Industry optimism will bear good fruits
For the majority of fund managers, 2017 was a tough year for investing. Many have boldly come out and said that last year was by far the most challenging year that they have experienced in their careers.
Hopefully, this will be juxtaposed with a year full of growth and opportunities. There is more than a small current of optimism in the market following a potential political realignment in South Africa and strong growth headwinds making their way down from Europe.
Injury time equaliser
Bridge Fund Managers said that the company had a challenging year in 2017 but stuck to the basics of investing.
Speaking at the company’s 2018 National Roadshow, Paul Stewart – Executive Director of Bridge Fund Managers – said that the extreme pessimism felt in 2017 led to several parties making short-term decisions. This was practiced across the board by investors, financial advisers, asset managers and designated fund managers.
“The main reason for the extreme pessimism included low confidence in South Africa’s economic growth and the ratings agency downgrades that the country experienced. Further, South African companies did not perform as well as they should have which was one of the reasons for the weakening Rand. However, the Cyril Ramaphosa victory at the end of last year has ushered in some much-needed confidence,” said Stewart.
He added that the only way that companies would have survived 2017 without any major impacts was if fund managers stuck to what they knew. “Consistency was the key to success in 2017,” said Stewart.
Not just about price
It is human nature to question the price that we pay for something when we are in a tough economic climate. I am sure there are many advisers who must field several questions from clients regarding the price of investing.
However, Ian Anderson – Chief Investment Officer at Bridge Fund Managers – pointed out that price should not be the only metric that is discussed in these situations.
“When one considers the fact that the JSE is one of the best performing stock markets in the world, the issue of price should be discarded immediately. Retirees are looking for above average, inflation beating total returns, and they are getting this from the JSE,” said Anderson.
Anderson then referred to a graph which showed that the JSE has an annual growth of about 13,1%.
Lower levels of volatility
The issue regarding price is the first key that Anderson believes will unlock a successful retirement. The second key is finding low levels of volatility for you to offer your clients.
“The key to taking advantage of low levels of volatility is to stay invested in the stock for sustained periods of time. Since 2012, Standard Bank has shown significant dividend and capital growth. Each metric currently achieves a growth rate of about 16% a year,” said Anderson.
Anderson then referred to the rest of the Standard Bank growth graph which showed that between 1996 and 2000, the company’s performance on the JSE was not as impressive as it currently is.
