16 Apr 2021

Home bias and thinking about local equity exposure

Ewan Naude

Friday Fix

In behavioural finance, we are warned of the dangers of adopting too much of a home bias. There are times however, where a focus on investments close to home can be favourable.

When it comes to investments, home bias is a behaviour that is ever present and can be described as the tendency of investors to favour domestic equities over offshore equities, while largely ignoring the opportunities outside of their local stock market. One of the strongest drivers of home bias is familiarity and this is not surprising, considering how we as humans feel very comfortable with everything that is familiar and find it difficult to step into the relative unknown. While home bias is important to address, there is another factor that investors as well as wealth managers should carefully consider – how to decide on a local equity strategy.


As high net worth South Africans have increasingly internationalised their portfolios, they may have material exposure to developed market equities and global multinational companies. These companies will have revenues derived from sources across the world, including emerging markets. The question that wealth managers need to ask is, if our clients are already exposed to Diageo, LVMH and Compass Group, do they also need to own AB Inbev, Richemont and BID Corp in their local portfolios?


While each client is different and personal circumstances need to be considered, a strong case can be made for South African investors to have exposure to companies that will give them something different when compared with their global portfolios. In a South African context, one can argue that resources (mostly precious metals), ‘SA Inc’ stocks such as banks and retailers as well as the small and mid-cap stocks fit this description.


At its meeting at the end of March, the Investec Wealth & Investment asset allocation committee made some high conviction calls, to favour emerging markets over developed markets, value over growth and mid/small caps over large caps.


These calls by the asset allocation committee play out in several of our mandates, for example, 25% of revenues from companies we hold in our Investec Global Leaders Fund are generated in emerging markets while our World Axis strategy has been well positioned in favour of value managers for a while now.

Time for EM to shine?

EM outperforms graph

Source: Bloomberg, Investec Wealth & Investment, 30/03/2021

Our asset allocation views are however best captured in the positioning of the Investec Wealth & Investment BCI Dynamic Equity Fund (Dynamic Equity). The fund is focused on small and mid-caps, has significant emerging market exposure, has a value philosophy and is one of the few local funds to give investors the differentiated exposure as alluded to. It is one of handful of funds of this nature that has survived the turbulent last few years in the SA market and has had a standout year, having been ranked as the top equity fund in the ASISA general equity category for the 12 months to the end of January 2021, according to Morningstar.

Depressed earnings

sc earnings extremely depressed graph

Source: Bloomberg, Investec Wealth & Investment, 30/03/2021

While this area of the market appears to be very attractive it is important to navigate it with caution and partner with an asset manager that has insight and experience in investing in this part of the JSE.

About the Authors

Kate Stannard

Kate Stannard

Investment manager

Kate holds a Business Science degree – her clients are Financial Advisers who use Investec's Investment Services. Keeping abreast of market conditions and being able to communicate relevant information is an important component of her role. Kate is also a qualified level 1 Kundalini Yoga teacher.

Ewan Naude

Ewan Naude

Investment manager

Ewan is a Wealth manager for high net worth individuals. He completed his accounting articles post-university and then moved on to a global mining company where he was a coal trader for three years. His interest has always been in financial markets and, specifically, investments which ultimately led him to Investec all those years ago.

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Couple holding hands

19 March 2021

Attachment theory and risk tolerance

As in our relationships with friends and loved ones, our attachment styles can make a big difference in the way we manage our wealth.

Kate Stannard

I had an interesting chat with a friend, the futurist John Sanei, the other day about the past. In order to optimise the future, he argued, we need to deal with our past. In particular, we spoke about attachment theory and how that affects our relationships, with friends, family and partners.

In order to optimise the future, John Sanei argued, we need to deal with our past.

Attachment theory is a physiological, evolutionary and ethological theory concerning relationships between humans, pioneered by the psychologist John Bowlby in the 1950s. 


The most important tenet is that young children need to develop a strong relationship with at least one primary caregiver for normal social and emotional development to take place. It puts forward that attachment is critical for healthy development. We evolved in tribes, and are helpless as infants, so we have evolved to need others to thrive.


It resonated with me, as I had just completed a Neurozone brain optimisation course. One of the learnings is that a key driver of brain performance is social safety. One of the key aspects of social safety is bonding/attachment. It involves the release of the hormone oxytocin when we are close to someone. When we feel safe, our brain/body system is relaxed (and not in energy-consuming fight or flight mode).


This relaxed physiological state allows us to use our energy wisely and for higher order tasks. It made sense to me, against this backdrop, to explore attachment theory, as healthy attachment is good for our brain/body system. The more I delved into the topic, the more it also resonated with financial advice and in particular with risk tolerance.

of people are securely attached.

It’s assumed that 50% of people are securely attached. They feel confident in their relationships and partner. They seek and give support. The others (myself included) fall into either an anxious-preoccupied, or the dismissive or fearful avoidant styles. Meaning relationships can trigger their nervous systems and childhood patterns, making attachment feel stressful in some way.


In their book Attached, psychiatrist and neuroscientist Dr Amir Levine and Rachel Heller explore attachment theory, and the scientific road maps that can help shift styles.  They report that this shift can be achieved and move us towards secure attachment through consciousness and therapy. Given the benefits to the brain/body system and of healthy relationships, it does make sense to me to make an effort to become a securely attached person.

Kate Stannard
Kate Stannard, Investment Manager, Investec Wealth & Investment

Financial coaching can not only help our clients navigate the risk tolerance informed by their past, but it helps them become more secure in their relationship with money in the future.

Attachment styles and money

When I look back at 20 years’ worth of client relationships, I see these secure, anxious, avoidant relationship styles in people’s relationships with their money too. Clients’ risk tolerance can be viewed through this lens.


Childhood needs being adequately met or not, informs people’s current behavoiur. If they have anxious or avoidant styles, this can lead to really detrimental behavior.


A client whose grandparents were in the Second World War, or whose parents lost everything on the stock market, for example, may be fearful of investing or disbelieve in the benefits of staying invested. This can lead them to make poor investment choices, by not taking enough risk early in their investment life or panicking and exiting the market after a crash.


Or they may have had very affluent parents or a relative who made it big on a single stock and thus they need the “high” of taking big bets on the market or are laissez faire in their financial affairs, putting themselves at risk.

This type can’t handle the slow, steady rewards of just being invested in a diversified portfolio in the markets. It triggers them to commit to the slow and steady.

Then you have those secure types, who have faith in the long term, commit to saving and allow the value of compounding to work for them. They commit to the peaks and troughs of the market and stay invested.


I really enjoyed Howard Marks’ recent piece about Value and Growth investing through the lens of a father with his son. Viewing their different styles through the lens of their respective childhoods. I felt like he took this theory not only into personal risk tolerance but to the entirely different investment styles of him and his son who grew up in very different circumstances.

Howard Marks: the false dichotomy between value and growth investing

Oaktree Capital’s Howard Marks explains why this famous rivalry of investment styles may be masking more important changes taking place in the investment world.

Part of our role as advisers is to hold our clients’ hands through trigger events and help them make better choices despite their feelings towards risk. But what if we saw the behaviour itself and risk tolerance as something malleable? That, like attachment theory or our relationships with others, our relationship with money can also become more secure? That with consciousness and with coaching, we too can become securely attached in our relationship towards money?


Let me give a small personal example. I go to the same yoga studio three times a week and have done so for the last four years. Yet, I pay for a “drop in” class each time, rather than getting a package of classes which would work out to be considerably cheaper.


When I started reading about attachment theory, I became conscious that my own commitment issues were playing a part in my payment of yoga classes and I shifted this behaviour by taking out the longer-term contract (and being consciously comfortable being committed to my yoga studio).


These small shifts in choice can make a material difference when added up, when it comes to spending, saving and investing. This is where financial advice starts becoming financial coaching and I am seeing this already emerging with some of my adviser clients.


This not only helps our clients navigate the risk tolerance informed by their past, but it helps them become more secure in their relationship with money in the future.

River  Nile

23 October 2020

While we were incubating

Reflecting on positive developments during the lockdown – from nanoclay to the approval of a fund.

Kate Stannard

Just before we went into lockdown a fire ranged across Lion’s Head and Table Mountain, burning all in its path. This week, as Lion’s Head opened to hikers again for the first time in months, I marveled at the bright green regenerated grass and the explosion of flowers. Fynbos thrives after a burn in spring. I also spent time in contemplation of some of the remarkable changes that have taken place in the world for humans during this enforced Covid-19 lockdown period, or what I like to call the enforced incubation.


Big tech has taken off, and innovation accelerated. Zoom meetings and exercise classes, online everything, electronic signatures, and API – adaption has been swift and efficient. The most overused word for the period has to be “pivot”. Tesla stock soared and then soured a little, Shopify bolted and Snowflake opened at double its IPO price on the day of listing.


Yet even as technology stepped in to improve remote efficiency, reduce transaction costs and can create greater financial inclusion, a backlash of sorts is coming, in my view. For context, I highly recommend “The Social Dilemma” on Netflix to all interested in the consequences of social media in its current form. Recently, Kim Kardashian West (who has 188 million Instagram followers, and whose Facebook page has been liked by more than 29 million) said she was freezing her social media accounts in protest at the “spreading of hate, propaganda and misinformation”. Whether you admire or despise her, she has made a fortune from social media and her voice thus carries clout (or is a barometer of popular opinion). She and others announced they would use the #StopHateForProfit hashtag, which is being widely shared by people criticising the behemoth social media companies using algorithms to capture and hold your attention for hours in order to sell you goods. We should all remember the cautionary tale of AT&T –  the US government has historically stepped in and broken up monopolies or increased regulation when it felt necessary.

Good things that happen in lockdown

Meanwhile, back in the natural world (for me the antidote to time online) while we were in lockdown, the UAE grew watermelons in the desert. Using “nanoclay” developed by a Norwegian company, “in just 40 days, a once barren plot of sand in this landlocked desert nation had become littered with ripe, sweet watermelons swelling under the Arabian sun”, the BBC reported this week.


The source of this miracle was the Nile. In the 1980s, the once fertile and flourishing Nile became barren. Historically, every year in late summer the Nile would flood, expanding onto the Egyptian delta plains before receding again. As scientists began to investigate what had caused the drop in land fertility, they discovered that those floodwaters carried with them minerals, nutrients and crucially, clay particles from the East African drainage basin that feeds the Nile, and deposited them across the delta lands. The clay gave the soil both its resilience and fertility, but the creation of the Aswan Dam some 10 years previously had stopped the flow of clay.


This remarkable 2.5 miles (4km) wide structure was built to generate hydroelectricity and regulate flooding so farming could become more manageable and predictable. But it also stopped all that good stuff flowing downstream. Years of trials followed, as Kristian P Olesen, a Norwegian fluid dynamics engineer, searched for a way of making a clay recipe that would easily mix with sand to turn it into life-giving soil. “It is not a case that one size fits all,” he says. “Ten years of trials in China, Egypt, UAE and Pakistan taught us that every soil needs testing, so we can mix the right nanoclay recipe. Clay can be a fickle beast. Too little and it has almost no impact. Too much, and the clay could form a waterproof crust on the surface of the sand or make compaction more likely.” While we were in lockdown, they cracked it.


Also while we were in lockdown, Investec Wealth & Investment received FSCA approval for a unitised offering for our Global Leaders strategy, to make it more accessible. After five years of outstanding performance, this strategy no longer requires US$300,000 to gain access, but rather US$10,000 through the unitised US dollar version, the Investec Global Leaders Fund, or R100,000 through the rand version, the Investec Wealth & Investment BCI Global Leaders Equity Fund (ZAR).

