Achieving investment success is a long-term project

Achieving investment success is a long-term project

Building wealth is best viewed as a long-term endeavour. We would argue that building a reputation as a skilled long-term investor is no different. While calling the market direction on any single day is largely a matter of luck, it is far more difficult to consistently deliver above-average performance in the long run.

We recently had the honour of being named as South African Manager of the Year at the Raging Bull Awards (and earning a number of fund-specific awards as well). We had been runners up in several years, and so, from a personal perspective, to finally clinch the title is something that has a great deal of significance for our investment team. But while winning awards is nice, it more importantly provided us with an opportunity to reflect on the journey to this point, and the overlap between winning awards and achieving investment success for clients, if any.

It all begins with a longer-term view
From around 2018 to the end of 2019, our funds underperformed. With the benefit of hindsight, we know this was because highly accommodative monetary policy had lent further impetus to cycles that we believed had already run their course. Thus, we were early in our positioning and had to be patient while we waited for our views to play out. Markets move according to their own timelines, and it can be challenging to remain focused on your investment thesis while markets continue to move contrary to what your reasoning dictates. To avoid being swayed by the vagaries of the market, investors need to have their thinking grounded in a proven investment philosophy that has stood the test of time, and thorough research. Without a firm bedrock to base your investment views on, it is easy to capitulate, and doing so can have devastating consequences to building wealth in the long run.

You have to be comfortable being unfashionable from time to time
While markets are weighing machines in the long run, they are also voting machines in the short run. This means that market prices can diverge widely from fair value from time to time. Some of the best opportunities, however, exist in the out-of-favour sectors of the market, where prices have been driven far below intrinsic value. Conversely, prices in the fashionable sectors of the market are often driven substantially in excess of intrinsic value. As price-sensitive investors, we know that to tilt the odds of investment success in our favour, it is best to buy quality assets at a wide margin of safety. This means that investors should be comfortable investing in what appears to be unfashionable from time to time. It can be challenging, but the ability to apply differentiated thinking can make a substantial difference to the investment outcomes investors attain in the long run.

Be an all-rounder
To win the prestigious South African Manager of the Year Award, it is not sufficient to excel in one category. Rather, the fund manager needs to deliver exceptional performance across categories that include equities, fixed income, multi-asset and global capabilities. Similarly, to build an exceptional investment portfolio, it is not sufficient to make one great investment call. When we construct portfolios at PSG Asset Management, we aim to ensure our portfolios are positioned to benefit from various sources of returns. Not only does this help to ensure we do not rely on a specific scenario materialising to deliver on fund objectives, but it also means that investment performance benefits from diverse performance drivers, helping to sustain returns over the long term.

You have to see the bigger picture
Successful long-term investing is all about finding the best opportunities to grow your money. In our view, following an unconstrained, globally integrated approach is one of the best ways to ensure your money is allocated to the best available opportunities. By ensuring investors are rewarded with an appropriate risk-adjusted level of return, we are positioned to ensure our portfolios can continue delivering exceptional performance in the long run.

Stay the course
One of the key differentiators that sets successful investors apart is a commitment to applying their craft consistently. We rely on our proven 3M investment philosophy to help us to consistently identify and exploit opportunities to our clients’ advantage, regardless of where the market finds itself.

While we are excited by the recent accolades we received, we are also confident that there are many more exceptional investment opportunities to be found, and robust and well-diversified portfolios to be constructed. We look forward to continuing to deliver investment excellence to our clients, and helping them build wealth in the long run.

We are honoured that our clients have chosen to invest with us, and have patiently supported us even when our investment views took a little longer to pay off than we would have liked. Thank you for your continued support, and we look forward the investment journey ahead.

Anet Ahern is the Chief Executive Officer of PSG Asset Management.