RYK VAN NIEKERK: Welcome to this Financial Advisor podcast – my weekly podcast where I speak to leading financial advisors. My guest today is Suzean Haumann. She is a financial advisor at Brenthurst Wealth in Cape Town; she’s a certified financial planner and a member of the Financial Planning Institute of South Africa. Suzean, welcome to the show.
We are certainly living in interesting times: volatility seems to be the new normal. At Moneyweb I measure the concern of our community by the number of interactions we have – that is phone calls from community members, emails, comments underneath our articles – and I think our community is becoming more and more concerned about the investment environment. Have you seen an increase in phone calls from clients with concerns about their savings and investments?
SUZEAN HAUMANN: Yes, I have definitely seen an increase, not so much in telephone calls but definitely in emails, where clients will forward on an article that they’ve read or a concern that they’ve heard on the radio or a news bulletin or something like that. So definitely, clients are more concerned, especially with what’s happening in South Africa with regards to land expropriation and how that will affect their own investment on a local, as well as an international, basis. So yes, definitely, and I know my colleagues have seen the same pattern.
RYK VAN NIEKERK: Do you think they are justified with their concerns? Aren’t we just seeing a normal protracted investment downturn and the cycle should turn in the future?
SUZEAN HAUMANN: Some of their concerns I certainly think are justified but again, as you say, it is a market cycle and markets do move in cycles. It will go down and cannot just go down sometimes or it will stop and then turn around and go back up. But with regard to the local front, yes, I think for the immediate term some concerns are justified. We do hope that things will turn around for South Africa in 2019, but it won’t be a rapid increase or a rapid growth improvement. It will take some time to implement the new strategies, new think patterns and turn around the growth in South Africa on the economic front.
RYK VAN NIEKERK: South Africans are emotional people, very emotional, in fact. What mistakes are some of your clients or investors making in these uncertain times?
SUZEAN HAUMANN: Well, that’s where we come in. It’s a mistake that they want to make but we try to educate them not to make it and that is to withdraw their money from their equity portfolios or their investment due to the fear of losing their money in this low-growth environment, which is a big mistake in our view. When you withdraw your money from your investment and you put it in a bank or a money market, it means that you are actually realising your losses in a down market. This could result in being out of the market when buying opportunities present itself in the future and that will lead to missing out on long-term growth. Our advice in this instance is to rather stay invested and wait for the market to turn. Partake in buying opportunities at lower costs, which will give you the longer-term growth. One can never be sure when a bad market will end and a new market will start, so you can’t time the market, it’s simply not possible.
RYK VAN NIEKERK: Do they listen to you?
SUZEAN HAUMANN: In most cases yes. I haven’t had one client who completely moved out of the market this year, which I am very happy about.
Decreasing allocations to JSE
RYK VAN NIEKERK: Has the volatility, and especially the poor performance of many investment markets, including the JSE, changed your investment philosophy?
SUZEAN HAUMANN: Yes, with the poor performance of the JSE we do favour more offshore funds, more global equities in the portfolios. I won’t take my clients’ money out of the JSE, but I definitely do decrease allocations to the JSE or the local market. Then also I have seen more stable growth or above-inflation growth over the last two to three years in your income funds, specifically from cash and bonds, which I then also allocate some money to for the shorter term, just to stabilise the growth in the volatile markets we are currently seeing.
RYK VAN NIEKERK: But it’s not only equity markets that are very volatile – other asset classes are also not pinnacles of stability, especially the property market. What are your views on the other asset classes?
SUZEAN HAUMANN: Yes, property has definitely seen a huge decrease or negative growth this last year. In my view property has always been a very long-term, good producing asset class. Where clients still have property allocations in their portfolios, depending on the size, I’m not moving out of the property at the moment because then I will be realising losses, so I would rather wait. But I’m not placing any new money in property for the time being.
RYK VAN NIEKERK: There have been some divergent views from analysts and asset managers and other commentators on the best approach in the current environment, do you follow some individuals and their views to try and get a sense of how they see the changing environment and how you should adapt your strategies?
SUZEAN HAUMANN: I do listen to some of the fund managers where I find some very good advice. One of those funds managers is Clyde Rossouw. I like his thinking and he takes a more defensive type of approach in the management of his funds, which I like.
There are a lot of strategists who have said that they see a lot of growth potential in South Africa; I get where they are coming from.
We are seeing buying opportunities in South Africa where our market is a little bit cheaper, but I am also hesitant to go full on back into South Africa at the moment.
So yes I do listen to them but I also sit around a table with my own financial advisors and investment strategists within our company, where we throw ideas around and I get a lot of feedback from them, which we follow as a house view.
RYK VAN NIEKERK: Do you think active managers can outperform passive managers, because they can structure their portfolios differently to reduce risk?
SUZEAN HAUMANN: Yes, I definitely do. I think over the longer term the active managers are definitely the better way to go, because we are [capable] of making decisions in volatile markets to help our clients protect their money, where passive investment doesn’t have that opportunity. So yes definitely, over the long term I think active investment is definitely better than the passive ones.
RYK VAN NIEKERK: International markets have outperformed the local market significantly in recent years. When you advise clients to go offshore, where do you put their money?
SUZEAN HAUMANN: Ryk, as we do with our local portfolios we do advise complete diversification in the global sector as well. We do at the moment go a little bit more – because of the volatility in the global market – we do allocate more money into your stable fund, your balanced-type of fund and then we are looking at, like we’ve done over the last couple of years, we still allocate money to technology, to biotechnology, your well-known asset classes, global equities. But predominantly yes, we are investing in the US where we see the bulk of the growth coming from.
RYK VAN NIEKERK: And boutique asset managers, do you think they offer something different to the established, big asset managers in this volatile environment?
SUZEAN HAUMANN: Yes, I think in certain instances they certainly can. They have the opportunity to go and buy the smaller companies, where the bigger companies are not able to do it because their books are so big. They cannot buy small companies to get it on their books, so they sometimes miss out on these up-and-coming mid-caps. Where[as] I see some of the smaller fund managers can go in and they outperform the bigger funds because they’ve got allocations to certain stocks, where the bigger companies don’t have it.
RYK VAN NIEKERK: Thank you Suzean, we’ll have to leave it there. That was Suzean Haumann. She is a financial advisor at Brenthurst Wealth in Cape Town.