The funds seek quality, global companies that are leaders in their fields, and is a collaboration between our experienced Investec Wealth & Investment South Africa and United Kingdom fund managers and draws on our well established research team in the United Kingdom. Combining developed and emerging market thinking, we seek Global Leaders; companies with sustainable competitive advantages in growing markets.


These advantages include:

  • Industry competitive landscape e.g. oligopoly
  • Distribution
  • Brand and pricing power
  • Technological leadership
  • Dominant market share
  • Low-cost position
We believe these advantages often compound over time and are generally reflected in superior profitability (quality) metrics that, over the long term, drive share price performance. By contrast, companies that are strategically challenged tend to remain that way despite efforts to turn them around. The funds are high conviction and will comprise between 30 and 50 holdings. Stocks will be selected using a “bottom-up” approach where the individual long-term attractiveness of an investment will be prioritised over geographic domicile. The portfolio is focused on the developed world equity markets, excluding Japan. This gives access to the majority of leading global business franchises, whilst also offering the protection of developed world standards corporate governance. Within certain approved ranges, sector and regional allocation will be influenced by our highly experienced Global Investment Strategy Group. In addition, a common-sense safety net analysis is applied to avoid over-concentration in any one sector or theme.
The segregated version of the mandates has benefitted during lockdown from our exposure to tech and health care. The new unitised versions, both local and offshore, will follow the same investment philosophy and process. As the mandate and Funds are actively managed, we measure risk and holding size carefully and take profit along the way when appropriate – benefitting from returns while “banking them”. So whether in the tech or healthcare sector or maybe one day (if it fitted our strict criteria) something like nanoclay, investing in Global Leaders got easier while we were incubating.
female on yoga mat

31 July 2020

Love your future self

Fighting the urge to spend now and rather invest in your future requires loving your future self.

Kate Stannard

I came across a post on my Facebook feed recently which triggered me in my investment manager capacity. A friend of mine, who is an avid traveler and spends most of her income of traveling, posted a meme with these words: “I am stuck between ‘I need to save money’ and ‘you only live once’”.


It just so happened to coincide with an interview I had just read by the journalist Bruce Whitfield with “Super Saver Julia”. Now Julia is someone who manages to save two thirds of her income. As her income has increased over the years, to around R1 million a year, she has kept her expenses roughly the same: she has held onto her old Corsa Lite instead of upgrading to a more fancy car, for example.


“Supersaver Julia started investing just before the last financial crisis. She invested a lump sum of money and proceeded to invest a third of everything she earned over many years until she had kids and needed the car and the house and all that sort of stuff.”


She has now amassed around R5.1 million through this frugal behaviour. She is currently on a savings pause due to “all of that stuff”.


Not everyone is a Julia

I have seen many cases of the extreme opposite. Whenever income has risen, new cars are bought and champagne tastes emerge, meaning that all the income is consumed today and the balance sheet is not grown at all. Or my dear friend mentioned above, whose modest earnings are spent entirely on travel with no thought of tomorrow. These choices make those individuals incredibly vulnerable to any sudden changes in their circumstances, far more than their more prudent brethren.

A special holiday can be reward for your hard work, but you should also save and grow your assets and, in doing so, love and protect your future self.

I feel that as advisers our role is to manage this seeming dilemma between saving money and “you only living once”. Drawing on my yoga teaching self, the answer for me is to help our clients love their present and future selves equally. It is wonderful to enjoy the fruit of your success now in some way. A special holiday can be reward for your hard work, but you should also save and grow your assets and, in doing so, love and protect your future self.


I have been interested in this space for some time and I feel that managing this sense of self-worth takes wealth management into the realm of coaching.


Loving your future self in action

A company that has managed this transition well is Ellevest, a US company that focuses on women. The business is built on the premise that gender-neutral investing has tended to fail women. Because women uniquely have to deal with the double whammy of the gender pay gap and having a longer life span, they need to save more, or at least save differently (like Super Saving Julia, save aggressively, back off and restart) to truly love and protect their future selves.

Gender-neutral investing fails women charts

Ellevest is taking this coaching role even further, not just managing the income (present) and asset allocation (future), but also helping women unlock their future value and break through the shackles of the gender pay gap. Ellevest offers one-on-one executive coaching from the company's career team, which can help women with impactful financial issues like salary negotiations and career transitions.


Ellevest even helps make the circle bigger – through Ellevest women can invest in other women’s businesses through private equity.


I think this is a wonderful value evolution and an idea that can really can help our clients, particularly women, to love their future selves more.

cycling to work

29 May 2020

Redefining movement in a Covid-19 era

As we enter a new level of lockdown, it’s a good time to look at how we will redefine concepts like commuting and travel in the future.

Kate Stannard

My four year old made me cry with laughter this week. Our new Covid-19 lockdown ritual is to have daily (nonalcoholic) G n Ts on my balcony in the evening before dinner. I asked him how his G n T was, to which to replied, “Hmm, it tastes like being on the podium”. As his father is an avid cyclist who sometimes makes the podium, this really made me laugh, and it also made me think. No one has felt the feeling of being on the podium for months, nor the joy of watching others ascend the podium (from the couch).


We may not see a cyclist on a podium again for a while, but it does appear as if people are starting to move. This is well illustrated in the chart below, from Apple. It depicts people putting requests for directions into their devices and has been rising globally.

Apple mobility trends

Apple mobility trends

Source: Apple

I believe this pandemic will create new shifts in that movement. It has been said that new habits are formed after 40 days and we have passed that point in this lockdown. Most clients and friends I have spoken to in our industry have managed to work quite successfully (parenting demands aside) remotely. Zoom or Webex meetings have replaced the in-person meetings. Our premarket opening daily meeting for example can easily be attended via this method of communication.

Do you require as much office space as before if employees can work successfully from home?

Will this mean greater flexibility post Covid-19? If you do not need to be in the office at 8am but can rather wait for the traffic to subside, you can easily add two useful hours to your day if you are one of the many who live outside the city centres: hours which could be used more effectively for work or family. Do you require as much office space as before if employees can work successfully from home? Twitter chief executive Jack Dorsey told his employees this month that many of them will be allowed to work from home in perpetuity, even after the coronavirus pandemic ends. Would people move out of the centers, closer to nature for example, if they didn’t need to be in the office from 8 to 5?


This week Facebook founder Mark Zuckerberg offered his staff the opportunity to work from home on a permanent basis. Zuckerberg expects half of Facebook’s workforce to take up the offer of working from home permanently over the next five to 10 years. The move gives employees the chance to relocate, but their salaries would be adjusted according to living costs.


Being stuck at home seems to have inspired some people in the US to move. Requests to see homes on sale are now 17% above their pre Covid-19 peak.

Seasonally-Adjusted Homebuyer Demand Index

Seasonally Adjusted Homebuyer Demand Index graph

I believe technology can improve life quality and we do not always use it as effectively as we could. Imagine for example if everyone put their destinations into Apple or Google maps every time they traveled? This would allow the algorithms to optimise traffic flow and congestion.


We are seeing tentative signs of air travel resuming. Southwest Airlines announced more bookings than cancelations last week and Easyjet said it would resume a small number of flights in the UK and France on 15 June after grounding its entire fleet on 30 March (with increased safety measures on board including mandatory masks). However, now that we have become accustomed to Zoom and Webex meetings, will we use technology to be more efficient and perhaps travel less for business? Could more businesses become location agnostic?

The World Economic Forum last week reported that Covid-19 could spark a cycling revolution in the UK, where 14 million people may choose their bikes over their cars.

Another transport shift which may occur is bicycle usage because of public transport being halted or discouraged amid fears of the virus.  The World Economic Forum last week reported that Covid-19 could spark a cycling revolution in the UK, where 14 million people may choose their bikes over their cars.


This change is supported by more than £2 billion in government funding to develop emergency infrastructure such as pop-up cycle lanes. Prime Minister Boris Johnson described it as an opportunity for a golden age in cycling. Meanwhile UK cycling chief Julie Harrington said, “Our country is undoubtably at a crossroads, and we now face a stark choice between the old routine of cars, congestion and pollution or a new future of healthy streets, happy people and cleaner air.”


A recent survey reported that 28% of the UK’s adult population cycle less than once per month, but would like to do so more often. It also claims that increasing cycling to 25% of all journeys in the country by 2050 could provide over £42 billion of economic benefit. It estimates that increasing cycling per urban dweller by an average of 3km per day and walking by 1km, would save the NHS £17 billion over the next 20 years.


It may seem paradoxical, but not being able to exercise during lockdown might inspire people to get fitter and into nature more, once they can do so. Perhaps people will aim to get onto the podium themselves rather than watch the podium ceremony from the couch. This may be a stretch, but there will be behavioural changes after Covid-19 and I am intrigued to see them unfold.

wearing trainers instead of heels

03 April 2020

The virus doesn’t care if you wear high heels

The world after Covid-19 will look very different from what it is today. Hopefully one of the changes will be greater support for human rights.

Kate Stannard

About a week before lockdown, a huge fire swept through Cape Town, burning houses and cars parked below the base of Lions Head. It resonated with me because fire, like a virus, is indiscriminate in what it burns. The lines we draw to segregate us – white, black, South African, American or Asian – are irrelevant to the virus. We are all human. Our atoms come from the same exploded stars and we all bleed red.

We have progressed a great deal in recent times in recognising this. Women’s rights have become more firmly entrenched and pay disparity is narrowing. Similar advances have come in the form of the rights of minorities or those who had been previously disadvantaged by prejudice.

One place that still fascinates me with its disparity of treatment is Japan. It is a developed economy, yet the law still practically requires women to wear high heels in the office. The Guardian reported last year on a campaign dubbed “#KuToo”, a play on words from the Japanese word “kutsu”, meaning shoes, and “kutsuu”, meaning “pain”. It is also a reference to the global #MeToo movement against sexual abuse.

The movement was launched by the actor and freelance writer Yumi Ishikawa and quickly won support from thousands of people online.

Campaigners say wearing high heels in Japan is nearly obligatory when job hunting or working in many Japanese companies.

Some campaigners describe high heels as akin to modern-day foot binding, while others have urged a broader loosening of dress codes in Japan, where business suits for men are ubiquitous in the workplace.

But Cannes kept the dress code, despite a protest by the Hollywood superstar Julia Roberts who went barefoot the next year.

In 2015, the director of the Cannes film festival apologised after a controversy blew up over women being denied access to the red carpet for not wearing high heels. But Cannes kept the dress code, despite a protest by the Hollywood superstar Julia Roberts who went barefoot the next year.

Japan’s health and labour minister defended workplaces that require women to wear high heels to work, arguing it is “necessary and appropriate” after a petition was filed against the practice.”

I find it astounding that in this day and age, women are still being forced to wear footwear that shrinks their Achilles tendon and can course serious health issues if worn for any length of time. https://well.blogs.nytimes.com

So I was heartened by the news that snuck in amid the Coronvirus headlines that Japan Airlines had just announced that female flight attendants will no longer be required to wear high heels or skirts but rather apparel that doesn’t make them uncomfortable or leave them in considerable pain. I am sure many businesses in Japan will follow suit.

