Adriaan Pask

The big themes in markets this year were rising inflation and interest rates. How did you respond in your allocations?

We have been sceptical of lofty, top-line forecasts and overly optimistic about profit margin estimates. With that as context, we watered down our growth-factor exposure and increased the exposure to the other factors. We also increased the level of diversification and introduced some managers that are more focused on real returns. We felt that a specific focus on generating returns in excess of inflation would improve portfolio resilience.

How have some of the major geopolitical events we’ve seen this year influenced your decision making?

Unless there is an extreme risk that is not being actively managed by our selection of fund managers, we won’t adjust our portfolios on the back of a single geopolitical event. Our underlying managers are much better positioned to address those risks on our behalf. That is why we use them. That said, extreme events of any kind always force you to re-evaluate, engage and monitor specifics.

In what ways have markets surprised you this year?

The extent to which the UK has experienced a wide variety of complex issues has been remarkable. The politics are top of mind, but the energy constraints and subsequent inflation issues have been material. Add to that issues in both capital and debt markets, and the exceptionally weak currency.

The US dollar has also remained incredibly strong. Economic fundamentals have deteriorated quite a bit, yet weakening global sentiment continues to support the dollar. This is a space to watch very carefully.

How did the lessons of 2020 and 2021 help you in 2022?

Good investment discipline plays a very important role in our approach. Every year comes with examples of where we had to fall back to that to help us navigate some type of complexity or challenge. 2020 was a good example of such a challenging period. 2021 helped us to reaffirm confidence in the approach, and we have been tested again 2022. Sometimes you relearn old lessons like that. The teachers are not always the same, but the lessons seem similar.

Which asset allocation questions have been most hotly debated this year in your team?

Exposure to growth assets continues to be a debate for us. We always try to find the right balance between managing risk effectively, but then also not overly tilt the portfolio in any specific direction. We do our best to provide some space for the investment expertise to add value, but be prudent, and never disrupt the views that have been meticulously crafted by the collection of underlying managers.

What decisions have you made this year that have had the most impact on your portfolios?

We trimmed back on growth exposure quite materially, which has been beneficial. The additional diversification we introduced also helped. Lastly, the hedges on the real return strategies added some good value.

Do you believe that the investment landscape for South African investors is more or less attractive than at the end of 2021?

South African assets are very attractive in our view. Even more so than in 2021. In equities, free cash flow yields are high and supported by attractive dividends and valuations. Bond yields are high at a time when the dollar is very strong. Cash rates continue to move higher. Listed property has moved past the worst in our view, and offers strong yields. Offshore allowances have also increased. We are excited about the level of opportunity out there. This year has been tough, but it has created a lower base for many asset classes, which provides a healthy platform for the next cycle.

What are the most interesting conversations you have had with asset managers this year?

The most fantastic thing about this industry is the people. The amount of intellect, insight, and fresh perspective still amazes me. Naturally, you always seem to get the most interesting comments, perspectives, or stories from the more ‘seasoned’ fund managers in the industry. They just have a neck for explaining complex issues in very simple terms and often tell remarkable stories about their investment journeys.  Showcasing experience in the best way.