By JAGO GG FIORE, Head of Product Distribution, Signal Asset Management Product Distribution, Signal Asset Management
It was three months ago as news of the Government of National Unity (GNU) broke, and I wrote:
“As election outcomes edged towards announcement, I became increasingly suspect that I was in the presence of a boss who was preparing for the worst. Delirious ideas to flee his homestead and set up shop on an island were being spawned off daily… Luckily/fortunately a business-friendly announcement from the elections, a Government of National Unity (GNU) soothed markets and convinced my employer that sipping spiced margaritas, speedos and suntanning whilst shorting South African stock from the Seychelles will have to wait a second longer.”
In fact, perhaps South Africa could be the place for suntanning and trading! The director of Ninety One, Jeremy Gardiner, who spoke recently at a UJC Business Breakfast, the outlook on South Africa as a country, society and investment opportunity is optimistic on the back of a treacherous few years.
Most financial institutions too have started to project a more confident narrative concerning investing in South Africa: “The South African market is filled with opportunity!”
Everyone seems finally to be bullish (positive), and why should we not be?
It seems that our new government is business-friendly, and more importantly attractive to curious investors peeking at investment opportunities in South Africa that they previously deemed too risky. Now there is an open invitation to foreign investment.
Before the National Elections, there was a large outflow of money as foreign and local investors anticipated a potential doomsday outcome. It is logical to anticipate the reversal of many of these transactions and the arrival of new investors into South Africa. We have already seen the beginnings of money returning to SA shores with the stronger ZAR and strong buying of South African Government bonds, which arises from investor confidence in SA.
There are also factors in the short term that will fuel and boost our economy. Two prominent factors already in play are the two-pot system and the ‘end’ of load shedding.
The two-pot system was introduced in September 2024 to allow cash-strapped investors a once-off dip into their retirement savings to a maximum of R30 000, and then all contributions to retirement funds to be split one-third into savings and two-thirds into retirement. The savings pot can be accessed once every tax year.
The amount of spending in the very short term could be as high as R70 billion, which could benefit retailers. Large retailers have incurred material savings by not having to run generators to combat persistent load shedding. While these savings will flow into the coffers of retailers, the overall impact may not be so positive since other service providers, such as generator and solar suppliers, will find large income streams drying up.
While local investing looks more appealing than in recent decades, it is not unwise to still allocate offshore and, if one is under-invested offshore, it’s a good time to get one’s affairs in order.
On the premise that as long as USA inflation is below South African inflation, the ZAR will continue to depreciate against
the USD over time – another factor to consider when allocating offshore monies.
Logical to take advantage of equity space – but how?
Investment products are intangible. Markets and investors’ input is built on trust. Clients need to trust what they are being told is true. It is easy to get swallowed up into generalisations and cliches in investing: for instance, investors being ushered into an equity portfolio in these times when growth and prosperity is expected. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain.
One of the most powerful concepts in investing is being able to compound growth off a high base. Imagine being able to get equity-like returns taking on about 1/3 of that risk.
South Africa is home to a hidden jewel that is: Retail Hedge Funds
Retail Hedge Funds are designed to accommodate all investor types, not only high net-worth individuals. Hedge Funds are markedly superior to Equity Funds. What the best Hedge Funds do is outperform equity portfolios by being able to profit off both upside and downside volatility.
There are some important safeguards, though, such as the careful selection of the best Hedge Funds, and having someone do the initial and continual due diligence on the Hedge Funds selected.
We at Signal Asset Management do exactly that and, with extensive experience in the Hedge Fund industry, we introduced our product called Signal Offense Defense. We have selected the best Hedge Funds in the country and put them together to produce a serious engine room for long-term sustained growth. Signal Offense Defense is aimed at investors wanting equity-like returns with much less risk than equities.
The Signal fund has now returned 17.1% over 13 months. So, R1 million invested at inception (August 2023) would now be worth R1 171 000. That’s a gain of R171 000.
I urge any investor to spend some time studying the Hedge Fund scene in South Africa. Many funds demonstrate proven results and, with many employing varying strategies, it is likely that one will be suited perfectly to your risk-return profile.
Hedge Funds are certainly an investment worth considering.
Signal Asset Management was founded in 2007 by Jewish Capetonian Alan Amler. This boutique financial services firm focuses on designing model portfolios for the retirement industry. Last year, Signal launched one of South Africa’s first Retail Fund of Hedge Funds as an alternate investment to pure Equity Funds.
The Signal Moderate Growth and Signal Stable Growth products from Signal Asset Management are designed specifically for retirees. The investor can withdraw the growth on the capital at regular intervals to fund their living expenses or for other needs.
For more information visit https://signalasset.co.za. Or contact Jago.Fiore@signalasset.co.za or Alan.Amler@signalasset.co.za. Tel: 021 439 8090.
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