I believe that improved equality of treatment and recognition of our shared humanity will be one result of this crisis but there will be other far-reaching changes. Futurist Yuval Noah Harari wrote an excellent article in the FT on this, which I highly recommend: https://www.ft.com

Some changes will be negative and others positive. Like the fire that swept through the mountain, while I felt grief for the animals and insects that died, I felt joy for the proteas that will explode like stars after a burn, releasing seeds. After the rains, these seeds will root and create a new fynbos forest. So too will we rise anew after the virus has past. Those who have adapted and learnt will thrive, as I believe will human rights.

Listen up

21 February 2019

Listen up

We spend years honing our investment expertise – but do we do enough work on our interpersonal skills?

Ewan Naude

Communication is dying. We are more ‘connected’ than we ever were through Instagram, Facebook, Whatsapp and numerous other technology-based mediums but we have created a world where immersing ourselves in our phones is the easy option.

We’ve lost the ability to ‘read the room’, listen and communicate on a personal level and it shows in our everyday interactions.

Gone are the days that we used to awkwardly talk about the weather in the lift or stand around the braai with someone we have zero in common with and fumble through conversation. The sad thing is that often an awkward braai joke or weather update in the lift (or elevator as the Americans like to call it) led to a common interest, but those moments are now often lost when reaching for our phones in a moment of silence. We’ve lost the ability to ‘read the room’, listen and communicate on a personal level and it shows in our everyday interactions.


In his book, Boredom Slayer, Richard Mulholland tells a story about an architect named Arthur Gensler who was on a JetBlue flight on his way home to New York. It so happened that the CEO of JetBlue, David Neeleman was on the same flight and walking down the aisle introducing himself to the passengers and asking them what they did for a living. 


Gensler knew that JetBlue were looking to build a new terminal in New York and as Neeleman walked down the aisle towards him, he began to formulate an elevator pitch. In the end he kept it simple and when Neeleman approached he simply introduced himself as an architect who designs airports. “Well then, we better sit down for a coffee,” was Neeleman’s response as he handed Gensler a business card. 


They had a coffee a few weeks later and the result was that Gensler was appointed to design JetBlue’s new terminal at JFK. While all the other passengers explained what they did for a living, Gensler explained what he could do for Neeleman.

Does a client want an in depth economic or political update at their annual review or do they want focus on something else that keeps them up at night? 

As wealth managers and investment professionals we serve our clients and their needs. All too often we launch into an elevator pitch or an in-depth market analysis without establishing if it’s even relevant to them at that point in time. Do we have the ability to ‘read the room’ and engage in a way that is appropriate to the situation? Does a client want an in-depth economic or political update at their annual review or do they want to focus on something else that keeps them up at night? 


As investment professionals we spend hours, months and years studying and honing our technical skills and keeping up to date with markets but very little time is spent on honing our interpersonal and communication skills, which are as important, if not more important, than the aforementioned skills.


Start by keeping the phone in your pocket in the lift or dropping it in the fruit basket when you get home from work. The world and your clients need more listeners and better communicators.

Conscious consequences

07 February 2019

Conscious consequences

The trend towards more conscious choices about environmental, social and governmental issues is gathering pace, from consumers to investors.

Kate Stannard

I went to a joyful music festival in Citrusdal a few weeks ago called Wolfkop. It was set against a breathtaking vista on a river overlooking awe-inspiring mountains. Festivalgoers float on giant inflatable swans and unicorns during the day and dance into the evening under the stars.


What I found interesting about this year’s event was the food. I hadn't attended this festival for a few years but the last time I did so, the food was all greasy fare to soak up the party excess. This year the stalls sold raw juices, fruit smoothies, CBD non-alcoholic drinks and almond milk flat whites. Even the burger stand had Beyond Meat vegan burgers and gluten-free bun options. Admittedly, the proximity to Cape Town reflects that microcosm’s habits, but I was astounded by the fast-paced adaption to the needs of a more conscious consumer.

According to The Guardian newspaper, almost one in five 12 to 15-year-olds reported using social media to express support for political, environmental or charitable causes or organisations.

This trend appears on a far more macro level. In a recent paper, the UK regulator found an increase in online social activism among children, calling the phenomenon the “Greta effect”.  According to The Guardian newspaper, almost one in five 12 to 15-year-olds reported using social media to express support for political, environmental or charitable causes or organisations.


In our morning meeting last week, we discussed the concept of flight shame in Europe. Germans increasingly prefer to travel by rail, rather than air, for domestic trips. Apparently, it's a phenomenon that's being seen across Europe, with rail companies expecting a large increase in demand over the coming years.


There are any number of reasons why consumers have made the switch, but there is increasing speculation that it is due to consumers choosing the low-emission alternative. If this is true, it presumably points to another reason that stocks that score well on environmental, social and governance (ESG)  metrics are likely to do well.

Greta Effect chart and Full Steam Ahead chart

Meanwhile, at Davos, Goldman Sachs, Walls Street’s biggest underwriter of initial public offerings, stated that after July it would no longer do business with a company lacking a director who is either female or fits other diversity criteria, according to Bloomberg.


Chief Executive Officer David Solomon (who moonlights as a DJ, so would probably not feel out of place at my favourite music festivals) told CNBC last week:


“We realise this is a small step, but it’s a step in a direction of saying, ‘You know what, we think this is right, we think it’s the right advice and we’re in a position also, because of our network, to help clients if they need help placing women on boards,’


“So this is an example of us saying: How can we do something that we think is right and help moves the market forward?”


Last year a major trend was the sheer volume of funds flowing into ESG funds in response to consumer demand. It seems this theme of conscious behaviour continues to feed into the market with increasing consequences for those who don’t adapt.

China vs USA economic chess
06 December 2019

China’s targeted tariffs point to hope for markets

China’s targeted tariffs against the US appear to be achieving their objective. This gives hope for a resolution to the trade wars and a good outcome for the markets.

Ewan Naude

In a game of political and economic chess, you would be very brave to bet against the Chinese. China’s leaders are extremely strategic – they think long term and are unemotional in their approach.


This is just as well for them because I can imagine it must have been frustrating for them over the past months to negotiate with the Donald Trump administration. In Trump, they have an infantile opponent who, to continue the chess metaphor, flings pawns across the board, changes rules on the fly and wants to settle disputes with a game of rock, paper, scissors. The trade war chess game has gone on for a while now, keeping market participants on their toes trying to anticipate the next move from either party.

China has been tactical in targeting the swing states when they retaliate with tariffs of their own.

China’s response has been interesting. They’ve been tactical in targeting the swing states when they retaliate with tariffs of their own. The charts below show how this has played out. As a result of the tariffs targeted at the goods of certain states, the average private earnings growth (salaries) has been markedly lower in the “purple” (neither decisively Republican nor Democrat) swing states than in either the red (solidly Republican) or blue (solidly Democrat) states. They’ve also been lower in the purple/swing states that voted for Trump in 2016 than in the purple states that voted for Hillary Clinton.

US average private weekly earnings chart

By doing this, the Chinese are attempting to sow seeds of doubt in the minds of the electorate in those states and sending a message to Trump that they are potentially able to influence the outcome of an election through their targeted tariffs.


With an election on the horizon, Trump will be aware of the importance of these states in his quest to be re-elected. This is one game of chess that Trump can’t afford to lose, which points to a likely market-positive resolution to this stand-off. It will certainly be cause for celebration over the festive season if this comes to fruition.

15 November 2019


From noiseless alternatives to fireworks to electric vehicles, new technologies provide both solutions and challenges to the way we do things. As investors we need to keep abreast of them.

Kate Stannard

This year Guy Fawkes went by with the chirping of crickets. This was thanks to the fact that the City of Cape Town had banned fireworks, citing the following reasons:

  • The decreased appetite from sub-councils to approve designated sites
  • The costs associated with running the sites, including deploying staff and resources, including law enforcement, metro police, traffic and, of course, fire and rescue services
  • Growing public antipathy towards the use of fireworks
While they can be beautiful and stirring, fireworks inflict trauma on animals and the sensitive and this makes me feel this is a good decision that reflects the power of people with a social conscience.
The fireworks at the Super Bowl this year created enough “pyrotechnic debris” washed up on the beaches of San Francisco to fill four five-gallon tubs.

The Mother City is not the first to go down this road. China (the birthplace of the firework) has banned fireworks in more than 400 cities in an effort to curb pollution. In the US, this environmental impact seems to have been borne out – the fireworks at the Super Bowl this year created enough “pyrotechnic debris” washed up on the beaches of San Francisco to fill four five-gallon tubs. In states like California, fireworks are being banned because of the fire hazard.


Fireworks on the Fourth of July are a long-standing American tradition, so innovators are coming up with solutions to fill the void. Drone swarms are taking to the skies to create dazzling light displays.


In 2018 Intel simultaneously flew 2,066 drones over Folsom, California, first forming some glowing blue “dandelion” puffs that looked just like slow-moving fireworks. Although unlike fireworks, the blue pixels then came together to form Intel’s logo across the sky… There was one dazzling shape after another — a jellyfish, planet earth. It’s a technologically-impressive feat. “All drones were controlled by one computer,” “and performed an impressive light show choreographed into an aerial ballet spectacle accompanied by music.” The performance displayed a level of detail that would be hard to achieve with fireworks.

Intel’s software can check the entire fleet of drones before a show, enabling it to select the most optimized drones for each flight based on battery life, GPS reception and more.

Each drone weighs less than a pound, yet can create more than 4 billion different color combinations. Intel’s promotional material describes this as “virtually limitless color combinations.” Intel’s software can check the entire fleet of drones before a show, enabling it to “select the most optimized drones for each flight based on battery life, GPS reception and more.” CNBC notes that Intel had already flown over 300 drone shows in 16 countries in the three years since they began performing sky-based spectacles with its “Shooting Stars” drones.

Source: https://thenewstack.io/could-drones-replace-fireworks/


This technology is still in its infancy and expensive so it will probably be some time before drones replace fireworks at every country fair, but it’s still an interesting adaption.


I’m constantly astounded at how fast the pace of innovation and rate of adoption is these days. Despite declining global auto sales, electric vehicle sales have been growing rapidly and far faster than expected (arguably also driven by those with a social conscience). The Chinese government is considering removing subsidies on electric vehicles, but given the previous reaction to a cut in subsidies, they appear hesitant to act too quickly.

EIA US Electric Vehicle Sales Forecast by Year chart

Our Global Investment Strategy Group (GISG) is keeping a close eye on electric vehicle sales, both in terms of an investment theme and in terms of their impact on other sectors and economies. Electric vehicles have consequences for South Africa: firstly, platinum, thus far, is not a component of electric vehicles (although platinum companies are working on this); secondly, it is unlikely at this juncture that electric vehicles will take off quickly in South Africa.


This is because of a current lack of infrastructure to support electric vehicles as well as the well-known constraints on electricity supply. There would also likely be a lack of appetite from government (understandably) to jeopardise the livelihoods of the over 100,000 people who work at petrol stations.


We could, however, benefit from lower petrol prices if global demand falls off as the Western Hemisphere adopts the new technology. Our GISG is constantly monitoring the data and keeping abreast of innovation and its consequences, which gives me comfort and often sparks fireworks of thoughts.

A victory for values
7 November 2019

A victory for values

The poignant message of the Springboks' victorious captain and coach after Saturday's final reminds us of the need for values in everything we do.

Ewan Naude

As I left for work this morning, I looked at my poor braai which had gone above and beyond the call of duty over the last few days. It’s been a week of ‘kuiering’, celebration and unbridled euphoria following Saturday’s incredible showing by the Boks.


