Brexit. SA Municipal elections. Trump vs Clinton

2016 has been the year of forecasting, voting and surprises. And potentially the biggest and most influential vote is still to come; in the form of the US Presidential election. As an interested outsider it seems remarkable how close the polls seem to be.

Coincidentally, each of these elections can teach us a couple of important things about investing.

It is extremely difficult to forecast things - It has been remarkable to note how wrong many of the traditional surveys have been. Right up until late on the evening of Brexit counting, many pundits continued to believe what they wanted (to remain), and not what the facts were showing (to leave). Similarly, investors need to make sure they do not become overconfident or wedded to their forecasts.

Consider the implications and probabilities of different eventualities and prepare for more than a single outcome - It was strange that post-Brexit, the Prime Minister resigned, the chief protagonist left office and it seemed as if almost no-one had a Plan B. Investors need to design portfolios that can be successful in a range of outcomes, including unlikely ones. A key component of this is to ensure proper diversification across managers, asset classes, sectors and geographies.

While the elections may be in the forefront of market influence, it is imperative to keep a level head. You may
have seen our television commercial which tells the story of Captain Chelsey Sullenburger leaving La Guardia airport, encountering a bird-strike which results in engine failure, and how he uses his years of experience and skill to land the plane safely on the Hudson River in New York City. It seems that the big Hollywood names also liked the story and the movie “Sully” directed by Clint Eastwood and starring Tom Hanks was recently released on circuit. It is well worth a watch. 

We remain committed to our primary role which is to help you achieve your goals. We do this is by making sure that we have appropriate funds available to you, and that we research, select and monitor Best of Breed™ managers who we believe to have a sustainable edge in their area of expertise. One of the benefits of our job is that we get to meet and interrogate many outstanding (and many not-so-outstanding) managers from across the world. These managers all have different views, philosophies, and processes but a common theme we hear again and again from them is a concern around the grand experiment of quantitative easing and how it eventually unwinds, coupled with a view that absolute valuations of almost all major asset classes are not cheap. 

In this newsletter, we have articles from three of our Best of Breed™ managers with different mandates (local asset allocation, global asset allocation and global equity). All three are cautious about prospective returns and have been trying to position their portfolios for an environment of uncertainty and fewer opportunities. Each attempts to do this differently, either focusing more on quality, or holding more cash, or trying to be more opportunistic when the markets react irrationally to short-term news or attempting to uncover hidden gems. Each of them has demonstrated skill in being able to add value over the long term.