The world is changing fast and to keep up you need local knowledge with global context.
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By Johan Burger*
Trying to predict what lies ahead for South African investors in 2020 is a bit like trying to predict the weather – the chances of being wrong are good. Investors can take advantage of modelling tools, use historical performance to create potential scenarios, only for an unforeseen event to take place and leave the predictor red-faced.
Looking at the top performing asset classes in South Africa, the winner by a considerable margin in 2019 was Global Equities. This was driven by the developed world markets such as Europe, the UK and the US, despite the predicted slowdown in global markets; trade wars and Brexit.
For the past decade the global technology industry was by far the best performing sector, delivering spectacular returns for astute investors.
Technology and internet sectors have become a significant share of the total global equity market capitalisation. Tech is close to accounting for 30% of US stock market value and 20% of global stock markets’ value.
Technology is the best-performing sector in the US, rising some 48% year to the end of December 2019 turning in its best performance in over a decade. But will it last?
Leading analysts see the tech bull market continuing into 2020 and beyond, driven by the advent of 5G networks that will push chipmakers and smartphone manufacturers to new heights. The so-called ‘network effect’ drives a lot of new developments, creative start-ups and drive business for existing tech giants.
Many South African asset managers had very little to zero exposure to this global asset class. But it is not too late to share in those returns.
Local investors are uncertain as to how they access the sector so underrepresented on the South African market, considering the foreign exchange complications of directly buying shares listed on especially the US Nasdaq market and the S&P 500.
The solution lies in a selection of funds available to South Africans offering opportunities for investing in rand as well as in dollar.
Funds to consider for direct offshore investing in dollar include the Brenthurst Global Equity Fund or the Franklin Templeton Technology fund. The Brenthurst fund invests in different sectors and asset classes but offers good exposure to the technology sector offshore, while the Franklin fund aims to achieve capital appreciation by investing at least two-thirds of its assets in equity securities of companies expected to benefit from the development, advancement and use of technology. Franklin adopts a broader definition of “technology”: companies that are creating, implementing or commercialising new technologies that are used to enhance productivity or create new services.
Other options are the Brenthurst BCI Worldwide Flexible Fund of Funds, a worldwide flexible portfolio with the objective of providing investors with a high long-term total return. Or the Mi-Plan Global AI Opportunity Fund, a global equity portfolio that aims to achieve long term capital growth by investing predominantly in foreign equity securities and participatory interests in collective investment schemes, including exchange traded funds. In selecting securities, artificial intelligence based quantitative processes may be used to seek out opportunities.
The Sygnia 4th Industrial Revolution Global Equity Fund is a high-risk, dynamically managed passive fund. This fund offers investors access to global companies optimally positioned to benefit from new technologies and innovations that have the potential to transform the global economy across a broad range of sectors.
Investments to be included in all these portfolios will, apart from assets in liquid form, consist of participatory interests and other forms of participation of local and global collective investment schemes, or other similar schemes operated in territories with a regulatory environment which is to the satisfaction of the manager and trustee of a sufficient standard to provide investor protection at least equivalent to that in South Africa and which is consistent with the portfolio’s primary objective.
However, it is important to note that chasing yesterday’s winners should not be the focus of an investment strategy. An investment plan must always be designed to suit an individual’s investment goals, risk profile and personal circumstances. The best approach is a portfolio that includes exposure to a variety of sectors, regions and asset classes, not only the current star performers, even if its outperformance is expected to continue.
More about offshore investing here.
- Johan Burger is a Certified Financial Planner® professional, Director and head of financial planning at the Pretoria office at Brenthurst Wealth. Johan holds a B.Com degree in Financial Management from UNISA and a National Certificate in Wealth Management. He also studied International Business at Lynn University, Florida, USA. He joined Brenthurst Wealth in 2006.
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