private wealth management
ROFICIO PNFB FINANCIAL UPDATE ISSUE 82 October/November 2015
FROM THE CEO’s DESK
W
ell now, we really have had a very turbulent time recently. From economics to politics, on a corporate level as well as in markets, activity and volatility have been the name of the game. Investors might have read warnings in recent years that our complacency can be our worst enemy. A recent example would include taking a strong rand and the concomitant opportunity to diversify for granted. The problem we now face in remedying this rather obvious omission, is the direction from what could be an overdone selloff, could easily be stronger! Who really knows? Add to this experiences of recent times when the rand experienced similar volatility from which it then recovered and you have real confusion. What is true is that offshore investments over the last few years have been rewarding given the weaker trending rand, stronger offshore equity markets and the “free ride” which diversification offers. I guess the point is to avoid second guessing the market. It all starts with understanding needs, understanding necessary outcomes and then establishing a risk budget. In simple terms this implies ensuring risk of missing your necessary outcomes on investments is balanced against the likely valuation volatility the chosen portfolio will display. Clearly, the longer money is invested for, the more likely the growth will be best if growth assets like shares and property, either here or abroad, are chosen. Similarly, they are also the most likely to display fairly significant periods of volatility. Equally, taking a more conservative approach will almost always lead to more predictable outcomes, but with a greater risk of underperformance particularly after inflation and tax are factored in! Equity markets are also all over the show. I feel so sorry for retail Chinese investors who, by the tens of millions have been enticed into a Shanghai Index and even more volatile shares which have performed remarkably over the recent past. What is not always clear to the uninitiated investor is gravity almost always prevails and sky high markets have a habit of returning to earth, often abruptly and often with a nasty bump.
listed entity. We concluded a deal on the 1st September and the Group, called NVest Financial Holdings, now includes the East London, Port Elizabeth, Cape Town, Stellenbosch and Johannesburg Advisory What is even more worrying is the fact that businesses, NVest Securities which is a Stock the Chinese listed shares are still being broker, NVest Properties and NFB Asset underpinned by government-backed funds Management, with a strategy to create a buying them, and brokers being leading, fully integrated advisory and encouraged to stabilize markets whilst the financial services business, capable of same shares are available in H shares in delivering cost-efficient world class product, Hong Kong at a significant discount! advice and service. China's woes are not just having From our client's point of view, nothing domestic impact. The material losses, the changes. We continue to be NFB and offer government's use of reserves to underpin the financial advice and service. What has failing economy, the terrible economic stats changed is the Group now has almost R25 coming out of China combine to put the billion under management. This will result in Emerging Market (EM) currencies and cost efficiencies and savings for our clients as markets under pressure. They simply don't product providers recognize the scale and need our coal, timber, iron ore, platinum and relevance of existing and potential many other goodies, particularly investment flows. Similarly, the stock broking commodities on which the EM's have based business offers a superb, cost efficient point their economies. of access to equities, bonds and derivatives. Another remarkably volatile commodity These will be developed into solutions for our has been oil. The attached graph shows an clients in Gauteng, following a very extraordinary range in a very short period of successful introduction into the Eastern Cape time. It appears as if the OPEC members are business over the last number of years. sorting out their differences and are It also follows that as an organization agreeing strategy which will likely result in a grows and the founders get a little older and stabilizing of the oil price at higher levels. The younger talent is developed, that batons oil price has recently risen by almost 27% in need to be passed on. In both East London ten days. Clearly this leaves some people and Johannesburg, we have appointed new happy and others very sad! Timing, which we Managing Directors. Gavin Ramsay and always say is not your friend, in planning long Andrew Duvenage are these new office term investment outcomes, is rather more bearers. I am sure you will join me in important in these times, particularly when congratulating them on these appointments large multinationals are buying or selling and wishing them well. The “older” team millions of barrels in deals! remain in play occupying roles on the listed Changing tack from matters of markets to company's Board and in their historical roles developments closer to home - NFB has within the advisory businesses. We would like to thank our many clients, business introducers, institutional partners and product providers as well as our families for the support and loyalty we have hopefully earned and enjoyed in our journey to this important point. We look forward under the Source: Bloomberg leadership of our divisional 52WK RANGE heads to continuing to deliver 42.23 - 101.25 advice and service of a some very exciting news. A few months back high standard and to continuing on a our long time partners in East London listed growth path where meeting your needs on the JSE's Alt-X. This was soon followed by is our central focus. us being invited to discuss our inclusion in this