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A LT E R N AT I V E I N V E S T M E N T S
Absa’s revolutionary new
Fund Linked Solutions Platform INVESTMENT OBJECTIVES
that could be worth zero can grow to many multiples of the
Why do we invest in financial assets? Irrespective of the
original price. Concentrated investing in potentially volatile
personal investment objectives, we invest in a range of
equities can lead to spectacular returns. However, to have
holdings to grow our wealth. No investor would be content to
the potential for stellar returns, there is a material amount of
have less, rather than more capital as an outcome of the
investment risk associated with the decision. The other mechanism for gains acceleration is the
investing process! Some investors want to grow
use of leverage. Leverage comes in one of two
their wealth rapidly and extensively. In contrast,
forms. Leverage can be inherent to the financial
others are more content to have slower gains
instrument, as with derivative instruments,
over time. Investors all have unique risk profiles that accompany their investment
or leverage means investing with borrowed
objectives and investment time frames.
money. Investing with borrowed money allows investors to increase their exposure
In a traditional investing environment,
to a financial asset. If the asset performs
to have more wealth, investors need the
well, there is plenty of capital to repay the
price of their purchased assets to increase.
borrowed money and make considerable
Unfortunately, asset prices do not always
gains on the original investor amount. It does of
rise within the intended investment time
course, work in the opposite direction, too; leveraged
horizon. Asset prices are influenced by a range of factors, from the economic environment and assetspecific elements, to market sentiment (what other investors think of the asset).
Chris Edwards, Head of Prime Services, Index and ETF
Being reliant on increasing asset prices to generate
investing can lead to material losses. For most investors, the primary risk they seek to avoid is a capital loss, wealth destruction. Many of the complex financial tools used by hedge fund
increased wealth is not always achievable. This dependence
managers allow for strategies that protect capital. Capital
made some financial market practitioners look for other ways to
protection is a way to guarantee that the initial investment will
achieve gains even if prices were not necessarily growing at the
be safe regardless of what happens.
desired pace. The “other ways” is where the hedge fund industry
While a capital loss is a chief investment risk, volatility, the
positioned itself. Initially unregulated, hedge fund managers
potentially wild swings in asset prices, is another type of risk.
sought to use more complex financial instruments to increase
Again, hedge fund managers have tools to control or dampen
wealth or minimise losses, even when asset prices were not
the volatility of some of their investments. It allows them to be
rising. They also sought out mechanisms that could accelerate
“on the roller coaster” but the gentler version.
wealth accumulation or reduce the risk associated with asset
As a retail investor, investing with borrowed money,
investing. Minimising losses and accelerating gains mean
leverage is not a readily available tool. Inserting a level of
compounding investment returns at an increasingly higher base,
capital protection is not an available tool. And mechanisms to
allowing hedge fund managers to outperform general markets.
dampen volatility are also not available in the retail investment
While the hedge fund industry is now globally more regulated, accessing hedge funds still tends to be the domain
space. Retail investors have until now, minimal investment tools at their disposal.
of high-net-worth individuals. The financial complexity and tools remain off limits. In other words, you already have to
DEMOCRATISING THE PLAYING FIELD
have money to make more money! And if money makes money,
The Absa Fund Linked Solutions (FLS) platform is revolutionary
then those that have it keep extending their wealth.
in that it provides a full suite of tools designed to democratise the investment playing field. The tools that were once the
INCREASING INVESTMENT WEALTH
preserve of hedge fund managers alone are now available to all
In pursuing investment wealth growth, there are some typical
investors. With the help of their financial advisor, the platform
ways to accelerate investment gains. Investors can make
allows all investors to combine traditional financial asset
significant returns by investing in volatile financial assets. For
investing with a range of advanced investment features. This
example, if the stars align, a small “penny-stock” company
offering sounds fantastic, but what does this mean?
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