How do you provide for the needs of your clients?

By: Florbela Yates, Head of Equilibrium

The Equilibrium Range of local and global model portfolios have been designed to help clients meet their personal investment goals. The range caters for a variety of different needs ranging from income to capital preservation all the way to aggressive capital growth. When designing portfolios, we considered that some investors have all their liabilities in South Africa, while others need to consider liabilities in other domiciles.

Over the past few years, we have increasingly been asked by clients to help them plan for inter-generational wealth and to help them address the costs of living of children studying or living elsewhere in the world. Hence, the range allows for us to meet clients’ needs both locally and internationally.

Research both locally and globally shows that staying invested is the main determinant of whether clients actually achieve their investment goals. The graph below shows the impact of staying invested. Investors who invested $10 000 in the S&P 500 in January 2003 and stayed invested were rewarded with an investment of $64 844 at the end of December 2022 (19 years later), while the value of the investment of those who missed the best 30 days was only had $11 701. Those people who missed the best 60 days on the market over this period actually lost money, only having $4205 left.

Source: JP Morgan, S&P 500 Index total returns from January 1, 2003 to December 30, 2022.

Achieving your investment goal is about time in the markets as opposed to timing the market. But staying invested can sometimes create huge anxiety for clients when volatility increases, or we are faced with prolonged negative market returns. In designing the solutions, we took this into consideration and build robust portfolios that aim to get clients to their investment goals over the longer term while taking cognisance of short-term volatility and finding ways to manage the downside in a manner that makes it easier for them to stay invested.

The result is that we have placed greater focus on downside protection in the more conservative portfolios whilst still using our strategic asset allocation and strategy optimisation tools to get clients to their investment objectives. In the more aggressive portfolios, where we have the luxury of a longer time horizon, we have set more aggressive CPI plus targets, allowing clients in those portfolios to focus on capital appreciation and achieving higher real returns. And even in the more aggressive portfolios, we manage these with specific downside limits, to ensure that clients can stomach the level of volatility and don’t disinvest.

By investing in Equilibrium’s range of model portfolios, clients can sleep easily knowing that there is a dedicated team of 25 investment professionals locally and 8 internationally spending their time managing portfolios on your behalf. It’s their job to select the managers, design the mandates, ensure compliance with these mandates and construct portfolios in such a way that they continue to perform regardless of short-term market volatility or changes in investment cycles, interest rates or currency movements that affect the local or global economy.    

Our aim is to create real wealth for your clients and to do this, we need to keep them invested. Although the higher CPI plus targets have been difficult to achieve over the recent years, this tried and tested process has resulted in the Equilibrium model portfolios outperforming their peer group average over the medium to long term with lower drawdowns than the peer group1. The advisers who have successfully managed to get clients into the most appropriate portfolios for their unique needs have been rewarded with clients who have remained invested in these portfolios, and are consequently getting superior outcomes.

1 Equilibrium Investment Management, 9 February 2024

Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum Metropolitan Holdings Limited, rated B-BBEE level 1.

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