Hold tight

25 April 2022

There is no hiding from market volatility in a world battered and bruised by the Coronavirus (Covid-19) and staring down the barrel of the fallout from a war on the outskirts of Europe.

When we were in the process of envisaging the first issue of Global Perspectives back in January 2022, our focus on market volatility hinged on a post-pandemic reality, the continued fallout from Covid-19, the change in monetary regime to more tightening and the bubbling inflationary pressures around the world. Then, in February 2022, Russia invaded Ukraine.

The weeks that followed saw the European Union, the US and the UK, among others, imposing strict sanctions on Russia, and later their core ally Belarus. These included banning a number of these countries’ banks from the global SWIFT financial messaging service, freezing company and oligarch assets, instituting travel bans and, for some, an all-out halt of imports of Russian oil, coal and liquified natural gas. The Russian rouble promptly collapsed by 40% to all-time lows and there was even a run on some Russian banks.

Ratings agency Fitch noted a number of credit risks associated with the conflict in early March, highlighting expected hikes in agricultural commodities, rising oil and fuel prices, and increasing inflationary pressures and downgraded the rating of several Russian banks. For some emerging markets the risks are even higher, noted Fitch, singling out greater risk aversion among international investors, the impact of a stronger US dollar and increased challenges raising debt on global markets.

Suddenly our focus on navigating market volatility took on a whole new hue.

It is hardly surprising that the unfolding conflict features prominently in this edition of Global Perspectives, but it is important to remember that the fundamentals of investing through good times and bad remain unchanged, irrespective of the geo-political fallout and market pressures of the day.

 

Albert Botha provides us with a glimpse into the fallout already evident from the Russia-Ukraine conflict, along with some sage words on how best to protect your money during wild times. I have contributed a piece to this edition, one that speaks to the importance of getting the basics right when crafting an investment portfolio – this way, when the tide goes out, you won’t be shocked to find your picks have been swimming naked all along.

Adam Drewry adds his voice to the volatility debate by unpacking the role asset allocation plays in building robust portfolios and how even with a solid understanding of macroeconomics there is always room for a touch of art in the science of investing.

Since there is a great deal of focus currently on inflation and interest rates, we’ve also included an article by Mathew John which explores the correlation between these two phenomena and asks what this means for investors and for the JSE as a whole. And, finally, Vicki Tagg takes a look at the new FNB Core Balanced Fund managed by Ashburton Investments and its place as a low-cost, passive building block solution in the retirement space.

There is a lot going on globally and locally at the moment. Nerves are on edge and uncertainty is building around the current and future implications of unfolding events. It is at times like these that a solid plan of action, the input of skilled professionals and adherence to meaningful investment principles is essential. Amid risk there is always opportunity, and the cycle will most assuredly turn if you just hang on tight.

With all the changes happening around us, we’ve also had a few changes within our business. On 1 March 2022, we welcomed our new CEO Duzi Ndlovu who has taken over from Sizwe Nxedlana. Duzi has a long history in the investment industry and is well placed to lead Ashburton Investments’ next growth phase.

We have also strengthen our investment team and capability in recent months. The team has grown with key additions such as Charl de Villiers as head of equities.

Our equities and balanced funds have been restructured and are seeing good performance. Our flagship the Ashburton Stable Income Fund and the Ashburton Diversified Income Fund have experienced top quartile performance over one year. We are grateful to our clients for the continued support and look forward to taking you along in our next growth phase.

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