The past few weeks have been difficult for investors because many have suffered declines in their investment values as a result of Covid-19 and junk status rating. My customers are no exception. The impact is even harder for those that are at retirement age because they do not have the luxury of time for the markets to recover. These are the most trying times for a financial advisor because one has to work harder to try and select funds that will give investors positive returns despite the pandemic. Pain leads to growth and in the last few weeks, I have spent countless number of hours learning, studying and analysing as I was looking for investment opportunities where I could still invest money for my customers and be confident that they would get positive returns. I knew that if any fund survived the negative impact of Covid- 19 then that is the resilient fund that I would want to invest in.
The sad reality is that our economy was already in a very bad shape prior to the Corona virus as we saw companies continuing with retrenchments, GDP growth of only 0.2% in 2019 and the virus just “put the nail in the coffin” of our economy. We are already seeing bankruptcies, businesses reporting poor earnings, suspension of dividend payments and debt defaults. The top 40 shares in the JSE record negative returns, the bonds also record negative returns and the money market current yield is declining as a result of the MPC reducing repo rates to stimulate the market. My investigation led me to look offshore for positive returns.
The 2 funds that gave stellar performance despite Covid – 19 are Sygnia’s 4IR global equity fund and the FAANG [Facebook, Apple, Amazon, Netflix, Google] Plus Equity fund with Year to Date performance of 20,8% and 31,1% respectively as at 30 April 2020. The 1 year performance for the 2019 calendar year was 27,8% and 35,6% respectively. Part of their stellar performance is due to the fact that they benefitted from the depreciation of the Rand against the Dollar. The 4IR Fund offers investors access to global companies optimally positioned to benefit from new technologies e.g. autonomous vehicles, clean tech, drones, 3D printing, robotics, nanotech, smart buildings, virtual reality, cybersecurity, space and wearables, etc…
The challenge is that due to Regulation 28, one can only invest up to a maximum of 30% in offshore funds for those who are investing in retirement annuities and pension funds.
In future, I will write about alternative investment funds that are likely to give positive performance regardless of the markets due to the fact that their returns are uncorrelated to market returns. These are an important part of a successful investment strategy because volatility is going to be a constant as the world suffers the effects of Covid-19. Diversification is going to be critical to counter the impact of volatility
Learning is a life long occupation and hopefully our customers will be able to recover quicker given the efforts we are putting to mitigate the negative impact of Corona virus and our struggling economy.
You can invest in these offshore funds from a minimum of R500 per month or lump sum of R20 000. If you want to invest as an individual, a member of a stokvel or as a company for your employees, you can email us at email@example.com
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