Iain Power, chief investment officer of Truffle Asset Management, which manages the Amplify SCI* Wealth Protector Fund, points out that while managing to beat the benchmark, the fund minimises potential drawdowns and capital loss. learn more about the performance and positioning of this multiple award winning fund.
China’s attempts to close the wealth gap, manifesting in policy adjustments at a time when it is going through its own energy crisis and internal constraints, introduces the potential for Chinese growth to be weaker or softer than anticipated, especially leading into 2022, which has a bearing on resource-type assets.
The path South Africa is on “is almost guaranteed to lead to a balance-of-payment crisis as the currency (the country’s share price) will experience a sudden stop event (a large-scale exodus of foreign investments)”, and South Africa may have to go cap in hand to the International Monetary Fund. But it is not difficult to change the direction.
Active management has been critically important in the low return environment of the past five years and the volatility of the past year. Amplify found itself ideally positioned with its choice of boutique managers, many of whom have hedge fund backgrounds, with the ability to act quickly and use a variety of investment tools to excel in a challenging investment environment.
In our new world fraught with an endless stream of webinars and Zoom fatigue, we bring you a fresh approach. A “Power Hour” with five of Amplify’s next-generation asset managers.
This dynamic engagement will give you access to a broad range of views from our diverse set of asset managers. It’ll provide insights on the current performance and positioning of the Amplify funds they manage, as well as their market outlook and resulting impact on the various asset classes.
The ability of hedge funds to produce consistent, positive and excess returns is a product of them having less constrained opportunity sets than long-only funds.
“Even more important is the correlation of returns. The correlation to equity is negligible, and the correlation to the bond market is not significant. This is a strong reason arguing in favour of the inclusion of relevant hedge funds into an investment portfolio to get the diversification benefit.”
To manage an absolute return mandate, the real return objective is the primary goal. “When we construct a portfolio, and when we think of return drivers, we look at how to attain the absolute return with the highest certainty and lowest tail risk, and we tend to veer towards overweight where such a return driver meets the return objective when the distribution of risk around that is acceptable,” says Amplify SCI* Amplify SCI* Defensive Balanced Fund and Amplify SCI* Absolute Fund manager Lourens Pretorius of Matrix Fund Managers.
Volatility across various asset classes has made for a thrilling 2021. Locally we’ve seen a strong rebound in risk assets over the short term leading to high levels of optimism. However, growing wealth or enjoying one’s retirement savings means enduring a longer timeframe so how can one ensure, with certainty, that your investments are working for you regardless of the market cycle or direction?
The long-awaited rotation from growth to value has arrived. Many market participants believe it to be a longer-term rebalancing within the equity market due to a massive dislocation between the two styles. However, it begs the question if there is still return potential in the value component of the market, will it be coming out of growth or is it a mix of the two?
Value has massively underperformed growth. In the short run, P:E multiples drive the market, but in the long run, earnings do, and earnings growth of value stocks is starting to rise. Value stocks have become extremely cheap, and current valuations are very low, while earnings going forward are in many cases looking more attractive than growth stocks.
The South African market is not excessively overvalued compared to other markets and the fund continues to find attractively-valued shares including commodity-related shares, notwithstanding their recent rise. Even if commodity prices come down a bit, our commodity shares still look reasonably priced and should be supported by earnings and cashflows, and we should see some special dividends coming through. These companies have been hoarding cash and paying down debt and are sitting with healthy balance sheets.
Style drift is the antithesis of a consistent investment manager. In times of high volatility and unforeseen events investment managers may be tempted to deviate from their strategies and chase performance.
Omri Thomas, portfolio manager of the Amplify SCI* Flexible Equity Fund, discusses the need for a strong asymmetric investment process, what tools are used and how sticking to this strategy ensures consistent outperformance of the market over time.
South African bonds are attracting attention – given the low interest environment and search for yield. “There have been large inflows into multi-asset income funds over the past few years, but many people are talking about the relative high yields and attractiveness of investing in South African government bonds,” says Marthinus van der Nest, head of Amplify Investment Partners.
You simply can’t ignore hedge funds. In this session, Marthinus van der Nest, head of Amplify Investment Partners, demonstrates the use of this alternative asset class in portfolio construction and the positive impact it has on clients’ investments, especially those needing to draw a regular income. Marthinus covers the various hedge fund strategies before taking a deep-dive into fixed income hedge funds. He highlights the factors which influence hedge fund selection, the importance of risk management and the benefits of diversification through the combination of fixed income hedge funds with traditional multi-asset portfolios.
As the world starts to turn the corner to economic recovery, South Africa needs to make changes to take part in the growth of emerging markets, which is set to outstrip that of developed markets. However, South Africa’s economy remains at a crossroads, and requires reform to put it on the road to redemption.
In an environment where market risk is high, a sound investment strategy is as much about controlling for risk and avoiding the investment “bombs” as it is about asset allocation and finding value.
“The future for us looks different to the past, and the yardsticks we used for value are no longer appropriate.”
However, that does not mean there is no value to be found, as the fund’s strong performance continues to demonstrate. Read about how the Amplify SCI* Wealth Protector Fund finds value.
The importance of including hedge fund investment has become clear in the past five years’ low return environment when equity performance has been poor. This is reflected in the All Share Index (ALSI), returning 8.23% per annum, while the blended performance of four Amplify hedge funds, over the same period, has reflected a return of 13.85% – from August 2016 until the end of February this year.
