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Over the past decade, independent financial advisor Magnus Heystek has very publicly delivered a consistent message – Move your money outside of South Africa. He has been spot on. As a result, clients at the company he started, Brenthurst Wealth, have profited as misgovernance hammered the Rand and rising global investment markets also far outperformed the JSE. In this powerful keynote to the 5th BizNews Conference at the Drakensberg Sports Resort, Heystek reiterated his message, providing fresh evidence to support his argument that it’s unlikely there will be a reversal of the trend anytime soon.
00:00 – Introduction
00:34 – Magnus Heystek on living in abnormal times
01:24 – On the difference between fund managers and financial advisors
03:43 – On the top three performing countries from 1900 to 1980
05:47 – The 2010 World Cup construction boom
06:18 – South Africa’s decline
08:33 – The 15 year chart showing the decline
09:23 – The 5 and 3 year chart
12:39 – On a dreadful period for South African investors in the stock market
13:23 – Lack of offshore exposure
14:25 – On independent advisors
16:09 On Frans Cronje’s research foundation stats
18:04 – An analysis of the political situation
19:38 – On taking your money offshore
20:13 – End
Some extracts from the interview
Magnus Heystek on the difference between fund managers and financial advisors
I need to draw a distinction here between asset managers or fund managers and financial advisors. They are two different groupings in law, in regulation and in practice. And a lot of people don’t fully understand this. When you hear a fund manager get up onto a podium or write an article, and the advisor is very bullish on a certain fund or sector, you need to remember – that is not advice by regulation. There should be a disclaimer for every single article or pronouncement, and most fund managers do stick to it.
But, with asset management industries in South Africa, that message sometimes get blurred and it confuses people, when they come to us and say, ‘How about that guy saying we should do this?’ And we say, ‘That guy’s not an adviser, he’s not qualified to give advice, he’s qualified to run these funds.’ It’s very important to remember that a fund advisor or an asset manager may not give you advice, unless they’re registered to do so, and generally they are not. They are qualified to run money. Financial advisors, on the other hand, operate under a very strict regime of responsible advice, and the outcome is very important. And that’s the ethos of our business.
We need to give advice which tries best to provide the best outcome for our clients. And there’s a balance between risk and return. And those are the two concepts, the two poles that we’ve been giving advice to in the last 10 to 15 years.
On annual management fees over the years being higher than the returns that they gave back to investors, and the impact on the South African investor
These annual management fees over seven years were higher than the returns that they gave back to investors. So it’s been a dreadful period for investors in the South African stock market, either via pension funds, indirectly via provident funds and directly in stock market portfolios linked to the index – it has been a terrible period of time. We can even look at a five year period of time. The same story. This includes covid, and the Russian invasion. Bearing in mind that the period was characterised by a massive boost in commodity prices, we had another commodity boom, and a mini commodity boom. And you can see it in Piet Viljoen’s Fund and other commodity funds. So the returns over the last three years have been boosted by commodities and one or two big dual-listed stocks that carry through; the Naspers, Prosus Richemont, etc. But despite that massive boom in commodities, we could not beat the three or four major indices that I follow to look at investment performance. You will find very little media and market commentary on this, and the reasons are very clear. We don’t come out very well. This book does not convince any of you to put money in the local stock market. If you see these numbers and even in one year, I was very surprised that we could not beat them. The JSE. This is the world, the MSCI World Index. The world as an investable place has beaten the S&P 500, Satrix and NASDAQ. Of course, Nasdaq had a humongous crash dropping 30 to 40% at the beginning of last year. So it was a very bad time for technology stocks, but not far off the pace. So I’m trying somewhat, to summarise that it has not been a great period for South African based investors.
At the same time, you also have the other blocks of wealth property in South Africa, with the exception of the Western Cape, has not been a great area to create wealth. We see a lot of clients, almost like a confessional in a church, the people come and tell us about their investments and when we start analysing funds and returns, etcetera, we realise without foreign exposure these people have become very poor middle class. The last 10 to 15 years without significant offshore exposure has become very, very poor and in some instances they’ve moved from upper middle class to middle class based on the returns of the South African based assets.
On why he thinks you should get your money offshore
We’ve seen research by Frans Cronje’s research foundation saying 50% of professionals in this country, including accountants, doctors, veterinary surgeons, etc., are contemplating immigration in the next three to 5 to 7 years, depending on what happens in South Africa. So we cannot advise them to build a local nest egg, if they’re going to be moving offshore, because they will be exposed to massive currency risks. That’s why when I get criticised, that I’m disloyal to the country and anti this, and negative and all that, I’m saying, well first of all you don’t pay me. My client pays me. I have not had one blowback back from a client over the last 5 to 10 years who had a go at me for taking their money offshore. In fact, we get thanked by people. They say, ‘Thank you, you saw stuff we didn’t see, or we didn’t believe how bad it is.’
An analysis of the political situation Helen Zille spoke about
What could happen in the election next year and she said, to quote her words, ‘An ANC/EFF coalition is the worst possible outcome for South Africa.’ Tim Cohen from the Daily Maverick says that’s precisely what’s going to happen based on what’s happening in the local municipalities. So there’s a very high probability that there’s an ANC/EFF coalition. Now we have to try and analyse: What does it mean for your money? Bearing in mind. The EFF have many times said that when they get into power, they are going to close foreign investment allowance. It’s still just a regulation that has been relaxed so that you need to take it into consideration when you do your own financial planning. Peter Bruce from the Financial Mail has been speaking about exactly the same thing. At this point, this regulation is still in place despite the fact that it’s been relaxed. So that, ladies and gentlemen, is a summation of a very big problem. The advice has been correct. The returns offshore have been better and considering what’s happening in this country as an objective commentator trying to understand the long-term, and medium-term objectives of our clients for the time being as far as equity investments are concerned, I need to stress our bond returns have been phenomenal. We need to consider taking that money offshore, externalising it, building offshore nest eggs, and then if we were wrong, we will bring it back. But you can’t do that if you’re wrong and you leave all your money in South Africa.
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