Uncertainty and volatility of investment returns are here to stay in 2022, driven by global inflationary pressures and rising interest rates, a weakening Chinese economy, new virus variants, and economies’ disparate re-emergence.
Investors are increasingly looking to diversify their risk with new investment avenues that provide more certainty in terms of returns in this environment. However, they are also looking for purpose by making a meaningful contribution to society and the environment around them, says Marthinus van der Nest, head of Amplify Investment Partners.
Amplify has identified three key trends that will shape investment demand in 2022.
Trend 1: Seeking alternative returns
It is becoming increasingly important for investors to diversify from traditional asset classes and find alternative sources of returns to protect and grow traditional investments.
Access to tools such as short-selling, leveraging and access to derivatives enables hedge funds to generate highly uncorrelated and better risk-adjusted returns than traditional funds.
Low correlations to equity and bonds mean hedge funds in a portfolio provide a diversification benefit and a strong positive return that is highly uncorrelated to traditional multi asset categories, especially when markets are volatile.
This has been particularly relevant for people drawing an income from their investments, as hedge funds lower volatility to produce better investment longevity.
Van der Nest says that hedge funds provide for asymmetry of returns, or the ability of a hedge fund investment manager to protect an investment on the downside but capture returns on the upside, thereby reducing the overall volatility of a client’s investment.
Amplify has eight proven retail hedge fund strategies, managed by hand-picked expert hedge fund managers specialising in multi-strategy, equity and fixed income, to achieve maximum investment impact.
Trend 2: The need for agility
Active fund management is an important investment strategy in uncertain times, and agile small managers have proved to be better equipped to consistently beat the market.
This has driven financial advisers to look for what boutique managers have to offer and why Amplify’s funds have thrived – they provide low correlated returns, high performance and strong risk adjusted returns from unit trusts that are optimally diversified and actively managed.
Industry-leading fund performance and significant inflows into Amplify’s funds over the past couple of years illustrate increasing demand for independent managers that thrive and actively trade in volatile markets, producing consistent returns that reflect a repeatable investment process and style.
Investors have recognised its performance, with assets under management increasing by over 200% since 2019. The industry has too, with the Amplify SCI* Wealth Protector Fund, managed by Truffle Asset Management, winning first place in the 2021 Raging Bull Awards on straight performance in the multi-asset low equity category and first place in the inaugural 2021 Citywire South Africa Awards for best conservative fund manager.
Trend 3: Investing for the future
The pandemic has forced us to think about the economy we want to rebuild, and investors are increasingly questioning investment practices and re-evaluating the concept of meaningful contribution.
Environmental, social and corporate governance (ESG) considerations were previously an afterthought to investment decisions, but they are now informing them. It has been found that stock selection based on long-term operational business risks creates portfolios that will overperform over time. This is because companies with a long-term sustainable business model, awareness of the environment in which they operate, accountability to stakeholders, good corporate governance and quality management are more likely to grow.
Given the ongoing uncertainty, people are becoming more aware of the critical importance of growing their retirement savings, leaving a legacy and making a meaningful impact on surrounding communities too.
In line with its investing with a conscience philosophy, Amplify is passionate about conservation initiatives that focus on protecting and saving wildlife and uplifting the communities living alongside these conservation areas.
Amplify does this through its commitment to investing in our futures in more ways than one – by growing clients’ money while also helping to build a sustainable future for generations to come.
As the world of investment changes, additional places to generate uncorrelated returns for clients are being sought with an increased demand for agile asset management in navigating uncertainties and the resulting market volatility.
Amplify remains ideally positioned in this space with its diverse range of unit trusts and hedge funds, managed by carefully selected next generation asset managers whilst contributing to social and conservation initiatives that truly matter.