The financial shocks of the past few months have provided a glaring reminder of the critical importance of saving.
“Many people have found themselves unprepared for sudden financial shocks as the economy effectively shut down,” says Marthinus van der Nest, head of Amplify Investment Partners.
However, Amplify believes that now is the perfect time to review your savings strategy to make sure you can weather future storms and be in a better position to enjoy the sunny days which will start to emerge as the economy gets restarted.
“National Savings Month provides the perfect impetus to reflect on our savings strategies, to re-examine your savings options, and to take further steps to increase our savings,” says Van der Nest.
For most savers, unit trusts offer a wide choice, are easily accessible and well-diversified as they are composed of a basket of equities, bonds and money market instruments. Selections need to be based on personal goals, relative risk appetite, investment styles, cost and diversification including unit trusts and hedge funds.
With over 1500 unit trusts in South Africa – significantly more than actual shares available for investment on the JSE – and a large and growing number of asset managers, there is no shortage of choice.
There is a growing demand for boutique managers that have a relatively large investible universe, giving them more opportunity to exploit mispriced assets not available to larger managers.
These managers are more agile and responsive to opportunities and react quickly to unexpected risks. “This has proven critical during volatility such as what markets experienced in the past few months, and the value is reflected in our relative outperformance during this period,” says Van der Nest.
“With black swan events such as coronavirus, our managers were able to move quickly in and out of certain positions and shares,” he says.
Amplify SCI* Wealth Protector, for example, has been ranked number two since its August 2016 inception and number one in 2018 and 2019 relative to its peers in the multi-asset low equity space. The manager, Truffle Asset Management, won a Raging Bull award this year for its income fund, indicating its ability to unearth opportunities and act quickly on them.
Amplify SCI* Defensive Balanced fund, managed by Matrix, is number one since its September 2014 inception, with the highest risk-adjusted performance in its class through the use of derivatives to protect on the downside and ensure a smoother return profile.
Amplify’s bouquet of hedge funds, which are by their nature designed to mitigate downside risk, but are relatively complex investment products, provide an added layer of diversification for investors and now available on certain LISP (Linked Investment Service Provider) platforms.
Their performance in volatile markets is reflected in recent statistics, which show that an equally weighted portfolio of four of Amplify’s Fixed Income Hedge Funds returned 9.10% growth for the year to end of May 2020 against a 10.1% decline in the JSE All Share index and a 1.5% growth in the All Bond index. Over a year, the blended portfolio grew 17.1% against the All Share’s decline of 5.9% and 6.4% growth in the All Bond index. The trend over three years is similar.
Given the huge array of downside risks at the moment, skilled small managers identified and selected by Amplify are able to potentially generate positive alpha, or above-average returns, for investors.
“Our selected managers perform well through the market cycle and in volatile markets regardless if the volatility is from coronavirus or oil disputes,” says Amplify’s head of strategy, Richard Bray.
“We are also able to proactively check-in with all them during unprecedented events and talk directly to them, providing an additional risk overlay which brings peace of mind to our investors.”
Taking into account the effects of the economic downturn, the lockdown, drought and various social issues, this peace of mind increasingly includes ensuring that investment priorities go hand in hand with environmental and social priorities.
Amplify believes that saving for the future includes leaving a better world for future generations.
“Investors want to continue to protect their wealth and make positive returns in an extremely uncertain investment environment. They also want to make a positive impact, and we believe in doing both,” says Van der Nest. For this reason, Amplify’s support for job creation initiatives and conservation remains a core pillar of its philosophy.
“We are helping our clients save and prepare for the future. For us, it is equally important to save for your own financial stability and to play a role in communities and the environment.
“For us, saving for the future means leaving a better world for future generations. We hope that savings month represents a new start in preparing for a better future,” Van Der Nest concludes.
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