• Investment philosophy

    “Remember the story of the tortoise and the hare? While many investors have ‘sprinted’ toward their investment goals, success is most often found by consistent action, not big action.”
    Brandon Turner

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INVESTMENT PERFORMANCE

Investment portfolio performance is determined by a host of factors. At FGIP, we continuously analyse these factors and assess to what extent each play a role in building portfolios for our clients that optimise growth and support their long-term objectives.

These factors include:

  • Asset allocation

    Asset allocation refers to the portfolio’s exposure to different asset classes, such as cash, bonds, equities, property and derivatives. Since these asset classes move in different cycles, skilful asset allocation and management are of paramount importance to achieve better performance.

  • Quality management

    Proper processes, experience, knowledge and information are key ingredients for adopting a sound strategy and managing funds accordingly.

  • Risk management

    Higher returns are usually associated with higher risk. Any successful investment strategy must have proper risk management procedures in place to protect against the downside of investment performance.

  • Taxation

    Taxable investors must seek to optimise their after-tax returns, where applicable. This requires the skilful use of tax-friendly instruments and structures.

  • Currency exposure

    Rand hedging is essential to protect an investment against any volatility and weakness of the rand.

  • Costs

    The amount paid towards costs has a direct impact on investment returns. Returns must therefore be assessed on an after-fees basis. It’s also important that the value of the service provided reflects the fees charged.

  • Global economy

    The economies in which we invest underpin all of the above strategies. To identify opportunities and to avoid unnecessary risks requires thorough research, insight and vision to determine the best allocations between geographical regions, asset classes and sectors.

MANAGING RISK

In the world of investments, risk is inseparable from performance. Rather than being desirable or undesirable, it is simply necessary.

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Understanding risk is one of the most important roles of the investment manager.

Risks must be measured and managed when making investment decisions. A common definition for investment risk is deviation from an expected outcome. This can be expressed in absolute terms or relative to something like a market benchmark.

To achieve higher returns in the long run, one has to accept more short-term volatility. How much volatility depends on an investor’s risk tolerance – their capacity and willingness to accept volatility based on their specific financial circumstances and how comfortable they are with uncertainty and the possibility of incurring short-term losses.

At FGIP we continuously consider and measure risk as far as possible. We understand that different investors have different levels of tolerances for risk and need guidance on what level of risk is in their best interest.

To this end, we use risk profiling methods to determine each client’s personal attitude towards and understanding of risk.

We manage risk in several ways, including:

  • Relying on qualified and experienced advisers and portfolio managers
  • Implementing proper quantitative and qualitative analytical techniques
  • Diversifying between asset classes, sectors and securities
  • Managing exposures
  • Monitoring investment managers on an ongoing basis
  • Providing detailed reporting
  • Meeting compliance requirements (internal and external auditing by independent auditing and legal professionals)

VALUE OF TIME IN THE MARKET

History shows that staying invested over the long term pays off.

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One of the main concerns when investing is market volatility, which is the degree to which prices change over time. Another way to think of volatility is looking at price swings. The bigger the changes in an investment’s price and the more frequently these changes happen, the higher its volatility. Investments with high volatility present a higher degree of risk because their prices are unstable.

However, short-term volatility does not necessarily indicate a long-term trend. A security can be highly volatile on a daily basis but show long-term patterns of growth or stability and/or maintain its purchasing power.

The advantage of long-term investing is found in the relationship between volatility and time. Investments held for longer periods tend to exhibit lower volatility than those held for shorter periods. The longer you invest, the more likely you will be able to weather periods when the market is down. Assets with higher short-term volatility risk (such as equities) tend to have higher returns over the long term than less volatile assets such as money markets. Long-term investing may also offer tax benefits and significant savings in transaction costs.

It is very difficult to predict the best time to enter or exit the market. The speed at which markets react to news means stock prices have already absorbed the impact of new developments. When markets turn, they turn quickly. Those trying to time their entry and exit may miss the turning point.

It is challenging to invest with confidence while markets are volatile. However, short-term market movements should not alter investment discipline.

At FGIP, we understand the importance of a well-planned strategy and maintaining the discipline of managing those risks that can be managed and the emotions that often cause irrational behaviour and unnecessary losses, to the benefit of our clients.

History shows that staying invested over the long term pays off.