Finding calm in the 2020 global investing storm

It takes an adaptable and robust investment management process to successfully navigate through the high levels of volatility and unpredictability of the financial markets over the last few years. In 2019, the markets were buffeted by waxing and waning of US-China trade tensions, and, during the first month of 2020 alone, geopolitical tensions and an outbreak of the deadly coronavirus have tested investors’ ability to gain consistent ground.

As world leaders attending the World Economic Forum in Davos grappled with the mounting climate risks confronting the world economy down the road, the coronavirus took centre stage. It became clear that the unpredictability and uncertainty that has prevailed since the 2008 crisis is here to stay for the foreseeable future.

If that’s the case, how can investors confidently navigate the global financial markets and achieve investment results that are consistently wealth-creating? Prescient Head of Asset Allocation Bastian Teichgreeber believes there are two critical components to delivering consistently strong investment returns.

Strip out the emotions

Fortunes have been won and lost on emotions, ranging from fear through to greed, that often drive investment decisions. Eliminating the human biases that lead to emotive and volatile decision making is an essential first step towards achieving more consistent returns, says Teichgreeber. He notes that investors will have a more predictable and high success ratio if they make less emotive decisions.

Prescient’s quantitative investment process does just this by relying on millions of data points and a 22-year investment track record to guide its investment decisions. It’s not a passive decision-making process, says Teichgreeber. “We always need to double-check that we are capturing all the factors that are influencing the financial markets. For instance, when there is load shedding or political uncertainty, which show up in poor business sentiment, we need to make sure this factor is adequately represented.”

Diversification offers calm in the storm

When market conditions are as unpredictable as they have been of late, a diversified portfolio offers the best assurance that you will be able to ride out the storm, protecting your wealth from the potentially significant impact of an event on one single asset class.

How diversified should an investment portfolio be? Bastian says the Prescient Balanced Fund, a top-quartile performer over most periods to end December, is globally diversified across asset classes, including equities, fixed interest and credit assets, as well as both developed and emerging-market assets. These exposures also need to be actively managed to take advantage of opportunities that arise when sentiment causes asset class valuations to move away from their underlying valuations.

Prescient, generally known for managing fixed-income assets, has built up formidable expertise in the equity and multi-asset class investment management space; the performance of which has been formally acknowledged. In January, Prescient was recognised as the third-best performing manager of the year at the 2020 Raging Bull Awards, highlighting the investment management company’s ability to deliver consistent performance across all its offerings on behalf of its customers.

The Manager of the Year Awards are based on the average PlexCrown rating achieved across all the manager’s qualifying funds. As such, the award acknowledges the breadth and consistency of performance gained across all asset classes and funds for periods up to five years.

Morningstar unit trust performance figures show that the Prescient Balanced Fund is a top quartile performer over one, three, four and five years. Over five years, the Fund was the eighth-best performer out of the 107 funds and seventh out of 160 over three years in the multi-asset class Association of Savings and Investments South Africa unit trust category. Meanwhile, the Prescient Positive Return Fund has also delivered top quartile performance over two, three, four and five years and the SA Income Provider Fund has achieved top quartile over four and five years.

On Prescient’s recognition as the third-best performing manager of the year at the Raging Bull Awards, Prescient CEO Cheree Dyers says, “Achieving a third place in these Awards shows that we are a strong investment manager across all asset classes.” She adds, “Prescient’s focus will always be on delivering consistent returns for investors and that this industry acknowledgement was a bonus. It confirms that we continue to deliver on our investment goal, which is to deliver consistent performance through exceptionally volatile and uncertain market conditions.”