Prescient Investment Management

ESG’s role in investment management is being increasingly criticised and minimised globally. Some US asset managers are reportedly rethinking the usefulness of integrating ESG and sustainability measures into their decision-making process.

As kids, we were told to save — save in our bank account, or in our piggy bank. What we didn’t realise then is that if we had invested our money instead, we would have been further on the path to unlocking our financial freedom.

In the world of investing, it is our view at Prescient Investment Management (PIM), that striving for the perfect balance is crucial for long-term success. We understand that this success hinges on meticulously calibrating strategies to be neither too aggressive nor overly cautious - striking this balance is essential to not expose investors to unnecessary risks; or result in missed opportunities for growth. Being alert to where one is in the market cycle and having the ability to adjust strategies accordingly is key to navigating market complexities and delivering on client promises.

Political uncertainty in the build-up to the elections and longer-term structural economic concerns have seen investors eager to invest offshore. This is reflected in the R73 billion increase in the total assets invested in foreign collective investment schemes to R928 billion in the first quarter of this year from R854.8 billion in the fourth quarter of 2023.

As we enter the final week of National Savings Month, it's an opportune time to highlight the power of compound interest, a cornerstone of long-term financial growth. Warren Buffett famously described compound interest as the "eighth wonder of the world." His wealth, largely accumulated after his 50th birthday, underscores the transformative power of time and patience in investing. The secret? Start early, invest consistently, and allow compound interest to work over time. As Buffett himself noted, "My life has been a product of compound interest."

At Prescient Investment Management (PIM), we recognise the scepticism and misconceptions that often surround ESG (Environmental, Social, and Governance) investing. It is sometimes unfairly labelled as a "dirty word" by critics who question its effectiveness and relevance. However, our approach to ESG is grounded in pragmatism and a clear understanding of its role in comprehensive risk management. We believe that integrating ESG factors is not only beneficial but essential in today's investment landscape.

In the intricate and forward-looking world of asset management, the distinction between macroeconomic outlook and market sentiment is pivotal. The former gives us an overarching view of the state of the economy and its likely trajectory. In contrast, the latter gives us insights into market participants' psychological and behavioural aspects, which often drive markets and may not reflect macroeconomic fundamentals.

Investors looking beyond South Africa’s borders to diversify their portfolios globally typically focus on the opportunities provided by global equities. However, high interest rates in the currently uncertain investment environment provide another compelling opportunity to invest in high-yielding, low-risk global income assets.

On March 19th, officials at the Bank of Japan (BOJ) declared that they will abandon a series of unconventional policies implemented to stimulate the economy and overcome its deflationary malaise. This decision marked the conclusion of a bold experiment, as they aimed to achieve sustained consumption-based measures of inflation of 2.0%.

A tit-for-tat escalation in hostilities between Israel and Iran adds to an already unpredictable geopolitical landscape, and with little certainty regarding the central banks’ next move on the interest rate front, the economic outlook remains highly uncertain.

Investors looking beyond South Africa’s borders to diversify their portfolio in today's interconnected world should consider highyielding income assets that are benefiting from the current high US interest rate environment, along with the myriad of other global equities not available on the Johannesburg Stock Exchange (JSE).

BY: BASTIAN TEICHGREEBER, CHIEF INVESTMENT OFFICER AT PRESCIENT INVESTMENT MANAGEMENT

South Africa’s rand has had an exceptionally volatile year, almost reaching R20 to the dollar in May before strengthening to about R17.27 in late July and then weakening again to trade between R18 and about R19.30 to date. Most notable about the domestic currency’s weakness is that it has been weak on a relative basis compared with some of the other emerging market currencies and not just against the US dollar, which suggests that there are other forces at work.