There’s so much to talk about when it comes to the Springbok campaign and how it culminated in captain Siya Kolisi lifting the William Webb Ellis trophy, but one thing for me in particular summed up the kind of group they are. In the post-match conference he and coach Rassie Erasmus were asked how the squad dealt with the pressure and expectation of a nation that desperately needed a win.

They shouldn’t feel the burden of pressure but instead feel the honour of bringing some relief over 80 minutes to those who experience real pressures in everyday life

Erasmus’s response took a very different angle, he spoke of what pressure in a South African context is. The pressure of having to find your next meal or not being clothed, the pressure of joblessness and crime. They explained how the squad had discussed this in detail in the weeks of the knockout stage and concluded what they felt shouldn’t be the burden of pressure but instead the honour of bringing some relief over 80 minutes to those who experience real pressures in everyday life.

The response is just one example of the cultural, societal and personal understanding within the group and when you throw in honestly, transparency and technical excellence it makes for a powerful mix. It takes a strong leadership, a culture of personal accountability and selflessness in order to scale these heights in almost anything in life and business is no exception.


Environmental, Social and Governance (ESG) investing has gained a lot of traction over the last few years and for good reason. Corporate South Africa has had a few governance issues over the past couple of years, with behaviour that is in sharp contrast to the values displayed by Rassie Erasmus and his Boks.

Investors are beginning to demand that those entrusted with managing their money consider the impact of the companies they are investing in

The world is on a precipice, we have presidents burning down rainforests and the US, as the biggest emitter of greenhouse gases, is on the verge of withdrawing from the Paris Climate Accord. Investors are beginning to demand that those entrusted with managing their money consider the impact of the companies they are investing in.  Companies will need to be better in order to attract shareholder capital going forward.


At Investec Wealth & Investment, we’ve committed to taking ESG seriously. Sustainability considerations form part of our investment analysis. Our commitment to sustainability recognises the interconnected nature of our business, the economy, the environment and society. We live in society, not off it, as our former CEO Stephen Koseff always reminded us.


Part of this commitment involves integrating ESG considerations into our day-to-day operations to ensure the sustainability of our investments. In addition to our own in-house analysis we subscribe to external research on company approaches to each of environmental, social and governance concerns. Our voting at AGMs is conducted through an ESG framework. We are on this path not only out of a need for sustainability in the companies we invest in, but because the evidence shows that across emerging markets companies that score highly on ESG criteria have tended to generate better returns than those that don’t.


Our captain and coach were able to look at the bigger picture, without losing sight of the attention to detail required to ensure success, and use it to motivate the team to higher heights. In our own small way, we hope our commitment to ESG will make for a better world while delivering benchmark-beating returns for our clients.

The costs of living in a concrete jungle
18 October 2019

The costs of living in a concrete jungle

Spending time in nature doesn't just confer short-term benefits - it makes us healthier, more productive and less violent.

Kate Stannard

Like the Friday Fix I have just returned from a break to recharge my batteries. After two days in the bush I became increasingly aware of the tension and stress leaving my body. The slower pace, the sound of birds and insects and the immersion in an abundance of flora and fauna allowed a sense of content and happiness to creep in. 

My experience brought to mind a theme touched on in Yuval Harari’s excellent book Sapiens. He puts forward that while the Agricultural Revolution was successful for Homo sapiens from a population growth perspective, it has arguably reduced the quality of life for humans who were hunter-gatherers prior to the husbandry of wheat and cows, since their diet and daily lives became significantly less varied.

Disconnection from nature can be bad for our mental health

Harari is not alone in this thinking. Disconnection from nature can be bad for our mental health, according to Australian sustainability professor Glenn Albrecht who coined the term psychoterratica in 2000, creating the beginning of a vocabulary to discuss the relationship between mental health and environment.

Biologists who study animals in the wild have come up with the concept of habitat selection theory, which is the idea that we are wired for whatever habitat we evolved in.

His term supports the findings of Ming Kuo of the University of Illinois Urbana-Champaign. Early in her career Ming studied the wellbeing of animals in zoos. Despite being provided with the basics of food, safety and shelter they often didn’t thrive and often died. Biologists who study animals in the wild have come up with the concept of habitat selection theory, which is the idea that we are wired for whatever habitat we evolved in. There seems to be this general kind of rule that animals who are in their "natural habitats" will do much better. They thrive both physically and psychologically and in terms of their social behaviours. This concept formed an interesting backdrop for her later work. 

In some ways, Homo sapiens have put themselves into zoos. We have shelter, food and safety and certainly more freedom of movement than zoo animals but far less access to our natural habitats then we had before. 

“For most of the last 2 million years, humans lived in a natural world, relying on nature for food and shelter. The amount of time we've spent in urban dwellings is a small sliver of the total time humans have spent on Earth. When you look at it this way, our shift from forest life to freeways and overflowing cities has been very recent and very dramatic.” Shankar Vedantam speaking in the Hidden Brain Podcast – Our Inner Nature

Ming went on to a multiyear study of what are called the Robert Taylor homes. The Robert Taylor homes are a series of 16 10-story buildings along a corridor in Chicago. They were originally designed with greenery around them but over time many of the treed, grassy courtyards were paved over and trees taken out to reduce maintenance. This provided a controlled study of “green buildings” and “not green buildings” in an area with similar demographics. 

The results of this multi-year, highly controlled study were interesting. While Ming thought originally that nature was a nice to have, her results show that a lack of it created social breakdown. The buildings with greenery and trees showed far better results for social cohesion and good neighbourly behaviour.  They also found that the people in the less green buildings were reporting more aggressive behaviours.

Columbia University and the University of Pennsylvania have also explored the effects of greening. Researchers at these universities worked with the city to coordinate their vacant lots programme, essentially cleaning up and greening trash-filled vacant lots, greening them and adding trees. They randomly assigned which lots would get this intervention and which ones would not. They tracked what happened in and around those lots afterwards. The results were impressive, given the low cost of greening. Around the lots that received this green intervention, gun assaults go down by 9.1% according to police records. There were similar patterns for burglaries and other aggressive complaints. 

In a similar vein, a study of London neighbourhood pharmacies found that, after controlling for income groups, prescriptions for anxiety disorder and depression medications were substantially larger the less greenery there is around the neighbourhood. 

The results of these fledgling studies into the effects of psychoterratica seem to be supported by others intuitively. From San Francisco to Japan, people are taking up “rewilding”, spending time in nature as therapy. 

A report by the World Economic Forum explains:

“Wood wandering as therapy began in Japan in 1982, when the government introduced the concept of shinrin yoku, or ‘forest bathing.’ It urged citizens to make use of the country’s 3,000 wooded miles to improve their wellbeing. Tomohide Akiyama, then chief of the forestry ministry, understood intuitively that the woods do people good, while distance from nature makes us sick. From 2004 to 2012, Japanese officials spent about US$4 million studying the physiological and psychological effects of forest bathing. They discovered that forest bathing not only feels good but it is also healing, physically, because it exposes people to the healthy essential oils that trees release, called phytoncides. These antimicrobial oils protect trees from germs and have a host of human health benefits, including boosting mood and immune system function; reducing blood pressure, heart rate, stress, anxiety, and confusion; improving sleep and creativity; and possibly fighting cancer and depression.” 

Ming expands on this thinking that proximity to nature is not only good for our mental health but also our bodies. She says that it strengthens our immune systems. After people spend several days in nature, researchers find measureable increases in what are known as natural killer cells. Moreover the effects last for some time.  “A three day weekend in a forest preserve – that boosts natural killer cells on average by 50%. And a three-day weekend in a nice urban area, it turns out, doesn’t do anything for your natural killer cells”.

She adds that “30 days later, after your three-day weekend, if you sample your blood, it will show that you are still roughly 24, 25 percent above your baseline number of natural killers cells.”  

Being disconnected from nature appears to affect us both physically and psychologically, just as it does the animals in the zoo. We in South Africa are lucky enough to live in one of the most diverse habitats in the world. So perhaps when our clients are feeling a little down about the state of the nation or world, we need to suggest they go for a weekend into the countryside. And maybe, as those studies of vacant lots show, maybe a bit more greenery can help solve some of our country’s problems too. 

American pie
30 August 2019

Gwijo and the light at the end of the long tunnel


If you look beyond the bad news, you’ll find many stories of hope that’ll lift you from the gloom and make you positive about the future.

Ewan Naude

I recently returned from my annual fishing and rafting trip on the lower Orange River. It’s a trip I love to take and when people ask me what I love about fishing I usually simply take them through what a day on the Orange entails. 

You float down a deserted river with zero contact with the outside world for six days, enjoying nature in all her splendour, have a few ice-cold beers and, at the end of it all, you roll out your sleeping mat under the stars and fall asleep as the Milky Way smiles down on you. The fishing is often secondary to the overall experience and the feeling of being totally immersed in the outdoors.

It’s especially difficult when the world has gone stark raving mad.

The return to civilisation can be jarring. It’s loud, unfiltered and an attack on the senses; it takes me a while to adjust to real life again. It’s especially difficult when the world has gone stark raving mad. My daily, unrushed meandering was abruptly replaced by unhinged Twitter feeds and visuals of the Amazon burning and it “swakked” me out for a few days.

After collecting myself and consciously making the decision to look for good news instead of wallowing in the quagmire of negativity, I found the stories that give us hope and encouragement – and there really are plenty of them.

There’s a JP Landman piece that’s been doing the rounds that’s a simple yet very important reminder of what many fail to recognise. The winds of change are blowing and they’re blowing in the right direction.

Something that really lifted my spirits though was watching and listening to the Gwijo squad doing their thing during the last Springbok/Argentina test. What the squad does is sing amagwijo songs that have been integral to Xhosa culture for generations. Listening to the founders of the movement, they describe how songs are sung in times of difficulty and tribulation, to lift the spirits and get people through tough times. The beautiful thing is that those same songs are sung in celebration, once the individual has overcome and triumphed over these challenges.

Soon we will be singing AmaGwijo in celebration.

The squad aims to use sport and song as a unifying force in a country where racism and intolerance has such a dark history. If the visuals I’ve seen are anything to go by, they are certainly achieving this. 

Times are tough, there is no hiding from that, but things are getting better. Soon we will be singing AmaGwijo in celebration.

The Gwijo Squad is changing the face of South Africa Rugby with traditional AmaGwijo songs ahead of big games.

TRT World

The Gwijo Squad is changing the face of South Africa Rugby with traditional AmaGwijo songs ahead of big games.
American pie
16 August 2019

Friday Fix – Meaty returns


Ethical, health and environmental concerns are driving the development of meat alternatives like plant-based and cultured meats. It’s also driving investment by major businesses and entrepreneurs.

Kate Stannard

Since my return to Investec five years ago, I have noticed an interesting trend in our Thursday lunch meeting. Where it was all chicken and chips five years ago, now approximately a third of the participants are eating meat-free. That’s quite a shift in a relatively short space of time, mostly driven by our new younger recruits.


The trend is echoed outside of the office. Individuals have different motivations for eating meat-free or vegan (no milk, butter, cheese or eggs). Some people view animals as sentient creatures just like humans and believe treating animals like a crop, forced into confined spaces, is cruel.


Others worry that meat is often riddled with antibiotics, creating antibiotic resistance and can be pumped with growth hormones and brine. Or the environmental impact is a concern. Livestock crowd out other species and forests, they increase greenhouse gases and they live on feed that requires fertiliser (and land).


