Global Corospondent - April 2019

Corospondent - April 2019

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Kirshni on point - April 2019

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Kirshni Totaram

Kirshni Totaram

Kirshni is global head of institutional business. She is a qualified actuary and a former manager of the Coronation Property Equity Fund. Kirshni joined Coronation in 2000.

IT’S A COMPLICATED world out there and we have seen a continuation in uncertainty both in South Africa and globally since the beginning of 2019. In this edition of Corospondent, we look to unpack prevailing issues, demonstrating how the ability to 'keep your head when all about you are losing theirs' pays dividends in the end.

POWER STRUGGLES IN SOUTH AFRICA

The biggest event in South Africa this year has been the sudden recurrence of load shedding. We had cautioned early this year that Eskom was the biggest, most immediate threat to growth, and that has indeed manifested.

Given the significance of the Eskom issue, we have looked to address different aspects, in not one but four articles in this edition, given the severity of the threat to our economy and the urgency required to find solutions. In his article on the investment impact of Eskom, portfolio manager, Neville Chester, points out that any recovery is likely to be slow. The unannounced load shedding was detrimental to the psyche of South Africans who are already under economic pressure. Economist, Marie Antelme, echoes this cautious stance in her South African economic review. She still expects consumer spending to be the biggest driver of growth, and for growth to be marginally better than 2018. But she states clearly that time is of the essence to sort out Eskom’s complex issues. In his article ‘South Africa’s power conundrum’, portfolio manager, Mauro Longano, tells it like it is in numbers and notes that all stake­holders will have to remain focused on finding a solution and dedicated to implement what will be intricate plans to keep the lights on.

It’s also an election year and a slew of pre-election activity has already begun – political noise is likely to remain high until the National Elections on 8 May. There has been a recent increase in service delivery-related protests across the country and tensions are running high. Whatever the outcome, we expect President Cyril Ramaphosa will try to ensure that key ministries are headed by capable people. Along with interven­tions at key institutions, this should help to provide some stability to policy and delivery. But really, it’s the way in which government manages the Eskom crisis which will give us insight into its wider capacity for reform.

AN UNSURE GLOBAL ENVIRONMENT

Keeping the world in the dark is the uncertainty over the future interconnectivity of the global economy. The outlook for global growth has been worsened by issues in several key economies. While some of these issues should ease over time, it’s hard to account for the long-term cost. A perfect example is the ‘Brextension’, which the UK has been allowed. It pushes back the deadline for the UK to exit the EU to 31 October so that it can avoid leaving without a deal. Fair enough – but it keeps the uncertainty going for longer. Elsewhere, racial tensions have continued across the world –

in Paris, the US and in the recent attack in New Zealand. Marie Antelme offers her insights in her article on the Global Economy. 

STILL FINDING OPPORTUNITIES

While frontier markets are frequently viewed as the preserve of investors with a higher risk appetite, it is apparent that certain business models work far better in frontier markets than in their developed peers, allowing investors some very interesting return opportunities. Global frontiers portfolio manager, Peter Leger, and investment analyst, Tascha Terblanche, share their insights on one such exciting opportunity, namely mobile money.

THE PERILS OF BUYING INTO ‘STORY STOCKS’

It is easy for investors to get caught up in the market noise, not wanting to miss out on the ‘next big thing’. Unfortunately, the market often drives up the price of favourably positioned assets way beyond their underlying intrinsic value. Deep proprietary research, which is a critical part of our investment process at Coronation, gives you the clarity to cut through this noise and leads to better investment decisions. Equity analyst, Nicholas Hops, takes us through three case studies of different commodity markets to show how detailed analysis can provide the kind of conviction needed to take an alternative view and go against the tide.

PERFORMANCE

Last year was a tough one for most of our strategies. We were truly tested on our belief in hard work and the power of investing for the long term. But we did not waiver and kept our eye on the goal, which in our world means striving to ensure that the people who entrust us to manage their hard-earned savings can retire with dignity and feeling secure.

Amidst all the noise in the market this quarter, we are pleased to report that we have seen better returns across all our strategies, many of the key contributors being reversals from the painful losses experienced in the market last year.

HOUSTON, WE HAVE AN INCLUSIVITY PROBLEM

In what was almost one giant step for womankind, the first all-women spacewalk with NASA astronauts Anne McClain and Christina Koch was due to take place in March, which is US Women’s History Month. Until NASA realised it had a big (or small) problem – two female astronauts, but only one space suit available in their size. So instead of McClain doing the spacewalk, a male colleague had to replace her.

It is an absurd example of how certain biases and assumptions shape our world, and how individual needs get overlooked. It talks to the lack of practical inclusivity in the workplace and one that I address in my article on inclusivity and diversity.

I look beyond the importance of achieving diversity in visible terms and highlight the importance of creating a work environment that enables people to be themselves, values their unique talents and perspectives, and makes them feel welcome. Being fully inclusive and harnessing the power of the different ways people think – cognitive diversity – is the key to truly unlocking optimal value in an organisation.

CONCLUSION

In times of uncertainty it has been our experience that staying committed to a long-term investment philosophy provides an invaluable anchor. After a more pleasing quarter for performance, and with our portfolios underpinned by compelling valuations, we remain cautiously optimistic about return opportunities going forward.

Thank you for your continued support and trust.

Kirshni