Rob Formby
Quarterly Commentary

2021 Q4 Comments from the Chief Operating Officer

I was recently reminded about a project initiated in 2014 by Scottish artist Katie Paterson. Termed “Future Library”, the aim is that a famous author will contribute one original piece every year for 100 years. These manuscripts will remain unpublished until the year 2114, at which point they will be printed on paper made from 1 000 trees that have been planted in a forest just outside Oslo specifically for this purpose. The authors are being selected for their outstanding contribution to literature and poetry, and their ability to capture the imagination of future generations.

There are so many questions that spring to mind when thinking about a project of this scale – not least whether it is indeed possible to ensure its longevity. Can the artist rely on others to carry it through? Will the city of Oslo continue to give the project support? Will paper even be a thing in 100 years’ time?

As instant gratification defines our lives currently, multigenerational projects may appear irrational and optimistic. But our medieval ancestors approached life differently; there are countless examples of buildings initiated by one generation purely for the benefit of generations to come. In fact, these activities led to the coining of the term “cathedral thinking”, which refers to long-term, multigenerational endeavours.

For me, long-term investing is the best current-day example of cathedral thinking. If done successfully, we can build a legacy for future generations. Marise Bester and Daniella Bergman discuss this concept in the context of the effect of short-term decisions on long-term investment returns. They look at the behaviour and outcomes across the broader industry, the Allan Gray Investment Platform and the Allan Gray Balanced Fund.

As we begin to emerge from the pandemic, it is important that we revisit this critical long-term goal, take stock, and figure out how to get back on track

Of course, before thinking about future generations, we need to consider one of the most important long-term goals for ourselves: being able to support and sustain ourselves when we are no longer able to earn an income. For many, the past two years of COVID-19-induced lockdowns have put serious strain on finances, and saving has understandably taken a back seat.

As we begin to emerge from the pandemic, it is important that we revisit this critical long-term goal, take stock, and figure out how to get back on track. In this quarter’s Investing Tutorial, Twanji Kalula offers some pointers on how to better invest for the future. He also reminds us that the end of the tax year is approaching, and now is the time to use or lose the annual tax benefits made available through retirement products and tax-free investments.

Transitioning into a post-COVID world

Last year this time, our naïve expectations that 2021 would bring a clean slate were rapidly kicked into touch by a new wave. Vaccines have given us a renewed sense of hope, but there is still a good dose of caution as we make our way through the first month of 2022.

The global economy is working hard to get back on track. In the major industrial nations there is a lot of spending power that is sustaining the demand side of their economies, but supply chains have been disrupted and there are shortages of various products, and labour, leading to price increases. Sandy McGregor talks us through the complexities of the transition.

Over and above the challenges presented by the global economic environment, we face several issues locally. These are not necessarily COVID-related, but the pandemic has exacerbated some. Luckily the commodity boom has given us some relief, and our equity market returned 23% over the past year.

But on a micro level, things are not so rosy. Many municipalities have failed to meet the basic needs of their constituents, including providing adequate access to water, sanitation, housing and electricity. Rampant corruption and mismanagement at many municipalities have resulted in a lack of funds and increasingly poor service delivery. Londa Nxumalo examines the current situation and looks at what must be done to drive change.

A message from Orbis’ President Adam Karr

In the previous issue of our Quarterly Commentary, I communicated upcoming leadership changes at our offshore partner, Orbis. These are now effective. Adam Karr has taken over the day-to-day leadership of the firm, leading the investment team while continuing in his role as portfolio manager, alongside Darren Johnston, who is leading the business team. In Orbis’ contribution this quarter, we share Adam’s inaugural president’s letter, in which he reveals a bit about himself and his background, the path forward for Orbis, the market opportunity Orbis sees and what clients can expect.

As noted previously, William Gray remains closely involved with the business in his role as chairman. While acknowledging dissatisfaction with recent performance, in his December 2021 chairman’s letter Will expressed a sentiment of quiet conviction, determination and enthusiasm for the future: “History has shown that investors – just like sports teams and businesses – differentiate themselves not by how they act and respond during times of prosperity, but by how they act and respond during times of adversity. The best individuals and teams take advantage of those moments of pressure and uncertainty by using them as an opportunity to improve and emerge much stronger as a result.”

Entrepreneurship for the common good

Allan Gray Fellows continue to demonstrate that they are dynamic, ethical, responsible and impactful changemakers who care about making a positive difference in the country – this in the midst of another pandemic-affected year. Yogavelli Nambiar, CEO of the Allan Gray Orbis Foundation, takes us through the highs and lows of 2021, highlighting some of the Fellows’ achievements to date.

As Sandy aptly notes in his piece: “It is remarkable the extent to which the future is hidden from us.” Indeed, we have got used to living in a state of heightened uncertainty. But as we dip our toe into the new year, I would like to wish you all a healthy, inspiring and less uncertain 2022.

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