Despite using up over 80% of farmland, meat and dairy only account for 18% of food calories and a third of proteins consumed (“Reducing food’s environmental impacts through producers and consumers,” Poore and Nemecek, Science Journal). Meat is thus an inefficient use of resources to provide the calories humans require.

Beef consumption needs to fall by 90% in order to keep the global temperature increase below two degrees centigrade by 2050

Research at Potsdam University argues for a massive reduction in meat consumption in order to fight climate change: in the West, they argue, beef consumption needs to fall by 90% in order to keep the global temperature increase below two degrees centigrade by 2050.


The internet abounds with material supporting meat-free choices. I know a number of people who have become meat-free after watching “Cowspiracy” and other similar documentaries.

A meaty, no-meat response

However, eating meat is deeply entrenched in human culture and to tackle this mental framework, many entrepreneurs have come to market to meet this meaty, meat-free, desire.


Plant based “meats” that use a combination of plant products to create products that resemble and taste like meat are widely available, like lentil “hamburger” patties or soy-based “sausages”. Some even include beetroot juice to create a bleeding effect.


There are also lab-grown, cultured (“clean”) meat options. The first slaughter-free meat was taste tested in 2013 by food critic and nutritional scientist Hanni Rutzler. It was a hamburger made from myosatellite stem cells (also known as muscle stem cells) extracted from the shoulder muscles of two beef cattle. The burger cost US$325,000 to make and was funded by Google co-founder Sergey Brin. Rutzler’s verdict was “I was expecting the texture to be more soft, there’s really a bite to it….It’s close to meat. It’s not that juicy but the consistency is perfect. I missed salt and pepper.” She added: “The surface of the meat was crunchy, but not typically crunchy. It was more like the surface of bread or cake.”


Professor Mark Post of Maastricht University in the Netherlands, who had led the five-year research effort funded by Brin, told the UK Independent that he accepted that the burger was still a work in progress and that he needed to find a way of adding fatty tissue to the cultured beef to make it more palatable (and cheaper for consumers!).

Through 2018, the worldwide funding of novel vegan meat replacement companies reached US$900 million.

Brin is in the good company of Bill Gates and Richard Branson in investing in the cruelty-free industry. According to AT Kearney, the global consulting firm: “Through 2018, the worldwide funding of novel vegan meat replacement companies reached US$900 million. The funding of cultured meat companies has reached the US$50 million threshold. As most cultured meat companies were founded around 2016 or 2017, this mostly represents early-stage investments.”

According to a recent Nielsen report, annual U.S. sales of plant-based meat jumped 42% between March 2016 and March 2019 to a total of US$888 million, compared to 1% growth of traditional meat.

Meat is a US$1.4 trillion global industry, according to Forbes. Plant-based alternatives are starting to make inroads into this market share. According to a recent Nielsen report, annual U.S. sales of plant-based meat jumped 42% between March 2016 and March 2019 to a total of US$888 million, compared to 1% growth of traditional meat.


Beyond Meat, provider of the plant-based Beyond Meat burger and Beyond Meat sausage, IPO’d in May at around US$23 a share and is currently trading, three months later, at a staggering US$163 a share or 54 times earnings (a recent report compiled for Forbes values the company at around US$96 a share or 16 times earnings).


Beyond Meat has added US$71.8 million to its revenue over the last two years and increasing sales from both its retail and restaurant and foodservice (R&F) outlet divisions, is likely to add a whopping US$270 million in revenue over the next two years.


Investors clearly think the market has legs if one looks at Tyson Foods. The biggest meat producer in the US has recently expanded into “alternative proteins” with the Raised and Rooted brand. Other cultured meat firms include FutureMeat, Supermeat and Finless Foods, which makes cultured fish.


The recent report by AT Kearney further supports this trend, the study suggests that up to 60% of “meat” in 2040 will be cultured or plant-based, with 35% cultured and 25% plant-based.

Conventional meat market to shrink by 33% by 2040 (US$bn)

Conventional meat market to shrink by 33% by 2040 (US$bn)

It appears that there is a solid market of people who want to exercise their ethical choices, framed by the comfort of their historical food choices. They also appear willing to pay for it, if the Beyond Meat burger – which costs R145 at Hudsons – is anything to go by.


The future appears a little brighter for chickens.

American pie
02 August 2019

American Pie


When it comes to the investment pie, it's a remarkably small part of that pie that has produced so much value over many years.

Ewan Naude

The saying, “as American as apple pie” is a strange one, seeing as apples are not even indigenous to America.  Apples were brought to America by the Pilgrim Fathers in the 1600s and to this day the US remains one of the largest producers in the world. It’s ironic that something so quintessentially American owes its roots to an alien species.

When it comes to the American stock market pie, the numbers make for some very interesting reading. Looking back over the past 90 years, the pie tells a story of a very small slice creating more than half of the wealth over that period. To be precise, only 90 stocks out of a total of over 25,000 listed over that period created all that value.

Total wealth created by all listed US common stock 1926-2016

The key takeaway here is that that good companies seldom go bad and if they have the ability to be flexible and adapt, they will stand the test of time and thrive. Asset managers that have a robust investment process, high conviction, and the discipline to continue backing these winners through the cycle will enjoy more than their fair share of the pie.

Illustrates our belief that great companies tend to remain great

Practically illustrated, our offshore equity mandate (Global Leaders), still owns close to 70% of the stocks it invested in at the inception of the mandate, which illustrates our belief that great companies tend to remain great.

Sharing is caring
26 July 2019

Sharing is caring


The desire to share is not only deeply ingrained in human nature – it’s also good for us. But it needs to be handled with care.

Kate Stannard

I just returned from a magnificent trip to Bali. A friend who teaches yoga there invited me on a four-day boat trip around the Gilli islands, scouting out a route for a trip she wants to run as a business. 

Yoga, supping and snorkelling on a live-aboard boat for four days? I said yes pretty quickly. On the trip were photographers taking photos of every aspect of the excursion. The photos were to be used for Instagram and Facebook marketing. I know a number of people who live in Bali and run their businesses online and all their marketing is done through sharing on social media. 

Getting a photo of everyone jumping off a boat, means everyone has to jump off the boat and that is actually lot of child-like fun.

At first, I found all of this photo taking a little narcissistic, but then I realised it was also creating a lot of fun. Getting a photo of everyone jumping off a boat, means everyone has to jump off the boat and that is actually lot of childlike fun. The other thing that it drove home was a deep desire to share. The purpose of creating this content was to share this amazing experience with others. This came to me while free diving; one of my friends was desperate to show me a luminous blue starfish; and somehow sharing the starfish with me made the seeing of it much more enjoyable.

Sharing is not necessarily innate – ask anyone with a two-year-old. It makes no sense to them. Why, if you can have all the cupcakes for yourself, should you give some to your friends? To a two-year-old, it means having less for yourself.

Sharing requires empathy, something toddlers are still developing. However, from my sample size of one, even toddlers (who don’t like sharing cupcakes) still love sharing their cool toys in show-and-tell (as long as they can take them home afterwards), much like adults like to share cool experiences online.

According to oxytocin research pioneer Paul J Zak, there is a good reason for this. Spending time sharing on social media dramatically increases our oxytocin levels, essentially giving us the same benefit/feeling as a hug.

Zak explains it thus: “Oxytocin is an astonishingly interesting molecule. It is a small peptide synthesised in the hypothalamus of mammal brains. It is made of only nine amino acids and is fragile. Oxytocin is classically associated with uterine contractions and milk-letdown for nursing.

”Zak expands in his article “Why Inspiring Stories Make Us React: The Neuroscience of Narrative”:

“After years of experiments, I now consider oxytocin the neurologic substrate for the Golden Rule: If you treat me well, in most cases my brain will synthesise oxytocin and this will motivate me to treat you well in return.”  Oxytocin is thus also a hormone of reciprocity.

I see it with clients, who might not have enough to live on but still are anxious about leaving money to their children.

Sharing creates trust and, as illustrated above, hormonally it makes us feel good too (unless we are a toddler with a cupcake). Whatever the cause, in my experience, as we age, we do seem to want to share more. I see it with clients, who might not have enough to live on, but still, are anxious about leaving money to their children. They may want to pay for their grandchildren’s education, contribute towards a wedding, look after stray animals or support a charity.

As an adviser, it is something which needs to be navigated with care. On the one hand, we need to educate our clients on what sharing is prudent, but on the other hand, we also need to be aware and respectful of the deep, human desire to share.

The truth sometimes hurts
24 June 2019

The truth sometimes hurts


Tricky as it is, sometimes you need to have those difficult conversations with clients. Ultimately, everyone benefits from straight talking..

Ewan Naude

There’s a show my wife and I like to watch when our two-year-old Tasmanian devil is asleep called “Black Mirror”. Netflix describes the series as follows: “This sci-fi anthology series explores a twisted, high-tech near-future where humanity's greatest innovations and darkest instincts collide”. 

It’s a hard-hitting watch as many of the plots could be our reality in the not too distant future and also exposes our own behaviours in the technology-driven world that we live in.

We recently watched an episode that was set in a world where people rated each other in real time on an app based on every experience they had with the person in question. Whether it was small talk in a lift with a stranger, service from a barista at a coffee shop or someone commenting on your outfit for the day, you either rated someone or got rated. Scores were live and your overall score impacted your everyday life, such as what products and services you were able to consume or whether you stood in the long or short queue. Not too dissimilar from today’s Insta-life where unofficial ‘ratings’ as defined by number of followers open a number of doors for those who flaunt themselves. 

In the episode, this type of system created a world where you could never speak your mind or even constructively criticise someone for fear of affecting your own rating. It created a fake world where people were insincere and inauthentic.

Those who called a spade a spade were ostracised and lived on the fringes of society.

A skill often neglected by wealth managers and financial advisers is the ability to ‘tell it like it is’ when dealing with clients. The reality is that without clients, we as advisers would cease to exist and this may result in us walking on eggshells when it comes to the difficult conversations we need to have. The conversations about lazy kids who milk their parent’s savings or, on the flip side, the conversations where we make clients aware that there is a strong likelihood that they may run out of funds and have to rely on their kids in their old age.

In my experience, these conversations, as hard as they may be at first, create a bond and trust with clients that is very hard to break. Yes-men may be fine when it comes to dictators and insta-celebs, but when you have constructive, tough interactions with your clients, your relationship will ultimately benefit all parties.

Lessons from the best
21 June 2019

Lessons from the best


Shared leadership, a culture of collective responsibility and accountability – these and other important lessons from the world’s best sports team can be applied to our lives and to business.

Ewan Naude

I seem to write a lot about sport. I suppose it’s easy to find writing inspiration in something you love but sport has so many lessons that can be carried into our professional and personal lives that nowadays I find myself more interested in the psychology of sport than the physicality or entertainment value. 

I find myself more interested in the psychology of sport than the physicality or entertainment value.

The All Blacks rugby team are arguably the greatest team in world sport, in any code, ever. They are synonymous with professionalism, success and have an aura about them that every serious rugby supporter, irrespective of their allegiances, has to admire. Growing up there were two teams who I watched in every test match they played, the Springboks and the All Blacks and, barring extraordinary circumstances, it’s something I still do to this day.

The entire New Zealand rugby system is fascinating. It’s a well-oiled machine, where provincial unions, clubs, communities and coaches understand the bigger picture and where they fit into it. A mega rugby company if you will. As with most successful companies they have great players and coaches (employees), their recruitment is unparalleled and their focus on getting their core skills and basics right is an obsession. Their rationale is that when under pressure, the basics need to be second nature and not something you have to think about in the heat of the moment.

