According to the Alexforbes S.A. Equity Manager Watch Survey up to end October 2023, the 36ONE SA Equity Strategy has consistently ranked #1 out of 50 local equity funds (benchmark cognisant category) across all time periods: YTD, 1, 3, 5, 7, and 10 years. The survey highlighted that on a risk-adjusted basis our SA equity strategy has delivered exceptional outcomes for investors over time. This has been achieved in volatile and challenging markets, with 2023 making up another year of fluctuations and surprises.
Going into the start of the year, there was an anticipation of a softer US economy in 2023 given elevated rates, leading to expected forecast adjustments for subdued inflation, lower interest rates, and a probable halt to the US Federal Reserve's rate hike cycle. Moreover, there were high expectations of a significant economic resurgence in China as the nation aimed to move beyond its zero-Covid policy. However, reality veered sharply from these projections. Contrary to expectations, the US consumer demonstrated remarkable resilience, driving continued rate increases. Additionally, the combined market capitalisation of tech giants known as the Magnificent Seven (Apple, Microsoft, Alphabet (Google), Tesla, Amazon, NVIDIA, and Meta (Facebook)) surged by an astonishing 99% this year alone. These specific companies combined now hold a market value roughly twice the size of South Africa, India, Brazil, and Russia's entire stock markets combined!
On the other hand, China's grand reopening didn’t pan out as anticipated, revealing a scenario starkly opposite to predictions. Economic data coming from China has been weak across the board. Industrial production continues to disappoint. Trade — both imports and exports — have slowed significantly. Alarming levels of debt, particularly in property development, comprising 30% of the economy, have become a cause for serious concern. In addition, we have also seen ongoing geopolitical risks from the Russia-Ukraine war and the more recent Israel-Gaza war.
The graph below illustrates the price fluctuations in the South African Equity Market (ZAR) throughout the year. As depicted in the chart, it has been a year characterised by consistent fluctuations, with individual stocks within the index experiencing even more substantial swings.
Although volatility isn’t easy to navigate and can feel like an investor’s worst nightmare, we view it as an integral aspect of investing. It can also prove to be an invaluable alpha-generating tool for agile asset managers like us who know how to harness it. We believe that increased volatility creates additional opportunities. Given that we also offer hedge funds, we are in a unique position to capitalise on market downturns.
As mentioned at the start, the proof is in the pudding with the Alexforbes S.A. Equity Manager Watch Survey up to end October 2023 showing the 36ONE SA Equity Strategy consistently ranking #1 out of 50 local equity funds (benchmark cognisant category) across all time periods: YTD, 1, 3, 5, 7, and 10 years.
We have included some snippets from the survey below, perhaps just to touch on our information ratio, notably over the 3-year and 5-year periods, which ranks considerably higher relative to our peers. This ratio is a useful parameter when comparing funds as it measures an investment manager’s skill in generating returns above a benchmark while considering the volatility of the returns. A higher information ratio shows that a fund manager has outshined other fund managers and has delivered consistent returns over a specified period. The survey showed that we delivered a significantly higher information ratio in comparison to peers.
While we don't profess to possess a crystal ball predicting the market's movements next year, our track record of successfully navigating turbulent markets speaks for itself. As we step into 2024, our investment team remains committed to not just delivering returns, but striving for exceptional risk-adjusted returns for our investors.