Taking Stock Winter 2021

Welcome to Taking Stock

Where to from here for investors as we enter a period of slowing global growth?

Aug 25, 2021

6 minutes

Sangeeth Sewnath
Where to from here for investors as we enter a period of slowing global growth?
“He who wishes to be rich in a day will be hanged in a year.”
Leonardo da Vinci

I was recently struck by this rather chilling quote while reading the biography of Leonardo da Vinci by Walter Isaacson, a rich narrative drawn from Da Vinci’s astonishing notebooks (estimated to consist of between 20 000 and 28 000 pages of notes and sketches). The quote is admittedly a dramatic introduction to an investment newsletter, but it remains pertinent. Even 500 years ago, there were no shortcuts to achieving long-term investment success!

Da Vinci described himself as a disciple of experience. Being largely self-taught, his genius depended on his insatiable curiosity, keen observation skills and experimentation, which helped him develop an empirical approach to learning. It is an interesting counterpoint to the age in which we live today, where information is freely available, and curiosity can be so easily satisfied. Nonetheless, the most important learning I took from this book is that one of the common traits found among people who achieve success in life – whether in sales, investment or business – is curiosity.

This is aptly demonstrated by Clyde Rossouw’s article in this issue, in which he reflects on the ten investment lessons he’s learnt during his more than 20 years of managing money. No doubt, his curiosity greatly contributed to the valuable experience (and wisdom) he has gained. Hopefully, you will be equally curious to learn about these lessons, and how they have helped Clyde successfully navigate markets over his career.

Turning our attention to recent market performance, returns were decidedly more muted over the second quarter. The 12-month performance, however, remains attractive, with the FTSE/JSE All Share Index delivering 25%, the All Bond Index gaining 14% and the MSCI All Country World Index returning 15% in rand terms (as at end June).

The more pedestrian second quarter performance reflects concerns that growth is slowing.

The more pedestrian second quarter performance reflects concerns that growth is slowing. A recent report by Gavekal Research1 suggests that growth has peaked, and that in the US in particular, it is set to go from “great to good”. In this environment, they believe cyclicals and the lockdown boom stocks are likely to struggle. On the upside, however, they point out that strong demand and tight capacity will spur capital spending, while the manufacturing sector is enjoying an ‘epic restocking cycle’.

Why do I mention this? We believe this environment really sets the stage for quality investing. Our Quality portfolio managers here in South Africa are currently fairly unique among domestic managers given their preference for global equities and SA bonds over SA equities.

There are nonetheless opportunities to be exploited in the local equity market. Hannes van den Berg explains in more detail how the Ninety One Equity Fund is positioned now that we’ve moved from the exuberant initial rebound to a mid-cycle slowdown.

We still saw net flows into our multi-asset funds.

How have investors responded to the changing environment? The big trend in unit trust flows over the last quarter was the sustained appetite for offshore and high duration fixed income funds. Although we still saw net flows into our multi-asset funds, as a whole this sector continued to bleed. While there were tentative signs that we were moving into a slightly more risk-on environment, these green shoots were unfortunately entirely undone by the violence and looting in July.

You may have noticed in the press that Ninety One recently became the first South African investment manager to sign up to the Net Zero Asset Managers Initiative. Our decision to sign up was not taken lightly. Indeed, our motivation to join was to help effect a transition towards net zero that would work for all of the world’s 7.9 billion people, not just the developed world. Be sure to read the article by Nazmeera Moola in which she sets out our approach to net zero and why it is critical for South African investors to take heed.

Before I conclude, we are encouraged by the flows into our multi-asset and income funds, and we are working hard to retain our number one rating in the PlexCrown survey. As you are aware, we are celebrating our 30th anniversary this year. We continue to build on our long-term track record and as ever, remain committed to delivering good investment outcomes to you.

Thank you for your continued support. Stay safe and curious.

Sangeeth Sewnath
Deputy Managing Director


1 Gavekal Research, Strategy Monthly: Dialing down expectations for US growth, July 2021.

Authored by

Sangeeth Sewnath
Deputy Managing Director

Next article

The “worst” winter of our discontent

South Africans have endured a slow vaccine rollout, a rampant third wave and another lockdown. And then came the riots. Where to from here for investors?

Taking Stock Winter 2021 Hub Next article

Important information

All information provided is product related and is not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information without appropriate professional advice after a thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security. Collective investment scheme funds are generally medium to long term investments and the manager, Ninety One Fund Managers SA (RF) (Pty) Ltd, gives no guarantee with respect to the capital or the return of the fund. Past performance is not necessarily a guide to future performance. The value of participatory interests (units) may go down as well as up. Funds are traded at ruling prices and can engage in borrowing and scrip lending. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. A schedule of charges, fees and advisor fees is available on request from the manager which is registered under the Collective Investment Schemes Control Act. Additional advisor fees may be paid and if so, are subject to the relevant FAIS disclosure requirements. Performance shown is that of the fund and individual investor performance may differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. There are different fee classes of units on the fund and the information presented is for the most expensive class. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Where the fund invests in the units of foreign collective investment schemes, these may levy additional charges which are included in the relevant Total Expense Ratio (TER). A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The ratio does not include transaction costs. The current TER cannot be regarded as an indication of the future TERs. Additional information on the funds may be obtained, free of charge, at www.ninetyone.com. The Manager, PO Box 1655, Cape Town, 8000, Tel: 0860 500 100. The scheme trustee is FirstRand Bank Limited, RMB, 3 Merchant Place, Ground Floor, Cnr. Fredman and Gwen Streets, Sandton, 2196, tel. (011) 301 6335. Ninety One SA (Pty) Ltd is a member of the Association for Savings and Investment SA (ASISA). The full details and basis of the award are available on request.

This document is the copyright of Ninety One and its contents may not be re-used without Ninety One’s prior permission. Ninety One Investment Platform (Pty) Ltd and Ninety One SA (Pty) Ltd are authorised financial services providers.