The new world order of disorder

The last five years have been challenging for South African investors, and with markets delivering underwhelming returns across the board, weary investors would be forgiven for wondering how much more they can take.

MARKET INDICES AS AT 31 MARCH 2020

5yrs*

FTSE/ JSE All Share TR -0.1%

FTSE/ JSE Top 40 TR 0.5%

FTSE/ JSE SA Listed Property -13.5%C

PI (lagged 1 month) 4.9%

*Annualised. Source: Bloomberg in ZAR

Just when there appeared to be a glimmer of light on the horizon, with markets starting 2020 well, along came COVID-19 to give investors a further shake. Cities have literally shut, nations have been instructed to stay at home, and restrictions on local and global travel are the new norm.

Along with drastically impacting our way of life, this pandemic has also left global markets shaken and investors reeling from its devastating effects.

Advisers are on the frontline of this economic crisis, facing ‘the New World Order of Disorder’ with the investment playing field simply becoming more and more difficult to navigate. The macroeconomic backdrop is everchanging and increasingly complex, with global and local markets having to digest trade wars, political uncertainty, failing state-owned enterprises, state capture, downgrades and now a global health pandemic.

Navigating this ‘New World Order of Disorder’ leaves even the most seasoned investment professionals with furrowed brows. Dealing with unprecedented circumstances and markets that react ferociously to minute-by-minute news makes managing investment portfolios even more of a fulltime job than usual. The digital era has resulted in information travelling faster than ever before, causing prices and market movements to accelerate similarly. Investment professionals have to deal with this turbulence and need to ignore the cacophony of noise in order to home in on the true market influences, adjusting portfolios where necessary. Not an easy task!

In multiple surveys, clients’ expectations of their financial advisers is that they should be their coach and financial guide, a voice of expert reason when looking at their overall financial wellbeing, including cash management, investment planning, tax advice, estate planning, cash-flow modelling, financial goal setting and establishing the plan to achieve these goals. Also, part of a financial adviser’s role, and probably most important of all, is helping their clients ‘make sense of it all’. There is little to no surveyed evidence that shows there is an expectation from clients that their financial adviser should also be an investment expert.

So, in this new world, it makes sense for financial advisers to give their clients’ investment portfolios the best chance of success by partnering with a team of dedicated investment experts. Appointing a registered and reputable discretionary fund manager (DFM) provides advisers with a proven investment process and robust portfolio construction methodology that assist in the creation of portfolios that are designed to meet investors’ objectives. Advisers will also benefit from fund research and due

diligence capabilities they would be unlikely to achieve on their own. As dedicated investment professionals, DFMs have the knowledge and expertise to identify the managers, funds and vehicles most appropriate to the required investment objectives, as well as the scale and influence to kick their tyres and see through their glossy marketing to the fundamentals. DFMs also have the ability to negotiate on costs, offering competitive solutions for advisers and their clients.

As a DFM, MitonOptimal collaborates with financial advisers, sharing the investment knowledge and decision-making with them, providing experience and strength to deal with the current market turmoil and seeing their clients through to achieving their investment goals in a cost-efficient way.

MitonOptimal South Africa (Pty) Limited, Registration No. 2005/032750/07, is an Authorised Financial Services Provider License No. 28160.

George Dell, Head: Business Development, MitonOptimal