One element that has however been critical in their success is leadership and this is something that is often not questioned enough when it comes to companies and the people tasked with protecting and growing shareholder capital.

The catalyst for their metamorphosis from good to great was the loss the South Africa at Ellis Park in the 2004 Tri-nations

Prior to 2004, the All Blacks were world class with a fantastic win record, but they weren’t the team they are today. The catalyst for their metamorphosis from good to great was the loss to South Africa at Ellis Park in the 2004 Tri-nations, a tournament that the Springboks won and the All Blacks ended in last place. As documented in Peter Bills’ book ‘The Jersey’, in the aftermath of that game, the behaviour of many of the team members left much to be desired. According to Wayne Smith, the assistant coach at the time, many of the players embarrassed themselves in the hours after the game and even on the flight back to New Zealand by becoming inebriated.

He felt that certain players had become bigger than the team and even though they were game changers individually, collectively the team suffered as a result of their presence and influence. Things changed the minute they touched down on Kiwi soil. Leadership was the key to the change and what they did is relevant to each one of us in our businesses, personal relationships and life in general. I summarise some of the principles that put them on the path to unprecedented success:

Shared leadership

Leadership is not only the responsibility of the captain and vice-captain. The All Blacks embarked on a conscious process of developing numerous leaders within the team. Again, in high pressure situations, the presence of a number of ‘cool heads’ is very calming and motivating for a team. Looking at the team now, whenever the chips are down, you can visually see a number of players talking and motivating on the field. There are probably half a dozen members of the team who are equally confident taking centre stage at a press conference for example.

Culture of service and collective responsibility

Prior to 2004 the team had a number of ‘egos’ and ‘me’ players, which created a fractious environment. A number of these players simply couldn’t change their ways and as a result were overlooked for team selection in the years that followed. The culture that emerged was one of playing for the person next to you and being supremely confident in what you do while displaying humility on and off the field. Looking at a number of past and present players, many of them are actively involved in the upliftment of communities in their personal capacities and are simply all-round good people. 


Individuals need to be accountable to their team. If you don’t maintain your fitness in the off season or fail to put in the effort in training, the team will call you out. There are no sacred cows and junior members of the team felt comfortable enough to challenge the more senior players if they felt standards were slipping.

Personal development

Sportspeople are human and have family, financial and other issues. They also need to think about ‘life after rugby’ and their ability to provide for their families after their playing days are over. Focus on individuals and their personal development and headspace is a critical ingredient in the All Blacks’ success. This is a point that is sorely overlooked in the corporate world.

Continuous challenging of ‘new highs’

No matter how good they get, they constantly ask the question: “How can we get better?” Opposing teams often lament the last-minute victories where the All Blacks score in the corner after the hooter has sounded, but the constant pursuit of perfection has resulted in a team that believes they can win under any circumstances. 

A moment that embodies all of these principles

In 2013 the All Blacks had their backs to the wall again Ireland in their last game of what would be an unbeaten season. Ryan Crotty, the inside centre (or second five-eighth, as the position is known in New Zealand) scored a try in stoppage time to win the game after the team had started the movement 60m downfield. At the end of it all the ball had been passed 24 times and gone through 13 pairs of hands before he touched down to give them a last gasp victory and finish an unbeaten season. 

Win ratio

Tellingly when interviewed for ‘The Jersey’, Crotty said he didn’t see it going any other way. The calmness exuded by a number of the leaders, the execution of the basics and the fact that 13 of the 15 players in the team touched the ball in those final moments meant that a season win ratio of 95% became 100%. A true team effort.

Fossil fuel fired
07 June 2019

Fossil fuel fired


Environmental, social and governance issues are here to stay for investors. We need to take a more active role.

Kate Stannard

Our house is on fire. I am here to say, our house is on fire. 

“According to the IPCC (Intergovernmental Panel on Climate Change), we are less than 12 years away from not being able to undo our mistakes. In that time, unprecedented changes in all aspects of society need to have taken place, including a reduction of our CO2 emissions by at least 50%.”

So reported 16 year-old Greta Thunberg at Davos earlier this year. I sincerely admire her tenacity and her activism. For me her words echo a broader trend towards activism that does appear to be taking hold in our industry, as seen in increasing activity and demand for ESG: environmental, social and governance investing, or more broadly: responsible investing. 

trillion managed in ESG funds

Global Sustainable Investment Alliance data shows there are now $31 trillion of assets professionally managed in sustainable investment strategies. This includes $17.5 trillion managed in ESG funds. This amount is up more than two-thirds in two years, the FT reported this weekend. This fast growth signals that all institutional investors are starting to incorporate, or at least consider, ESG factors in their investment decisions. (Source: https://www.top1000funds.com/2018/08/pension-funds-want-esg-guidelines/)

“We’re seeing a tipping point,” said Sarah Kjellberg, the San Francisco-based head of iShares sustainable ETFs for Blackrock in the FT this weekend.

Europe is leading the way but in the US we’re seeing signs that demand is strong.

It does appear that governments in the western world are also starting to take heed. The UK hasn’t burnt coal for electricity for two weeks.  That’s the longest streak since the 1880s. The UK is looking to wean itself off coal completely by 2025. On 14 May, Britain generated a quarter of its energy from the sun – the largest proportion yet. When coal wasn’t used over the past fortnight, solar, wind, nuclear, gas and some hydro-generated power took up the slack, the National Grid Electricity Systems operator said. During the two-week period, on average gas made up nearly 40% of Britain's suppliers, nuclear 20%, wind 13% and other sources made up the rest. (Source:  https://www.bbc.com/news/business-48473259)

Germany, one of the world’s biggest consumers of coal, announced in January that it will shut down all 84 of its coal-fired power plants over the next 19 years, to meet its international commitments in the fight against climate change. 

However, the decline in coal consumption in Europe and the US has been entirely offset by an increase in Asia

Burning Up

Coal-fired generation is in decline everywhere -- except in Asia, where it's been booming

Burning Up
Source: BP Statistical Review
Note: TWh=terawatt-hours, equivalent to one billion kilowatt-hours.

The future for coal globally does however look questionable. Final investment decisions for coal have recently dropped below capacity that is being retired.

Help the Aged

Annual final investment decisions for coal generation projects have fallen below the pace of closures

Help the aged
Source: Global Coal Plant Tracker; International Energy Agency; Bloomberg Opinion estimates
Note: FID figures are visual estimates taken from the IEA's charts. The IEA didn't provide raw data before publication time.

It will take a while to play out. At the moment demand for coal is still increasing primarily due to China and India but the long-term outlook for coal must surely be in question. Last year there was nearly three times as much investment in solar generation than coal.

Global investment in the power sector by technology
Source: IEA

Perhaps a reminder that is worth shedding apathy and being a more active investor.

Beating the buzzer
17 May 2019

Beating the buzzer


President Ramaphosa once again needs to “beat the buzzer” and take some market-positive action to get investor money back into the country. 

Ewan Naude

What a fortnight it’s been for sports fans (unless you are a Blue Bulls supporter)! In the UEFA Champions League semi-final, Liverpool orchestrated one of the greatest comebacks of all time by erasing a three goal first-leg deficit against Barcelona and scoring an audacious winner in the 79th minute to book a place in the final against Tottenham Hotspur who themselves pulled a Lazarus-like manoeuvre and rose from a 3-0 deficit (two goals down on the night) to beat Ajax, including a goal deep into injury time. 

Jumping continents and sports codes, the Mumbai Indians won a record fourth Indian Premier League title by pipping the Chennai Super Kings by one run in a dramatic final over. Although I’m not an avid fan of the T20 format, I have to admit that it can be very entertaining stuff at times and this final was certainly popcorn worthy.

For me though, in terms of pure entertainment, skill and athleticism, the prize goes to Kawhi Leonard of the Toronto Raptors, a Canadian basketball team. I am the first to admit that I know zip about basketball. I know tall guys are generally good and that you get three points for shooting outside the circle and two points inside but other than that, nada. With the match all tied up at 90-90, Leonard makes an impossible, off-balance shot, which bounces off the hoop three times before gently dropping through the net and just beats the buzzer – pure poetry in motion.

You can relive the action here:

In December 2017, President Cyril Ramaphosa had his own “beat the buzzer” moment, when he managed to win the party leadership race at the ANC elective conference by a whisker. Although 18 months have passed since then, it feels as though we have been a country in limbo waiting for the national elections. Now that the ballots have been cast and the final numbers are in, South Africa has some political clarity. You can breathe a sigh of relief; Hlaudi won’t be president, Mmusi has his work cut out for him, Pieter and Julius could one day be coalition partners, Aunty Pat was flat and Cyril has a mandate. 

Now that the ballots have been cast and the final numbers are in, South Africa has some political clarity. 

Global and local cash-flush investors are waiting for market-positive action to be taken over the next few months and are poised to take advantage of the incredibly low valuations available on the local market. There’s a lot at stake and very little time, Cyril is facing the buzzer once again in his short political career and he needs to beat it again for the sake of our country. The next few weeks will be telling. 

Desert festivals and the value of social capital
10 May 2019

Desert festivals and the value of social capital


The altruistic values of a festival in the Karoo provide an example of how social capital can be channelled to provide innovative services. 

Kate Stannard

I have just returned from Afrikaburn, an extraordinary festival held each year in Tankwa in the Karoo. There is nothing to buy so you have to bring everything in (including water) and take all rubbish out. The desert is alight with huge sculptures, music and expressive outfits; it  is a shrine to human creativity.

It also brings out beautiful qualities: people are radically inclusive, accepting, considerate and giving (giving is mandatory). Like its cousin Burning Man in the States, it is a wonderful utopia for a few days and it made me think about the idea of social capital. According to Wikipedia, social capital broadly refers to “those factors of effectively functioning social groups that include such things as interpersonal relationships, a shared sense of identity, a shared understanding, shared norms, shared values, trust, cooperation, and reciprocity”. You help someone change a tyre, put up a tent or give them a fresh cup of coffee, both because it is kind and because it is really nice when someone does it for you.

An example of social capital stood out for me recently, shared by a friend who lived in Japan. He watched a man walk into a restaurant in a town on the outskirts of Tokyo and put his wallet on a table. He walked out and come back an hour or two later and neither his wallet nor his table had been taken. For someone Japanese, this would have been normal, an understanding that exists between everyone. As a South African it was startling: here, the wallet and table would have been gone and been considered “fair game”. In Japan, the man trusted his wallet (and table) would still be there. 

Social capital is important in our industry because it impacts the way that people behave and their habits.

Social capital is important in our industry because it impacts the way that people behave and their habits. Change can only happen if it is adopted, so habits and the way we interact, matters. For example in the US, people still settle their bills using cheques, which seems bizarre to me but that is just how things work there and more modern systems have not been broadly adopted as yet. People trust and accept cheques as a means of payment and not electronic transfers.

Monzo, an online bank which enables you to open an account with a photo of your passport, is opening 35 000 accounts a day.

In the UK, one still needs to go into a branch of a traditional bank to change address details or send a fax (something our children will probably never know about), since that is what is trusted there. Yet adaption is present and trust in technology is shifting behaviour. Monzo, an online bank which enables you to open an account with a photo of your passport, is opening 35 000 accounts a day. Comfort with technology is shifting behaviour and services.

