Rüdiger is a portfolio manager responsible for SA Equity & Multi-Asset strategies within Ninety One’s global 4Factor team. His specific focus is managing the asset allocation of the South African and Botswana Balanced portfolios and the offshore investments of the multi-asset portfolios. He also manages the Worldwide Flexible Fund and our Target Retirement Date funds. He is also an analyst within the wider Multi-Asset team with a focus on asset allocation and fixed income. He joined the firm in 2004 following his studies at the University of Cape Town. While studying towards his Bachelor of Commerce (Hons) and Master of Commerce degrees, Rüdiger worked as a research assistant in the School of Economics and at a firm of management consultants in Germany. From 1996 to 1997, he lived in Germany where he worked in the film industry. Rüdiger holds a Master of Commerce degree (cum laude) in Economics from the University of Cape Town.
Hannes is the co-head of SA Equity & Multi-Asset within the 4Factor team at Ninety One. His focus is on the General Equity and Balanced strategies and equity hedge funds. Prior to joining the firm, Hannes was a portfolio manager at Fairtree Capital. He was also an analyst and head of the equities trading desk. Before that, he held various positions within the Sanlam Group, including being a founding member of MiWay Insurance and member of the Group Corporate Finance team. Hannes completed his articles at PricewaterhouseCoopers. Hannes holds a Bachelor of Accounting Honours as well Bachelor of Accounting Masters degree from Stellenbosch University. Hannes is a Chartered Accountant and CFA Charterholder.
Discovery Target Retirement 2050 comment - Sep 15
Equity markets were volatile over the third quarter of 2015, particularly emerging markets, but even large developed markets were not spared either. The MSCI World Index fell 8.4% while the MSCI Emerging Markets Index declined 17.9% in US dollar terms. This resulted in the sharpest emerging market equity drop since the third quarter of 2011 and, also, the lowest MSCI Emerging Markets Index level since the global financial crisis. Over the past few quarters, we have repeatedly raised our concerns around the fragility of the global economy and asset markets. To this end, our patience was rewarded as it allowed us to increase our foreign equity exposure and invest our US dollar cash at much better levels. Currently, the global economy does not reflect a homogenous story of improving growth and rising inflation. China is arguably the largest contributor to global growth concerns. Recent economic data points to further rapid deceleration, a trend which began almost two years ago. The collapse in commodity prices and Chinese equity markets - the latter occurring following a recent meteoric rise - continues to spill over into global markets.
Our positioning within the resources sector continues to contribute positively. Not holding the likes of Anglo American, BHP Billiton and Glencore helped as these shares were hurt by falling commodity prices. Meanwhile, our continued overweight exposure to global cyclical industrial shares Mondi and Steinhoff International also added to returns. Our more cautious asset allocation, reflected by our underweight exposure to risk assets, proved helpful amid heightened volatility. Across the Fund range, we significantly increased our allocation to nominal bonds and reduced our position in inflation-linked bonds. Also, our offshore component was positioned more defensively. This strategy was beneficial as our sizeable cash allocation and significant US dollar skew reduced overall volatility and provided some downward protection. Overall, our offshore exposure was also aided by the tailwind of a weaker rand. Given the prevalent ‘risk-off’ environment most recently, our underweight allocation to large-cap defensive stocks detracted from equity index relative performance. British American Tobacco and SABMiller were large beneficiaries of negative market sentiment. The latter was further supported by an approach from Belgian-based mega brewer Anheuser-Busch InBev, with the intent to make a firm offer to acquire it.
Portfolio activity As markets collapsed in late August, we increased our equity exposure into weakness by deploying most of our US dollar cash position in favour of European equities. In our view, the region continues to provide attractive stock investment ideas, within an environment that is experiencing a broadbased recovery in economic activity. Our sector biases are similar to those we have within our local equity component, away from energy and materials, and toward industrials and select financials. Meanwhile, our allocation away from the US dollar continued. Since its peak in March this year, the currency has tracked sideways, largely held up by prospects of further monetary stimulus in Europe and Japan. While we do not disagree that further policy support may materialise, we argue the euro/dollar adjustment has priced in much of the potential monetary easing. Locally, we added to our fixed income exposure, which now comprises a significant portion of our portfolio, while recognising the serious headwinds facing both the economy and, in particular, the fiscus. Against a backdrop of low global bond yields and a sharp rand sell-off, the prospect of real returns from local debt is attractive in our opinion. Within local equities, we continued to trim some of the larger positions, including FirstRand, Standard Bank Group and Sanlam. We also added Richemont and Vodacom Group on the back of improving earnings outlooks from operational activity.
Portfolio positioning Earlier, we cited the high levels of market volatility and uncertainty surrounding potential policy moves. We recognise the environment for outlandish returns has deteriorated, while simultaneously the potential for somewhat tighter US monetary policy in the near future is ever increasing. Counterbalancing the headwinds is the significant downward price adjustment of assets that are most vulnerable should the global environment deteriorate. Furthermore, the usual inflationary pressures that have historically resulted in much more coordinated tightening by policymakers and a subsequent global slowdown remain largely absent. We maintain a medium level of risk in the portfolio, seeing ample opportunity across a broad set of investments, both in South Africa and abroad.
Within South African equities, we believe opportunities for now remain within the industrials and financials sectors, where companies are seeing improvements in their profit outlooks relative to historical consensus. But within these sectors, we maintain our underweight allocation to companies that are significantly exposed to the domestic economy. Our positions in Mondi, Steinhoff International and, most recently, Richemont all benefit from the improving European growth environment. In line with our investment process, we will continue to add exposure to companies receiving operationally driven, positive earnings revisions, while having reasonable valuations. We believe that even in uncertain and challenging market environments, the opportunity to outperform remains, but acknowledge that more moderate returns may lie ahead.
The objective of the portfolio is to maximise the total real returns comprising both capital and income over the anticipated life span of the portfolio. The risk profile of the portfolio will vary over the investment term following the cohort of investors who anticipate a retirement date close to 2050.