By: Mikhail Motala, Fund Manager at PSG Asset Management To say that the period since the Global Financial Crisis (GFC) has been anomalous would be an understatement. And yet, the low inflation and low interest rate environment associated with this period has become viewed as the ‘new normal’. However, as inflation persists at higher levels than...
It is easy to forget how much the investment landscape has changed since the Covid-19 pandemic has made its presence felt. We have certainly seen (and continue to experience) extraordinary times. To understand how profoundly things have changed, it helps to consider what investors would have seen when looking back from 31 August each year, over the past three years, for various reporting periods.
In early 2020 leaders in the tourism and hospitality sector were faced with unprecedented turmoil in the form of the COVID-19 pandemic, which shut down the industry for four months. Since the start of lockdown, the industry has undergone various levels of restrictions, which for many establishments in the sector dealt a final blow to business. Some, however, have weathered the storm and are positioned for recovery, with a renewed focus on optimising the guest experience as a way of maintaining a competitive edge.
These are confusing times for investors. By way of analogy, it may be fair to say that investors are experiencing a harsh winter and may be wondering how to ride out the storms brewing on the horizon. However, the ideal portfolio should not be structured for one season only but should be able to withstand a multitude of market conditions.
When the winter arrives properly in Cape Town, it inevitably brings a few storms. It will rain, there will be some flooding, the wind will howl, and it will be cold. This is one of the times that Joburg dwellers really crow about their climate. Capetonians do not however fundamentally change their lives as a result – rather those who are able to, adapt around the edges, developing their own enjoyable coping strategies that are part of our local culture.
It’s been a roller-coaster year and a half since the Sars-Cov-2 virus, which causes Covid-19, was first identified in Wuhan, China, in December 2019. Since then our lives have changed dramatically. Masks, social distancing, zoom classes and sanitising have become the norm, and while vaccines may help to bring some normalisation, post-pandemic life is sure to look different to the pre-pandemic normal.
While many investors may associate multi-asset funds with the higher-risk balanced funds (which can hold up to 75% in equities), there are also multi-asset funds with more moderate risk profiles and a lower allocation to equities. These funds offer a dynamic solution to changing market conditions, while remaining aligned to the stated fund objective.
Recently, fixed income investors have been roiling from the news that one of South Africa’s largest money market funds will be closing its doors to investors. As a result, many fixed income investors are now forced to explore alternative investment options at short notice.
Investors need to let go of the idea that the stock market is one uniform entity. Such thinking implies that all shares behave in a similar way, which isn’t the case at all. Just because “the market” is up, doesn’t mean all shares are, and similarly when it is down, there will still be some shares that are performing well.
Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za