FFM podcast Ep7: Meet the CIO; where macro and micro collide; the oil play
Off the back of the US federal reserve interest rate pause, after ten consecutive hikes, it was fascinating to have Terebinth chief investment officer Erik Nel in the studio. Nel chatting with BizNews' Stuart Lowman and Corion Capital's Garreth Montano, gave insights into everything macro, from interest rate cycles to business cycles, plus a good case for an oil play. Garreth brought in some of the micro challenges SA inc has to deal with on top of the macro challenges, with a keen eye on banks and some of the beaten-down SA Inc. On the data front, players have moved away from SA inc, with Sanlam, Truworths, and MultiChoice making up three of the five least-owned shares. While Sasol was the most bought in stock in week seven, potentially supporting the oil play. We've also opened up a questions section, which you can write in by going to our Twitter handle @Fantasy_Fund, emailing danita@biznews.com, or visiting www.speakpipe.com/ffm and voicing a question. Remember to make your picks each week by the market open on Monday to have a chance to win any of the prizes up for grabs. And invite your friends. Register at www.fantasyfundmanager.co.za—thanks to our platinum sponsors Sharenet, Terebinth Capital, ClucasGray Asset Management, and Money Better. Remember to subscribe to the podcast so you don't miss an episode.
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The Fantasy Fund Manager podcast started with Corion Capital's Garreth Montano reflecting on the competition, now in its seventh week of a six-month journey. Guest Erik Nel from Terebinth Capital admitted that he had not applied as much effort to the competition due to his day job responsibilities as the chief investment officer, where he oversees the firm's fixed income and hedge fund operations.
Eric explained that his day-to-day focus revolves around allowing the front office to perform their jobs while emphasizing a flat organizational structure. He mentioned that Terebinth is expanding its equity unit and multi-asset policies, leveraging its fixed-income experience and incorporating a top-down macro approach.
The conversation then shifted to the macro element and how it has influenced investment decisions. Gareth highlighted the impact of macro factors on sector performance and asked Eric about his experience managing money during turbulent times. Eric mentioned that Brexit and the COVID-19 pandemic significantly affected the market. He described the challenges faced during May 2023 as negatively affecting liquidity and causing market turmoil.
Eric discussed their investment approach, which combines top-down and bottom-up analysis. He emphasized the importance of building a framework based on the current position in the investment cycle and then developing scenarios to mitigate potential risks and understand return outcomes.
Regarding the current cycle, Eric pointed out that while there are signs of slowing down in the housing and production sectors globally, the employment and earnings aspects still need to follow suit. He acknowledged the unique challenges posed by the COVID-19 pandemic and the Russian invasion.
Gareth was asked about potential sector upswings within the cycle. He stressed the importance of addressing South Africa's energy and electricity issues for businesses to function correctly. He expressed optimism about the undervalued SA Inc. companies, which rely heavily on the South African economy. Still, he noted that it is challenging to predict the exact bottom for sectors such as retailers and banks. He advised looking forward and identifying industries and companies that could thrive in 12 to 18 months.
Overall, the discussion provided:
- Insights into the competition.
- The role of a chief investment officer.
- The impact of macro factors on investments.
- The analysis of the current investment cycle and potential sector opportunities.