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THE NAVIGATOR – ANCHOR’S STRATEGY AND ASSET ALLOCATION, 2Q21

09 April 2021

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by Anchor

The Navigator is Anchor’s quarterly review of the major themes affecting markets and gives an overview of our current Strategy and Asset Allocation. Click here for the full document.

The purpose of The Navigator is to provide our clients with insight into Anchor’s thoughts on various asset classes and our near-term market outlook.

It is refreshing to be able to write that South Africa (SA) as a nation is in a better place than it was at the time of our January Navigator publication. Businesses are recovering faster from the pandemic than was initially anticipated, the nation’s tax collection has proved to be more resilient than expected, national debt is now forecast to peak at 87.3% of GDP (which is still high but is better than the 92% peak that was forecast late last year). Similarly, the trade balance remains positive giving support to the currency, which is still on a gradual strengthening trend. President Cyril Ramaphosa has taken a strong stance against factionalism in the ANC and there can be no doubt that his hands are now firmly on the steering wheel of the party and the nation. Preserving lives remains at the forefront of the president’s agenda, but equally we are seeing a focus on the economy that was lacking under the previous administration. The bungled vaccination drive confirms that SA is not perfect, however, we do expect that, in the end, vaccines will be made available.

SA asset classes (both equites and bonds) have performed better than their global counterparts this past quarter (1Q21) as the country benefits from the cyclical upswing. New uses for our mineral resources in greener energy may see SA prosper for a while yet. Local asset classes will quite possibly continue to outperform in the short term.

In the context of managing our clients’ wealth, we maintain our view that diversification is of the utmost importance and that investors should seek to strike the right balance between domestic and foreign assets. The rand has strengthened against the US dollar and it is now close to our estimation of its fair value. Investors who have not yet done so, should think about taking some money offshore at current exchange rates. The rand is still in a strengthening trend and, while the exchange rate may yet improve, this is a good time to at least look to diversify some of your investments to offshore destinations.

In this regard, some diversified exposure to global equities, global bonds, and alternatives such as hedge funds and structured products would make sense for many investors. This should form part of your long-term investment strategy and we would caution against getting too caught up in the short-term performances of these asset classes. Over time, patience and diversification are the keys to investment success, while offshore assets do bring some peace of mind.

The key to successful management of your wealth is an ability to understand the changes to the world in which we live and to adjust (when necessary) your investment portfolios accordingly. As a boutique asset manager, we can navigate these twists and turns of global developments more readily and our team of experienced investment professionals are ideally suited to understand and react to a rapidly changing environment as we pursue exceptional investment outcomes for our clients.

For the full report and our views on each asset class, click here.

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