Back in Africa, the way in which people behave and their social capital is being innovatively used to create interesting services. For example, a friend of mine works for a microfinance company, Jumo, which uses all sorts of data provided by cell phones to effectively credit check individuals who thus far haven’t had access to finance, such as the creditworthiness of the people they call the most and whether they charge their cellphone in the same place every night (an interesting indicator of stability).

The way we relate to each other can be an indicator for early adoption of new products and services. Trust and reciprocity are not just utopian ideals found in Japan or Afrikaburn, they are also present and required in our industry to create change.

Conquering the wall
12 April 2019

Conquering the wall


Whether in the office, at home or when dealing with clients, we often face major challenges in our lives. A great team makes all the difference.

Ewan Naude

When it comes to documentaries, I tend to gravitate towards those that are focused on sports and wildlife as that is where my interest lies. I recently watched an incredible one called “The Dawn Wall”, which is the story of Tommy Caldwell and Kevin Jorgeson, the first rock climbers to freeclimb the Dawn Wall of El Capitan (El Cap) in the Yosemite Valley.

What the documentary doesn’t capture is Caldwell’s depression after his wife had left him and that he was about to attempt a free solo (without safety equipment) climb of El Cap, when the first light hit the Dawn Wall and the idea to climb it struck him moments before he was about to attempt a life threatening climb. His loss and the need to occupy his mind had driven him to attempt a feat that everyone, except him, believed to be impossible.

You need to watch the documentary to understand the level of preparation required to tackle something of this nature, but the attempt was years in the making and involved reconnaissance of every nook and cranny of the 3,000ft rock face, rigorous training and an unbreakable spirit. 

The climb was broken up into a number of “mini-climbs” or “pitches”, 33 in total, and, depending on their difficulty, the aim was to climb a number of pitches per day until they reached the summit. For 19 days, they ate, slept and climbed on the face of El Cap, through sun, rain and wind, until they reached the summit on 14 January 2015.

Pitch 15 was always going to be very difficult and it was at this point that Jorgeson hit a speedbump. Caldwell sailed through the climb on his first attempt but Jorgenson failed three attempts on the same day which was the start of a nine-day period where failed attempts were followed by days of rest in order to allow the skin on his fingertips to recover. After a few days, Caldwell moved on and flew through pitches 15 to 20 to reach Wino Tower, the only flat ledge on the face and the point at which the toughest and most technical climbing is over. 

Caldwell’s celebration on Wino tower was short lived however, as he realised that a summit without his climbing buddy Jorgenson would be a hollow victory, so he made the decision to descend back to pitch 15 and wait for him. In the days that followed, Caldwell continued to encourage his climbing partner while Jorgenson somehow managed to stay motivated and showed incredible resolve to finally complete pitch 15 on 9 January, 9 days after he first attempted it. Caldwell’s faith in Jorgenson was vindicated and five days later they summited El Cap as the first climbers to conquer the Dawn Wall.

Like many great sporting triumphs this story has a number of life lessons which, although not investment related, are pertinent to business and just generally to being a good human (in my humble view). Caldwell could have summited without Jorgenson at least a week earlier, eliminating the risk of sickness or inclement weather but he didn’t. 

He knew he couldn’t have got this far without his climbing partner, but having trained with him, he also knew that with time and the right motivation, he would get through pitch 15. On the other side, Jorgensen knew that all the encouragement and support in the world wasn’t going to get him through without the commensurate hard work and can-do attitude that he displayed. The combined team effort created this sporting moment in history.

Whether in the office, at home or when dealing with clients, each person has their own Dawn Wall to conquer. It really is much easier climbing it with a trusted team.
Don’t forget your older clients
29 March 2019

Don’t forget your older clients


These days, the millennials seem to get all of the attention. 

Patrick Lawlor

These days, the millennials seem to get all of the attention. This is understandable, seeing as it’s the generational cohort that is currently at a crucial point of setting off on their wealth journey – they’re starting to climb the corporate ladder, or getting their businesses off the ground. They’ll need plenty of advice and help in the coming years.

But as we focus on this generation, we shouldn’t forget the importance of the older generations, particularly those approaching, at or beyond retirement age. Data from the UN, Haver Research and Deutsche Bank shows that, for the first time ever, there are now more people on this planet over the age of 65 than under the age of 5. And the number is expected to grow.

World Population

This has major implications for the world and for financial planning – the latter of which I was reminded of recently when I read a report about how the elderly are being targeted more and more by fraudsters in the US.

in claims filed

According to the US’s Consumer Financial Protection Bureau (CFPB), cases of financial exploitation targeting the elderly quadrupled between 2013 and 2017, and was higher than the rate across all age groups. This is based on suspicious activity reports (SARs) submitted by banks, financial services firms, credit unions and casinos. Claims filed amounted to US$6bn and may even be a fraction of what actually occurred, says the CFPB.


One third of losses occurred for people over 80, while the average loss was also higher for people over 80.

So what lies behind this rise in the targeting of the elderly? One simple reason (as the UN numbers show) is that the older generation is simply growing in numbers. People are living longer and having fewer children, so it makes sense not only that there are more older people but also that many of them have more money.

I would add a few other trends at play. With greater global mobility, there are more instances of generations spreading out across different regions and countries. It’s not uncommon for older South Africans to have children and grandchildren in different countries around the world. 

This dispersion of families can be particularly trying for the elderly, especially if a spouse has passed away or for a couple that has divorced. As social animals, we treasure the proximity of loved ones and close friends. Deprived of these social links, people may be more vulnerable to confidence tricksters (including many posing as financial advisers), especially if they offer wonderful returns.

(The CFPB noted that many of the fraudsters were family members – I would argue that this actually reinforces the point. Deprived of contact with one’s network of children and grandchildren, one may be particularly vulnerable to the advances of a family member nearby)

Other factors are poor financial planning over one’s life or a lack of financial sophistication, made worse by the complexity of the investment world right now. If one finds one’s nest egg insufficient to cover one’s liabilities in retirement, one would probably be more susceptible to the wiles of an unscrupulous operator offering a get-rich-quickly scheme.

And all of these factors might come into play at the same time.

So where does this leave us as advisers and managers of wealth? It does remind us of our duties to support and help our clients. In particular, it reminds us of the challenges our older clients face and how we can be a friend and supporter to them. Many older clients are custodians of family wealth too, so by helping and supporting them, we are helping the following generations too, as well as ensuring the longevity of our businesses.

Broadly speaking, I think it reminds us of the challenges of the demographic shifts taking place around us and how we as an industry can be a force for positive social change. We should do our bit by being an honest friend to older clients, but we can also help to bridge the gaps between generations and break down that feeling of alienation that many older people face. 

Taking out the trash
15 March 2019

Taking out the trash


China is rolling out production of electric vehicles, with positive implications for the environment – and platinum producers.

Ewan Naude

In a world of facetuning*, Insta celebs and bored trust fund kids ‘making a career’ out of social media, it was a breath of fresh air for me to see the latest trend to hit the interwebs this past week. As a keen outdoorsman I’ve always argued that the only way for humans to change their ways and become more environmentally conscious is to play to our inherent vanity and although the #TrashTag movement is positive, there is surely nothing altruistic about it. For those who haven’t seen it, you essentially take a picture of a polluted area like a beach, street corner or your bedroom, clean it up and then post a before and after picture with the handle #TrashTag. 

Why people can simply not pick up their own Styvie stompies and Simba chip packets without the blessing of the social media gods is beyond me, but at least this trend is doing some good and mother earth needs every bit of help she can get, even if it’s from the Kardashians.

Although I suspect its motives are entirely different, China, which is the largest greenhouse gas emitter in the world, has for some time now paid far more interest to the environment. The Chinese are long-term investors and for the ‘long term’ to come to fruition they have probably realised that the current path we are on is an extremely dangerous one, unless you are a cockroach or the indestructible Iggy Pop. The growth of the electric vehicle (EV) market also means a massive reduction in oil usage for the country, which is very appealing from an energy security perspective.

China's Electric Vehicle

China is now the largest manufacturer of EVs in the world due to a combination of incentives, subsidies and the fact that it’s also the biggest market – in fact, the market is estimated to be more than three times the size of the US, according to Statista.

Car charging infrastructure in China is growing at a rapid rate to support the growth of EVs and according to the South China Morning post, industry executives predict that by 2023, six million units or 20% of the total vehicle market in China will be EVs. 

Electrifying Autos
Source: Raconteur


A report by the Financial Times spells it out well:


Now Beijing hopes to do the same for fuel cells — which along with electric vehicles could help decarbonise the entire transportation fleet and reduce China’s vast reliance on imported oil. While fuel cells are unlikely to compete with batteries for small passenger cars because of the latter’s continued reduction in costs, they could play a role in larger vehicles such as trucks and buses, as well as in ships and trains.

’If you look at what China did in solar, in wind and in battery electric vehicles the subsidy tap was opened and it brought a lot of capital and companies to these new markets, which resulted in China being the leader in all three of these segments,’ says Randy MacEwen, chief executive of Canada’s Ballard Power, one of the world’s largest fuel cell manufacturers. ‘We expect to see something similar with the fuel cell industry.’

All told, China will have spent about Rmb85bn ($12.4bn) on supporting fuel cell powered vehicles last year, in a mix of national and local subsidies. The technology received high-level support in October when Wan Gang, a former minister of science and technology who is considered the father of China’s push into electric cars, said ‘the next era belongs to fuel cell technology’.

While fuel cells are unlikely to compete with batteries for small passenger cars because of the latter’s continued reduction in costs, they could play a role in larger vehicles such as trucks and buses, as well as in ships and trains.

“Fuel cells have a number of advantages for China. They can help reduce the country’s reliance on imported energy as well as raw materials. While lithium-ion batteries require a host of metals such as cobalt, lithium and nickel, most fuel cells only require platinum, of which there is an abundant supply, as a catalyst, at a level of around 0.5 to 0.6 grams per kilowatt.”

Source: ‘Hydrogen power: China backs fuel cell technology’, Financial Times



*Using apps to make your social media persona more aesthetically pleasing than you appear in real life. A form of catfishing (a catfish is someone who creates a false online identity).

While you were sleeping
01  March 2019

While you were sleeping


Looking for a great personal investment? A good night’s sleep may be the answer.

Kate Stannard

I still remember the day adjectives came back after the birth of my son. About five months after his birth, a delicious descriptive word wafted into my head and it fully hit me just how devastating the sleepless nights spent nursing him had been on the functioning of my brain. I had been operating on basic sentences for months.

I am not alone in my realisation. There is increasing evidence to support the importance of a good night’s sleep. Even the smallest amount of sleep loss can have huge consequences says Matthew Walker, Professor of Neuroscience and Psychology at the University of California, Berkeley, and Founder and Director of the Center for Human Sleep Science. 

As Walker expands, the human brain doesn’t have a sleep credit system; you can’t make it up. Sleeping should be seen more like breathing rather than eating, where our body has cleverly designed a fix in the fat cells that store food for times when we can’t eat. We have no such fix for sleep loss. Once you get past 16 hours of being awake we start to see mental deterioration and physiological deterioration in the body. He says that after you've been awake for 19 or 20 hours, your mental capacity is so impaired that you would be as deficient as someone who was legally drunk behind the wheel of a car. So if you were to ask Walker what is the recycle rate of a human being, it does seem to be about 16 hours and we need about eight hours of sleep to repair the damage of wakefulness. Wakefulness essentially is low-level brain damage according to Walker.

