:

Global geopolitics: The Russia vs Ukraine war
Investment managers cannot afford to be complacent the longer the war continues. In addition, according to political analysts, interactions between the US and China around Taiwan will play an ongoing role in global geopolitics. When it comes to investment, it is important to look through the political challenges and invest in companies at reasonable prices. From a South African perspective, it is important not to pre-empt changes but rather look to where local and global valuations are at, as well as the attractiveness of the stocks. The probability of geopolitical flare-ups is difficult to call. Risk management scenario analysis and pre-empting where portfolios are exposed helps to shed risk in these circumstances. Sentiment towards emerging markets and identifying the impact of big trends that a recession in the US could mean for growth assets along with the likelihood of ending up in a goldilocks situation or stagflation and the potential impact are considered. It is important, however, not to bake in too much in terms of political events.

ESG
Consider the ESG risks from a holistic perspective according to each company and where there are concerns such as carbon taxes for instance and factor these into the valuations. Also, to consider the unintended consequences of ESG and the knock-on effects to commodity prices and the impact on communities and societies. A holistic view of the situation and the integrated impact of E, S, and G combined on the earnings and valuation of the company and engagement on where improvements can be made, especially on decarbonisation should be contemplated. Addressing the specific metrics of ESG such as the weighted average of carbon intensity relative to company operations and the wider portfolio is now possible. Investment strategies are built on providing returns. Currently, these allow for some exclusions, but broad exclusions and strategic revision remain a live topic. At a multi-manager level, the transition from the carbon economy is being considered to avoid over-exposure to any particular outcome. This area is rapidly changing and providing sustainable returns over time must be factored in. The narrative of giving up returns in order to achieve ESG has completely changed. ESG can no longer be ignored if companies want to ensure their future sustainability.

Inflation and interest rates
Globally, there is a strong consensus that the worst of inflation is almost over, and interest rates are near the peak. The US has been able to control inflation more quickly, given that they are energy efficient and far away from the Ukraine war. This has helped the US however, for European countries like Germany where energy prices have experienced a much bigger spike, this has been more difficult.

Locally, it is unclear where the interest rates are going to go. The market’s expectation of interest rates are continuously changing as it considers whether interest rates will come down as quickly as expected or whether it will stay higher for longer. Resilience to either scenario is important.

Regardless of the inflation and changing interest rate environment, it is fundamental to remain fully invested in the market through the varying cycles and in companies and portfolios that perform well, despite the interest rate and inflation environment.

All in all, volatility will continue to benefit investors. Active strategies have delivered positive results so far and should continue to do so. Ultimately it is important not to panic at the wrong time, timing the market is the most successful way to generate returns.

PPS Investments is the preferred wealth management services for graduate professionals, We offer a suite of transparency, and flexible investment solutions geared towards the creation and management of inter-generational wealth. We offer a wide range of single and multi-managed funds with various risk profiles to meet your investment needs. Visit our website to view the full PPS Investments fund range – www.pps.co.za

We would like to thank all the financial advisors who attended the sessions and appreciate all the feedback received. We hope to come back bigger and better next year.