27four Investment Managers
20th April 2020
Covid-19 updates for the 27four investor
We have curated all Covid-19 related resources on to this web page, including resources from official Government channels as well as important updates from our various teams.
27four remains open to you during the lockdown period and our teams continue to live your investments.
Support for SMMEs
Led by Willowton Group, 27four Investment Managers has joined other South African corporates to collectively provide funding and support for South African small businesses impacted by Covid-19 through the Giving for Hope Foundation. The foundation’s primary objective is to provide free loan funding to South African business to prevent job losses.
Learn more about these efforts and how SMMEs may apply using the link below.
Understanding the impact of Covid-19 on your investments
We answer some of the frequently asked questions presented over the last while from investors regarding the impact of Covid-19 on their investments. If you require help with a product or fund question, speak to your financial advisor or get in touch with our client services team.
Why has my investment lost so much value?
The recent global health emergency caused by the coronavirus (COVID-19) outbreak has led to losses in financial markets. Your savings are invested in financial markets and the value of your savings is linked to what is happening in financial markets. Share prices in all countries fell because of COVID-19 and other problems in the world economy. The reason for this effect is partly because the virus will have an impact on economic growth going forward and partly because people are anxious, fearful and uncertain. This leads to selling shares, because of fears that prices will fall more. If a lot of people are trying to sell shares at the same time, share prices decrease.
Will my investment decrease even further?
It is possible. We do not know when the coronavirus crisis will end or how. This means that we do not yet know what the full impact will be on economies and financial markets. What is becoming abundantly clear is that the global economy is going to experience a sharp downturn for at least the first 2 quarters of the year impacting full year growth. While operating in an information vacuum, the market reaction to what the expected impact is likely to be will be severe. In January 2020 the IMF estimated global growth for 2020 to come in at 3.3%. Now that forecast has been slashed by 6% with the IMF expecting global growth for 2020 to be -3%. Experience has shown that financial markets recover after a global crisis, but how long this may take is unknown.
When will markets recover?
The global outlook is uncertain. It is not possible to calculate exactly when the South African stock market will fully recover or for how long this situation will persist and we should all expect continued volatility over the coming weeks and months. History shows us that markets tend to recover within one to three years after a crash.
Should I switch to a different investment portfolio/money market?
It wouldn’t be a wise strategy to sell out now, particularly if you are still a long-term investor and your time horizon hasn’t changed. The chances are, you are going to lock in a loss and you are going to miss the recovery. Research conducted by JP Morgan suggests that, on average, six out of the ten best trading days happen shortly after the ten worst trading days, and the chances are good that you might miss out on those ten best trading days when you switch out at or near the bottom of a fund’s performance.
When investment values fall, people often react by changing their investment portfolios or preferring a cash-type investment like a money market fund. Because we don’t know when financial markets will fall or how far they will fall, these actions usually take place too late after investment values have already decreased. Remember, different asset types behave differently over time and during different market cycles. Growth assets (investments), like shares (equity) and property, look to achieve an investment return that exceeds inflation. Assets like cash and bonds, on the other hand, achieve lower, steadier returns relative to growth assets. Although switching into cash or other similar assets may seem like a good idea right now, these asset classes are less likely to grow your money by more than inflation in the long term. The severity of this current market shock has meant that all financial markets have been adversely affected, including more defensive investments such as bonds. The result is that virtually all portfolio values have declined. More conservative portfolios have, however, declined less than other portfolios and the market as a whole. The most suitable investment portfolio for you to be invested in is one that will help you achieve your longterm goals.
What is 27four doing to prevent my investment from reducing further?
As a multi-manager, our philosophy is based on the premise: don’t put all your eggs in one basket. Investing in a single manager fund exposes the investor to risks associated to one investment house and investment style. Similarly, investing in one asset class exposes the investor to market risks associated with that specific asset class. Our diversified investment process is designed to mitigate such idiosyncratic (fund specific) and market (systematic) risks to deliver superior risk-adjusted investment returns, across market cycles. This is achieved through superior fund selection and sophisticated portfolio construction (blending) processes that offer multiple levels of diversification between asset classes, geographies, underlying managers (funds), investment strategies and styles. The result of this is that our portfolios have maintained their value better during the crisis than the market has. Our solutions are designed to give clients the highest likelihood of achieving their investment goals over the fund’s investment timeframe.
How does the current market downturn create opportunities for me?
For those already invested in the market, it means holding your nerve and continuing your contributions. For those on the outside, it means getting started while assets are undervalued. It is during these periods that investors can afford to buy more shares with their money, just like when goods are on sale. This may lead to better investment values in future as markets recover, bearing in mind that there will be bumps along the journey.
How should investors manage their investment during high market volatility?
Try not to act impulsively. Historically, the best course of action in times like these has been to stay invested, even though it is extremely uncomfortable while you are experiencing short-term losses. Try and separate yourself from the market noise and focus on the above investment truths. Avoid using daily news headlines to make decisions. Stick with your investment strategy which is designed to help you reach your goals over the long term. Attempting to make money by switching portfolios based on guessing what market movements will be will most likely lead to missed opportunities or losses. Time spent invested in the market is the most important factor in your investment success. Experience shows that your actions, not the market, are the biggest factor that determines if you will achieve your long-term savings goals or not.
Should I stop contributing towards my investment?
We don’t believe you should pause your contributions because this is exactly the time that you are going to get better value for those contributions. As a retirement saver you are a buyer of shares so you should welcome lower share prices because that allows you to get much more value. We are all getting many more shares for the same R100 or R1, 000 we are contributing. So this would be the wrong time to stop contributing to your retirement funds. In general, one should be very careful about stopping contributions at any stage. In the long run the amount that you contribute during a working life over 40 years is much more important to a successful retirement than any financial crisis has ever been. In the long run the effect of financial crises and the volatility of stock markets tend to be minor and have no meaningful impact on our retirement. Stopping contributions and cashing in along the way, on the other hand, is devastating and has a much bigger impact and will have much more negative consequences for us in retirement than market volatility.
You should make every effort to continue your retirement fund contributions.