Media Release: More multi-asset investments anticipated as South Africa prepares for elections

May 2024: With the elections approaching, South Africa is preparing for a time of increased market uncertainty, which is likely to boost the growth of the multi-asset investment category.

This is the view of Rob Johnson, Head of Investments at Nedgroup Investments, who says that South African investors have been showing strong interest in the category for a long time, and he anticipates more demand for the category as investors look for the diversification benefits in anticipation of election-related instability.

“South African investors need the reassurance that most multi-asset strategies provide when it comes to diversification. By spreading investments across various asset classes, a proven multi-asset strategy can mitigate risks and capitalise on opportunities. Moreover, multi-asset strategies can adapt more fluidly to changing economic conditions, which is particularly valuable in an election year where investor sentiment and market reactions can shift rapidly based on political development,” he says.

It is common for investors to wait until after impactful events, such as the forthcoming election, hoping that there will be more stability and a clearer path ahead. In reality, economic and market uncertainty are omnipresent, and the South African election is just another disruptive element. Rather than waiting until after the election, investors can use multi-asset portfolios to manage the uncertainty.

South African Multi-Asset portfolios received approximately R60 billion in net inflows in 2023. SA Multi-Asset Income portfolios were the most popular with investors in 2023, receiving R30 billion which illustrates the reticence of investors to put money to work in more risky asset classes. However, the SA Multi-Asset High Equity category also attracted a large amount in net inflows, R21 billion, as the investment of choice for long term holdings.

“A feature across the Nedgroup Investments multi-asset Flagship Fund Range is that they are specially managed to handle the kind of uncertainty that we are facing in markets currently and built to avoid permanent impairment of capital. If investors can see through the noise of the coming months and think about longer-term prospects of SA multi-asset funds, we would expect the growth in the category to surpass this in 2024.”

For financial advisors, using multi-asset funds in client portfolios can help to match the individual risk profiles and investment goals that they have developed with clients. “The wide range of multi-asset funds available can be a flexible tool. They help advisors to build investment solutions that match their clients’ risk appetite and objectives, whether they want short-term stability or long-term growth” Johnson says.

Johnson also highlights the behavioural advantages for investors who have good diversification over a period where there is likely to be more noise and emotion.

“A number of SA Multi Asset High Equity portfolios have been able to keep pace with the SA Equity market over the past 10 years to end March 2024. This means that investors in SA Multi Asset High Equity portfolios can still benefit from the returns of the equity markets, but - importantly - with less of the variability that comes with equity portfolios. This is especially relevant during periods of uncertainty and can lead many investors to make poorly timed investment decisions. A multi-asset fund should be able to manage short-term risk and opportunity more effectively.” he says.

As the elections approach, Johnson advises investors to stay informed and to take measures to avoid emotional or impulsive reactions. “For most investors, the long-term outlook is what matters, and volatility is normal in the short-term. Diversification can help improve the investor experience during these times,” he says.

Nedgroup Investments has a flagship range of multi-asset solutions. To learn more about Nedgroup Investments’ multi-asset strategies, visit: https://www.nedgroupinvestments.com/content/NGISingleSiteContent/Local/Financial-Planner/campaign.html.

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