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Quarterly Commentary

2020 Q1 Comments from the Chief Operating Officer

This is the 80th edition of our Quarterly Commentary, which was launched in the first quarter of 2000. Each issue has been printed and sent to you via post or email, depending on your preference. Each has been produced by the collective efforts of professionals in the business and the assistance of our creative agency. 

This quarter, things have been different. Printers are closed and the postal service is disabled, therefore, unfortunately, there will be no physical copies of this Quarterly Commentary available for distribution. Looking more broadly, the country is in lockdown as we collectively support efforts to slow the progress of the coronavirus. Many aspects of normal life have changed in an unprecedented fashion. 

The investment markets have not been spared, and the uncertainty has led to large drops in value both locally and globally, along with extreme volatility. We are very cognisant that these are difficult times for many clients. You rely on us as your investment manager to deliver returns over time and we are disappointed that our portfolios have not withstood the current crisis better. I want to thank you for your continued trust in us as a business and assure you that we continue to work hard to create the best possible investment outcomes.

We are very fortunate that the company is set up to weather this storm

Adapting to the situation

Our business is operating differently, with 97% of our employees working remotely. I am extremely grateful to the teams across the business who rallied before the lockdown to make this possible. This has allowed us to continue focusing on our key priority: supporting you, our clients, and making sure you have uninterrupted service and access to your investments. 

What counts at times like these is not only how you react, but also how the business is set up, i.e. the strength of the foundations. We are fortunate to be privately owned, and we are designed for resilience to enable the business to withstand extreme uncertainty. The importance of this is being highlighted as we live through a global economic collapse unparalleled in modern times. As investors we must think about what the world will look like when the pandemic has passed. This is difficult because the information we have is so uncertain and fragmentary. In his piece, Sandy McGregor offers his thoughts on some of the features of the post-pandemic world. 

Scrutinising opportunities

As investment managers dealing in probabilities, uncertainty is something we are very accustomed to. In fact, at times like these, it can open up opportunities. As others rush to perceived safety, bargains can emerge. But there are also many risks, and many businesses will sadly not survive this crisis. Opportunities have to be approached with a great deal of caution. In his article, Andrew Lapping discusses where some of these opportunities are emerging as he takes a look at the markets and the major investment decisions we have made over the past two months. 

One of these decisions has been selling offshore assets in the face of rand weakness and local opportunities, and bringing funds back to South Africa to invest in these undervalued assets. However, we still maintain our full offshore allocation in our asset allocation funds and, although they too are cautious, our offshore partner, Orbis, believes their current portfolios are well positioned for future returns, and that exciting opportunities exist in global markets. Ben Preston takes a look at some of these

Rationalising the situation

While wrestling with all this uncertainty, one way to try and rationalise things is to look at previous drawdowns to get a sense of what followed. Stephan Bernard draws on history, looking at crises we have endured, as he tries to make sense of the current situation and potential outcomes. 

While it may feel like little consolation, we are very excited about the prospects for the portfolios from here. As painful as it may feel, if your circumstances have not changed and you don’t need immediate access to your investment, we encourage you to sit tight through the cycle so you can enjoy the returns when they come. This is going to take staying power, and a fair amount of “cool thinking”, as Nomi Bodlani explains in her piece

It’s so hard to see beyond the pessimism at the moment. The very tragic loss of life due to the disease, and the immense hardship the lockdown has brought upon many, make it so difficult to look to the future with any sense of optimism. But while we are grappling with the immediate, very real challenges, we also need to make sure we are preparing ourselves for the periods beyond. The only way to do this is with a sense of optimism that this will eventually pass. Lise-Mari Crafford explores the notion of optimism in her contribution.

we encourage you to sit tight through the cycle so you can enjoy the returns when they come

In solidarity

We are very fortunate that the company is set up to weather this storm. With this privilege comes responsibility. As stated earlier, our key focus is remaining robust for our clients. It goes without saying that the health and safety of our employees are also paramount, and we have a deep concern for our long-standing suppliers who may be vulnerable during this downturn. We are doing what we can to support them. 

We have also identified worthy initiatives to support, including feeding schemes, COVID-19 testing kits, medical supplies for health workers, and small to medium-sized enterprises in distress. Staff members have donated to these very worthy causes, and the company is matching these donations. Meanwhile, members of the leadership team have followed in our president’s footsteps to donate part of their salaries to the Solidarity Fund. The Allan & Gill Gray Foundation, E Squared and the Allan Gray Orbis Foundation Endowment are all making significant donations in their own right. 

I sincerely hope that by the time you read this, we have some clarity about the way forward and how we can recalibrate as a country. Stay safe and keep healthy.

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