“While global markets look expensive, we still manage to find value in South Africa,” says Omri Thomas, portfolio manager of the Amplify SCI* Flexible Equity Fund and a director at Abax Investments, adding that the fund finds this value both in the hybrid space – with convertible bonds – and in some quality shares on the JSE. South African stocks remain relatively cheap and attractive, especially given the serious warning lights in global markets. To find out more about the fund’s top stocks picks.
An agile investment strategy tuned in to prevalent market dynamics will help investors find the silver lining in a new year where buoyant equity markets, vaccine roll-outs and easing lockdown measures provide impetus for a level of positivity in investment markets.
In terms of this strategy and with yields negative in global fixed income, equities are likely to produce positive returns in 2021, according to Laurium Capital, which manages Amplify Investment Partners’ Amplify SCI* Balanced Fund.
While the economic lockdown was arguably the most economically disastrous event in living memory, the JSE All Share Index and major global indices have recovered to similar, and in some cases, higher levels than before the crash started in mid-February, even though the pandemic continues to wreak havoc on economies. Marthinus van der Nest, head of Amplify Investment Partners, says: “As much as we keep saying that keeping a cool head is the cornerstone of investing, many investors act impulsively when faced with a crisis, believing that the current event is different to those of the past. 2020 showed us that even an event that takes down all economies simultaneously could be ridden out as equity markets are resilient, with agile and responsive fund managers who continue to find opportunities.”
The SA Medium Term Budget Policy (MTBPS) is of particular importance this year off the back of spiraling debt and a lockdown that’s had a catastrophic impact on the growth of our economy. Together with a bloated wage bill, record-high unemployment and lower tax collections, how will Finance Minister Tito Mboweni keep South Africa from falling off the fiscal cliff?
The pandemic has forced all of us to reconsider what we value. Our priorities have been rearranged from a world of excess to where livelihood is as valuable as a quick win. ESG and Impact Investing enable investors to get more than just financial returns. But just how much is known about these two principles, how they are applied and more importantly, how they can help investors drive value.
It is time to change what we value, to question investment practices and re-evaluate the concept of meaningful contribution. Amplify is in the business of helping its clients grow their money so that they can achieve their goals, and, equally, in the business of making a meaningful social and environmental impact and helping to preserve our environment for future generations.
Glacier Invest recently launched its Living Annuity Income Solutions, an industry first which encompasses a unique approach to portfolio construction. We’ve put together a series of four videos where the Glacier Invest portfolio managers engage with the asset managers of the funds in the Income Solutions to better understand how they manage their funds.
Optimism feels justified as more economies start to move through the worst of the COVID-19 recession and reopen. Now the debates clearly shifts from the depth of the contraction to the shape of the recovery. We are thrown headfirst into the alphabet soup of scenarios – V, U, L and W. The one constant across the various scenarios is uncertainty. How do you construct an investment portfolio that is protected from another dip but does not sacrifice unrealised market recoveries? More importantly, how do you still achieve your clients’ long-term savings goals without further capital loss?
As investors remain wary of the sustainability of the rapid recovery in financial markets this year, South Africa’s top fund managers are successfully navigating the fine line between managing ongoing risks and taking advantage of the significant opportunities that the volatility has presented to them.
Who’s the fairest of them all?
Plunging corporate earnings and an unprecedented surge in global debt, because of the coronavirus-related stall in activity, will weigh heavily on a rebound in global economic growth. Across major economies, governments face slumping tax revenues and soaring stimulus costs. South Africa is not immune with an already fragile economy and low growth prospects. As such, which world economies will fully reopen soonest and what will be the long-term impact of the great lockdown recession? Have risk assets in certain regions run ahead of their underlying macroeconomic narrative?
The pandemic will deliver a long-lasting shock to South Africa. When the outbreak struck, the economy was already in recession. The drastic containment measures implemented to curb the spread of the virus have deepened the contraction and resulted in ballooning government debt. Will it be the death of the once competitive and beloved SA Inc. or will the recovery of other regions leave us behind?
Considering skewed fundamentals, where are the opportunities in equity type investments?
Omri Thomas, portfolio manager for the Amplify SCI* Flexible Equity Fund, discusses how the unbundling of list companies unlocks value for your investment.
Hedge funds are showing their mettle as markets continue to experience significant volatility, uncertainty and poor performances across asset classes due to the coronavirus pandemic. By their nature, these funds are geared towards producing relatively superior risk-adjusted returns regardless of market condition. The proof has not always been in the pudding, but recent statistics have validated their raison d’être, and rewarded investors for their faith in an often overlooked and misunderstood asset class.
Disclaimer© Amplify 2020
Amplify Investment Partners (Pty) Ltd is an authorised Financial Services Provider (FSP 712).
Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) is a registered and approved Manager in terms of the Collective Investment Schemes Control Act. Collective investment schemes are generally medium- to long-term investments. Past performance is not necessarily a guide to future performance, and the value of investments/units /unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager on request. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The Manager does not provide any guarantee with respect to either the capital or the return of a portfolio. The manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Income funds derive their income primarily from interest-bearing instruments. The yield is current and is calculated on a daily basis. If the fund holds assets in foreign countries it could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange. The Manager retails full legal responsibility for the co-brand portfolio’s. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Forward pricing is used. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Performance is calculated for the portfolio and the individual investor performance may differ as a result of initial fees, actual investment date, date of reinvestment and dividend withholding tax.