30 April 2021 | www.moneymarketing.co.za
WHAT’S INSIDE YOUR APRIL ISSUE DEVELOPING YOUR ADVICE BUSINESS Understanding your options for succession Page 14
BOUTIQUE ASSET MANAGERS SUPPLEMENT The unique culture of boutique asset managers Page 23
ALTERNATIVE INVESTMENTS SUPPLEMENT Investors are turning their attention to alternative investments Page 35
NOW, MORE THAN EVER, IT’S ESSENTIAL TO GET CLIENTS INCOME PROTECTION THAT MATCHES THEIR NEEDS If a client suffers a disability, income protection is critical to their financial wellbeing and that of their family Page 44
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First for the professional personal financial adviser
The rise of thematic investing BY JANICE ROBERTS Editor: MoneyMarketing
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outh Africa’s advisers, retail investors and institutional investors should take a closer look at thematic investing, what it means for the future of investing and why the old way of thinking about investments – based on income statements and balance sheets – is outdated in an age where platform technologies are taking over the world. That’s the message that Magda Wierzycka, CEO of Sygnia Asset Management, delivered to delegates at this year’s Meet the Managers forum hosted by The Collaborative Exchange. Digital themes are in play right now that are shaping the future and, in particular, the future of investing. “These digital themes are underpinned by disruptive innovation – and that innovation is basically making traditional industries value traps. A very good example of this is the difference between investing in a coal mining company and in a solar energy company. As solar energy is going to become the predominant source of energy worldwide in the next decade, why would you want to invest in a coal mining company if you can invest in the future?” She emphasises that the speed of change is the fastest ever seen in human history, “and that Magda Wierzycka, CEO, Sygnia Asset Management
speed of change has been driven by technology, and technology is just going to accelerate”. Big companies that do not adopt change to enable them to move into the future will be left behind. “Some big companies are completely inert. A very good example of that has been the fact that last year, instead of companies investing cash in innovation, we have seen massive buybacks of shares by the behemoths of the past.” Millennials now constitute a third of the workforce, but will make up 75% of that workforce within the next five years. This means the way in which investments happen, and the way in which investment themes are promoted, will change. “For instance, the impact on ESG, or crypto investing, or traditional equity markets, will be driven by that intergenerational wealth transfer from baby boomers to millennials.” Innovation, Wierzycka explains, requires both the private market and the public markets. “A lot of wealth creation in companies happens while they remain private and less accessible to retail investors. But those private companies usually get to a point where they need to IPO, where they need to list, and where they need the support of retail and institutional investors in the listed space.” This, she says, is an opportunity for a typical investor to benefit. At the same time, there are greater risks to traditional ways of investing. “Last year saw
massive price dislocations in oil, in banks, in yields, as well as some strategies employed by hedge funds. Shorting all of a sudden has become something completely different to what it used to be – and I’m sure I don’t need to describe to you what happened with Reddit, GameStop and Robin Hood.” Wierzycka believes that the digital revolution requires a new paradigm of thinking and investing. One of Sygnia’s four pillars of investment has long been thematic investing based on platform-style delivery, alongside low management fees via passive investments, risk management through active tactical asset allocation, and alternative investment strategies. She defines thematic investing as an investment approach that focuses on predicting long-term trends, rather than investing in specific companies or sectors. “So, we are talking about trends that lead to structural massive once-off shifts that can change the way we live, the way we behave, the way we work. It’s about investing in innovation and in disruptive technologies. Disruption is happening all around us, and it’s happening at multiple levels, for example data collation, cost, convenience, speed of access and social behaviour.” Platform technologies are starting to converge and merge sectors, she says. “A good example is Tesla, as it collects data on its customers and is involved in the development of electric vehicles as well as autonomous vehicles, and in battery/cell battery development. Tesla is much more than just a car manufacturer. Would you rather invest in a company of that nature, or would you rather invest in a traditional car manufacturer?”
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