NEWS AND MEDIA

Risky assets: Are they worth it?

KIM HUBNER Head: Business Development and Marketing, Laurium Capital Launched on 27 March 2014, the Laurium Equity Prescient Fund (the Equity Fund) was the second addition to the long-only range of Laurium Capital, following the success of the Laurium Flexible Prescient Fund (the Flexible Fund), which since its inception on 1 February 2013 is the number-one ranked fund in the SA Multi-Asset Flexible Sector, with a return of 12.7% per annum (4% ahead of the ALSI per year). While the Flexible Fund invests across a broad range of asset classes, local and foreign, the Laurium Equity Fund invests only in South African equities and is fully invested at all times (minimum 95% in equities), and designed for investors (discretionary fund managers, multimanagers, pension funds, etc) to be used as a building block in their portfolio solution offerings to their clients. The Equity Fund celebrated its fifth anniversary on the 28th of March this year. Since its inception on 27 March 2014 to 31 March 2019, the Equity Fund has an annualised return of 6.7% versus the peer group median of 4.7%, and is ranked number 15 out of 104 funds in the South African General Equity category. Although the Equity Fund invests only in South African equities, it is important to remember what you are buying when investing in the JSE. We are fortunate that the South African equity market offers numerous diversification opportunities beyond the borders and growth drivers of the South African economy. By our assessment of value, roughly a third of the JSE All Share index value is driven by what we refer to internally as ‘SA Inc’. In other words, a third of the broad SA market is a function of South Africa’s heartbeat and the remainder is driven by the ‘heartbeat’ of other international markets, the majority of which have superior growth prospects at this point in time. We believe that the Capped SWIX All Share index is a more appropriate equity index than the All Share index against which equity performance should be evaluated, given the investable construct of this index and the lower weight of Naspers in the index. The SA Inc driver is higher at 47% of the index. Even at 47% index weight for SA Inc in the Capped SWIX there are significant diversification opportunities outside of South Africa, to invest in world-class companies, with world-class brands like Naspers, Richemont, British American Tobacco, AB InBev, BHP Billiton etc. Investors in these companies have been well rewarded over the long term. The temptation in volatile markets is to try and time them, by switching into less risky assets. This has proven over time to be a destroyer of value. Time in the market is key – the longer you stay invested, the greater your chance of earnings positive inflation beating returns. Investors in the South African market have been rewarded for their patience. Over the last 20 years, the All Share Index has delivered positive real returns over five-year rolling periods 100% of the time