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<\/p>\nThe tariffs announced by the Trump administration a week ago have caused havoc in world markets, reminiscent of the 2008 financial crisis.<\/p>\n
Investment specialists, however, caution against hasty decisions and aggressive portfolio restructuring as markets do eventually recover.<\/p>\n
<\/p>\n
Here are insights from three asset managers amid the current turbulence.<\/p>\n
\u201cMarkets don\u2019t like the unknown,\u201d says managing partner Attila Kadikoy. \u201cIt creates anxiety among investors, and that is what is pulling markets down \u2013 not growth expectations or revised company earnings. We haven\u2019t reached that point yet. It\u2019s more due to the shock of the announcements.\u201d<\/p>\n
The fluid nature of the situation makes it risky to trade after the fact, potentially solidifying losses.<\/p>\n
\u201cWe will have to wait and see what happens next. In my view, the biggest risk would be to try and rebalance a portfolio in this turbulent market.<\/p>\n
\u201cA well-balanced portfolio will prevail and ride out the turbulence,\u201d he says.<\/p><\/blockquote>\n
\u201cThat might include certain geographic areas, such as China, which is faring slightly better than developed markets and fixed income.\u201d<\/p>\n
He believes adopting a slightly more defensive investment stance is appropriate, as it offers greater stability. \u201cAccordingly, we are increasing exposure to high-quality bonds and inflation-protected securities.\u201d<\/p>\n
Investors with fixed income and gold in their portfolios to counter losses would be well-positioned to protect their portfolios in the current environment, he adds.<\/p>\n
Ninety One<\/h3>\n
\u201cOur investors will know we\u2019ve been defensively positioned around SA Inc trade in our cautious-managed and opportunity funds, with growth and jobs being our main concerns,\u201d notes Ninety One\u2019s SA investment chief Duane Cable.<\/p>\n
He expresses disappointment and concern over the instability within South Africa\u2019s government of national unity (GNU) but believes it \u201cmay hold\u201d due to vested interests \u201con both sides of the fence\u201d.<\/p>\n
(The two biggest parties in the GNU \u2013 the ANC and DA \u2013 fell out over South Africa\u2019s national budget incorporating a Vat hike, which has sparked fears of a DA exit.)<\/p>\n
\u201cUnfortunately, investors will not again fall for the excitement and euphoria we\u2019ve seen around President Cyril Ramaphosa and the GNU,\u201d he says.<\/p>\n
\u201cThis time around, they\u2019ll want to see tangible evidence of positive growth dynamics and if the GNU is effective in getting things done and moving forward before making further investments.\u201d<\/p><\/blockquote>\n
In terms of portfolio strategy, Cable mentions that both Ninety One\u2019s opportunity fund and the cautious-managed fund started the year with significant cash.<\/p>\n
\u201cWe are selectively looking for opportunities, focusing on SA government bonds before considering SA Inc equities.\u201d<\/p>\n
Peter Kent, Ninety One\u2019s co-head of emerging market fixed income, highlights that the recent decline in oil prices could offset the rand\u2019s weakness and improve South Africa\u2019s inflation outlook.<\/p>\n
The South African Reserve Bank (Sarb) has already been implementing tight monetary policy, and there could be a resumption of interest rate cuts. \u201cSo, we\u2019ve moved our portfolio to the part that is exposed to cuts.\u201d<\/p>\n
Kent also emphasises the importance of diversification in the current environment, advising against moving to cash.<\/p><\/blockquote>\n
\u201cThis is not the time to be running to cash. There are a lot of opportunities outside the US,\u201d he says.<\/p>\n
\u201cPricing power will play an important role \u2013 tariffs are inflationary, and companies with pricing power, as well as countries that can adapt to inflationary pressures, should be considered for investment.\u201d<\/p>\n
Protea Capital Management<\/h3>\n
\u201cOur investment strategy remains the same \u2013 search for shares of high-quality companies to buy at reasonable prices, and search for shares of mediocre companies to \u2018short\u2019 at expensive prices,\u201d says CEO Jean Pierre Verster.<\/p>\n
Although the strategy remains the same, he adds that Protea has adjusted its portfolios (especially the global long-short portfolio) recently as opportunities presented themselves due to the higher volatility.<\/p>\n
Domestically, Protea has been cautious about making significant changes to its long-short portfolio amid the rising tensions within the GNU. \u201cThe changes we are considering are due to valuation considerations rather than GNU reconfiguration considerations.\u201d<\/p>\n
Protea\u2019s strategy remains to balance risk exposures and hold a larger number of smaller positions in funds, which is its typical portfolio construction.<\/p>\n
\u201cWe are cautious about making major changes. A fund manager can very easily increase the risks that a portfolio is exposed to by making major changes in the midst of market volatility.\u201d<\/p>\n
In terms of defensive investments, Protea focuses on equities in sectors such as healthcare, tobacco, and alcoholic beverages.<\/p>\n
\u201cWe also believe that both defence and offence should be kept front of mind, since it is often during times of great market volatility that attractive opportunities present themselves. Opportunity and threat are two sides of the same coin.\u201d<\/p>\n
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