In Spring, when the clocks change and people lose an hour of sleep, there is a 24% increase the numbers of heart attacks the following day. 

We see the cost of losing just an hour of sleep very dramatically in the social experiment that is daylight saving, which affects 1.6 billion people annually. In Spring, when the clocks change and people lose an hour of sleep, there is a 24% increase in the numbers of heart attacks the following day. In Autumn, when an hour is added, there is a 23% decrease. Thankfully for South Africans, we don’t have daylight saving in these parts.

Walker continues that just one night of bad sleep at night drops anti-cancer fighting cells, called natural killer cells, by 70%. That’s an alarming state of immune deficiency.  And that's the reason that we know that short sleep duration predicts your risk for developing numerous forms of cancer. The list currently includes cancer of the bowel, cancer of the prostate, as well as cancer of the breast. The impact is such that the World Health Organisation has classed night shift work as a probable carcinogen.  Denmark recently became the first country to pay worker compensation to woman who developed breast cancer after working years of night shifts.

Japan - a sleep-deprived nation  |  image: Statista

But now many Japanese firms are taking steps to change the nation’s relationship with work and sleep. Tokyo-based wedding organiser, Crazy, has started rewarding staff who get a minimum of six hours of sleep per night. And an IT services company called Nextbeat is reported to have had bespoke napping rooms installed for its staff (source: World Economic Forum).

Tokyo-based wedding organiser, Crazy, has started rewarding staff who get a minimum of six hours of sleep per night. 

This might seem a little quirky but, given the productivity enhancement, and given the health consequences of not getting enough sleep, investing in sleep makes good business sense.

Black gold
15  February 2019

Black Gold


An oil find off the south coast could prove to be a game changer for SA.

Ewan Naude

In their 1992 hit of the same title of this piece, Soul Asylum wrote a war-themed song which deals with the first Gulf War. “Two boys on the playground” was used as a metaphor for the US and Iraq. 

A blessing and a curse, over the years oil has created prosperity, started wars and fuelled greed. Governments have been overthrown, palms have been greased and natural resources often exploited or destroyed. Few countries have managed to follow the “Norwegian model” in managing their oil assets and ensuring that wealth remains once the wells dry up or oil prices drop.

Brulpadda, as those who “praat die taal” will know, means bullfrog in English. This is the name given to an offshore oil and gas project being drilled by Total off the Western Cape coast (southeast of Mossel Bay) and indications are that this project is worth croaking about. Gwede Mantashe, our minister of mining was not croaking but instead tweeting up a storm directly from the rig recently. 

The Total Exploration project in the Western Cape is one of the most important projects underway in the country. We believe the project will help turn our economy around.
Reduce the Budget deficit by 30%

From a tax, royalties and downstream products and services perspective a find like this can be a game changer. Media reports say it could add R1 trillion to the SA economy and reduce the Budget deficit by 30%, but at this stage, the details are too sketchy to draw definitive conclusions.

From an investment perspective a positive find could have a major positive effect on the rand as oil currently accounts for 15% of SA’s imports and this in turn would impact inflation expectations and interest rate sensitive stocks positively.


HCI has an indirect stake in the project through its 49% holding in Impact Oil & Gas

We will have to wait and see what impact it has on specific stocks like Sasol, which contributes about 25% of SA’s fuel needs through its oil-from-coal operations. HCI has an indirect stake in the project through its 49% holding in Impact Oil & Gas, which has a financing agreement with one of the partners in the project.


Time will tell how significant the find turns out to be and, more importantly, how effectively the process is managed by our government.

Sneakers, Lego sets and other Alternatives
24 January 2019

Sneakers, Lego sets and other alternatives


We find that Lego investments outperform large stocks, bonds, gold and other alternative investments.  

Kate Stannard

My millennial colleagues’ love lives fascinate me. Their stories are far more interesting than an episode of the “Bold and the Beautiful”, the soapie much watched by my generation every afternoon in the common rooms of boarding schools and university residencies.

I would have thought feelings, in all their messy joys and sorrows, are the point of dating, but my colleague informs me this is not the case. 

One particular colleague, however, has grown up with Netflix and Showmax on her laptop and a far greater variety of choice in afternoon entertainment. Dating happens online and not in the common room. “I might catch feelings,” she informs me after asking if she is going to go on a third date with “Bitcoin guy”. Bitcoin guy (as the name suggests, he trades cryptos) is pitted against cake guy (the guy who sent her a cake via Uber eats to cheer her up) for her affections. I would have thought that feelings, in all their messy joys and sorrows, are the point of dating, but my colleague informs me this is not the case. 

If the views on dating are alternative, so are the investments. Bitcoin guy will be crowing less loudly on social media after last year’s fall in the Bitcoin price, but there are other interesting investments that are a little foreign to my generation. Trading sneakers (my generation used to call them takkies) for example is some people’s full-time income stream. Nike, Adidas etc make limited edition sneakers which are bought, kept in their boxes by these sneaker traders and onsold, often for a vast profit. There are select communities and clubs for fans of different brands. These are not advertised and are sometimes even on the Dark Web. Much like trading collectable cars, these shoes are things of beauty, attracting designer talent fascinated with street art and engineers. A robust secondary market exists for these high-end limited edition shoes, as this website shows: www.sneakerfreaker.com

I am generally not a fan of investments that don’t have a yield, but where this has proved to be unfounded is Lego sets. Victoria Dobrynskaya of the National Research University Higher School of Economics finds that “Lego is an iconic toy, with diminishing over-time supply and high collectable value. A huge secondary market for Lego sets, with tens of thousands of transactions per day, has developed since the turn of the century. We find that Lego investments outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015.

A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the Lego toy an attractive alternative investment.

“Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. Lego returns are not exposed to market, value, momentum and volatility risk factors, but have an almost unit exposure to the size factor. A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the Lego toy an attractive alternative investment with a good diversification potential.” 

Alternative investments can be lucrative and alternative views are interesting and entertaining, and expand our horizons. Remember though that you can also lose a lot of money, so they work best within a balanced, well-diversified portfolio – whether you’re a millennial or not.

Backing the big dogs
18 January 2019

Backing the big dogs


With 2018 in the rear view mirror (good riddance), I’ve arrived back at the office bright-eyed and bushy tailed with my shoes on and ready for what 2019 throws at me.   

Ewan Naude

Sitting down to write my first Friday Fix of the year is never easy. Three weeks of sun, sand and a break from the market make it tough to put on a pair of shoes for the first day at work, let alone ease my brain back into the complexities of financial markets. With 2018 in the rearview mirror (good riddance), I’ve arrived back at the office bright-eyed and bushy-tailed with my shoes on and ready for what 2019 throws at me.

The first thing you see when trawling through the masses of unread emails is the post-holiday specials on everything from flights to pink Speedos. For those with a bit of discipline, who were a little more frugal in the lead up to the festive season, it’s a very good opportunity to buy the same items at a significant discount.

The financial markets are not too dissimilar to retail in their behaviour, where irrational consumers and trends can impact pricing and create inefficiencies. Not too long ago, the JSE ‘Big 4’ were untouchable and investor appetite was insatiable, valuations looked stretched and subsequently, on the back of some of some poor earnings numbers and industry headwinds, these shares have de-rated materially. 

The ‘Big 4’ (plus Mediclinic) showing value


The ‘Big 4’ (plus Mediclinic) showing value

Without getting into the particulars of each stock and despite the fact that each of them faces challenges, the de-rating appears to have been overdone and the forward multiples paint a picture that should get any bargain hunter excited.


Proceed to checkout. It’s time to back the big dogs. 

Whats Cooking
11 January 2019

What's cooking


The idea of a traditional marriage can be romantic and I have seen many successful ones where the combining of two people with clearly defined roles and specialisations leads to a union which appears greater than the sum of the parts. 

Kate Stannard

I met a delightful man at a party the other day who is heading towards his 80th birthday. He lost his beloved wife many years ago tragically to illness. Listening to him talk about how he feeds himself reminded me of my own father who lost his wife to divorce. Many years of single life later, both men seem a little lost at not having anyone else to cook for them. The idea of cooking for themselves is foreign. Where once there were wholesome, nutritious suppers, there are now toast and microwave meals. They are vulnerable and unable to look after themselves optimally. Listening to him was the first time I really registered the cost to the other side of the traditional marriage where roles are clearly defined.


The combining of two people with clearly defined roles and specialisations leads to a union which appears greater than the sum of the parts

In my years in wealth management, I have come across many women in traditional marriages whose husbands have died or left them. Many who don’t know where their assets are or how much they are worth. Many have never discussed investments or budgeted in their lives and are now suddenly forced to make decisions with no experience. Some without bank accounts in their own names, another who missed a payment to her security company/ armed response (and their services were suspended) as the estate was frozen when her husband tragically died. They are bereft and vulnerable.


The idea of traditional marriage can be romantic and I have seen many successful ones where the combining of two people with clearly defined roles and specialisations leads to a union which appears greater than the sum of the parts. It is a romantic view of taking care of each other in fulfilling your role well. It is indeed affirming to provide something the other cannot. Perhaps however taking care of each other means empowering each other to do your role too. In this stereotypical example, women teaching their husbands how to cook and men teaching their wives about investments and asset classes.


Serendipitously attending another party in the same week, I chatted to another man of my acquaintance whose traditional marriage ended when his wife left him. He responded by enrolling himself in a Silwood cooking course and becoming an amateur chef. In a charming about-turn of events, he ended up marrying a highly successful career woman who he cooks for every night.


As advisers, it’s a topic worth discussing with clients, in order to empower their partners to help protect them. For example, we can offer to educate partners (irrespective of gender) and beneficiaries on investments and asset classes. We can help ensure that they have valid wills and that they have planned for the different scenarios in the event of death, and communicated this with their partners. And perhaps recommend cooking lessons …

Braai talk
16 November 2018

Braai talk


I am starting to feel optimistic about the South African equity market, which has been a painful place to be over the last five years. This has been reflected not just in stock market returns but also in what I call "braai talk."

Kate Stannard


Up until the end of last year, my conversations with business owners around the braai yielded stories of order books on hold, little investment, and general pessimism and immobility. 

Recently I have sensed a shift. There is movement in the listed space: increasing corporate actions and delisting of small caps. Around the braai I am starting to hear stories of people acquiring businesses, investing in equipment, and other forward-looking positive behaviours. While I am conscious of this being just my own personal experiences and not neutral empirical evidence, I am also starting to get excited around valuations.

Dividends play a large role in our various valuation models and the JSE ALSI trailing 12-month dividend yield is now at levels not seen since the financial crisis (2008) and the tech blowout before that (2000 to 2002). 

JSE dividend yields - heading towards 4%

JSE dividend yields - heading towards 4%

Source: Bloomberg

PE ratios have fallen sharply and are now hovering around 11.7 times (forward) on the JSE ALSI. Having traded for years at a premium relative to both emerging markets and the MSCI World Index, the JSE is now trading at a discount.

South Africa (SWIX) Versus MSCI World & MSCI EM PE ratios

South Africa (SWIX)

Source: Bloomberg, Investec Wealth & Investment

Past performance is not an indicator of future performance. We need to repeat this like a mantra and constantly reassess our environment and remind ourselves to refrain from giving too much credence to recent events and trends in our decision-making process. 


Nevertheless, for the first time in years (and whilst I am conscious it might be a bumpy ride), both valuations and positive momentum in “braai talk” have started making me excited about investing in South Africa.

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