Navigating the investment landscape
Trevor Ndjadila, business development manager at Alexander Forbes Investments Namibia (AFIN), and Joleen Mans, the head of consulting at Alexander Forbes Namibia, share the company’s vision and strategies to ensure clients reap the fruits of their savings.
B7: How would you summarise market behaviour in 2020 and the reasons for it?
TN: The fourth quarter brought a close to 2020, a year where a global pandemic affected all our lives and one we are still trying to navigate into 2021. The rollout of vaccines globally has given some light at the end of a difficult tunnel, but the reality is that we are still not at the end of the crisis and we continue to feel its ongoing impact.
The fourth quarter saw a continuation of the strong rebound that we experienced for most of the year after the sharp sell-off we saw in the first quarter. The strong performance of asset classes in 2020 does not reflect the uncertainty and weakness of the macroeconomic environment and is something we are focused on. The reality is that the major driver behind the strong performance has been the unprecedented global stimulus to support economies in a time of crisis rather than a return to growth.
B7: How did 2020 affect investment performance in Namibia?
TN: Namibian equities struggled (-1.8%); however, Namibian cash (5.8%) provided positive real returns in a subdued inflation environment where Namibian inflation came in at 2.2% for the year. Namibian bond returns were astonishing, finishing the year with a return of 14.4% by shrugging off sovereign ratings, stretched liquidity conditions and a precarious fiscal situation.
While returns were positive for the year, this came with a large degree of volatility. The purposeful diversification in our portfolios ensured risk was controlled despite the uncertainty, reducing the volatility of portfolio returns when compared to overall market volatility.
In addition to reducing risk, the diversification also ensured exposure to a wide array of investments, allowing a diverse set of return opportunities for the portfolios to capture in the year. From a performance perspective, most of our portfolios have navigated this environment well and have outperformed their respective benchmarks.
B7: What is the outlook for the economy in 2021 and 2022?
The recovery will depend on widespread, effective vaccine rollout. Notably, the last quarter data releases were by and large encouraging, with a significant rebound in real gross domestic product, as lockdown restrictions were lifted to allow for increased economic activity. Going forward, we expect the economy to return to a moderate recovery path of 2.6% in 2021 and 3.2% in 2022.
The recovery is likely to be supported by the traction gained in the NamPower and NamWater investment projects already in the pipeline, which aim to ensure efficient provision of energy and water across the country. However, the wholesale and retail trade sectors, which contribute about 10% to total GDP, are likely to remain subdued given the high unemployment rate and cautious consumer spending, resulting in muted demand for most of 2021.
B7: What will Alexander Forbes' investment approach be after Covid?
TN: At Alexander Forbes, our portfolio solutions are closely monitored by a team of knowledgeable and experienced investment professionals who maintain high quality investment oversight on behalf of clients, irrespective of market or economic conditions. Our multi-management approach is centred on a practical risk management framework which allows us to carefully consider all potential outcomes and manage any risk that might arise in the process.
This means that we are uniquely positioned to employ a diverse set of investment strategies and asset managers that are responsive to market changes, and better positioned to deliver the highest likelihood of achieving clients’ long-term investment objectives.
We urge our clients to be patient and to stay invested for the long term and be comfortable that their retirement and personal savings are in safe hands.
B7: What is your message to people worried about the knock they suffered in 2020?
TN: As with any typical journey where we may experience both smooth and bumpy periods, the investment journey is no different. Clients are reminded of the importance of remaining invested through the short-term noise and volatility. Staying committed to long-term goals is critical; the market can be a scary place at times, but long-term investors shouldn’t panic.
TN: The fourth quarter brought a close to 2020, a year where a global pandemic affected all our lives and one we are still trying to navigate into 2021. The rollout of vaccines globally has given some light at the end of a difficult tunnel, but the reality is that we are still not at the end of the crisis and we continue to feel its ongoing impact.
The fourth quarter saw a continuation of the strong rebound that we experienced for most of the year after the sharp sell-off we saw in the first quarter. The strong performance of asset classes in 2020 does not reflect the uncertainty and weakness of the macroeconomic environment and is something we are focused on. The reality is that the major driver behind the strong performance has been the unprecedented global stimulus to support economies in a time of crisis rather than a return to growth.
B7: How did 2020 affect investment performance in Namibia?
TN: Namibian equities struggled (-1.8%); however, Namibian cash (5.8%) provided positive real returns in a subdued inflation environment where Namibian inflation came in at 2.2% for the year. Namibian bond returns were astonishing, finishing the year with a return of 14.4% by shrugging off sovereign ratings, stretched liquidity conditions and a precarious fiscal situation.
While returns were positive for the year, this came with a large degree of volatility. The purposeful diversification in our portfolios ensured risk was controlled despite the uncertainty, reducing the volatility of portfolio returns when compared to overall market volatility.
In addition to reducing risk, the diversification also ensured exposure to a wide array of investments, allowing a diverse set of return opportunities for the portfolios to capture in the year. From a performance perspective, most of our portfolios have navigated this environment well and have outperformed their respective benchmarks.
B7: What is the outlook for the economy in 2021 and 2022?
The recovery will depend on widespread, effective vaccine rollout. Notably, the last quarter data releases were by and large encouraging, with a significant rebound in real gross domestic product, as lockdown restrictions were lifted to allow for increased economic activity. Going forward, we expect the economy to return to a moderate recovery path of 2.6% in 2021 and 3.2% in 2022.
The recovery is likely to be supported by the traction gained in the NamPower and NamWater investment projects already in the pipeline, which aim to ensure efficient provision of energy and water across the country. However, the wholesale and retail trade sectors, which contribute about 10% to total GDP, are likely to remain subdued given the high unemployment rate and cautious consumer spending, resulting in muted demand for most of 2021.
B7: What will Alexander Forbes' investment approach be after Covid?
TN: At Alexander Forbes, our portfolio solutions are closely monitored by a team of knowledgeable and experienced investment professionals who maintain high quality investment oversight on behalf of clients, irrespective of market or economic conditions. Our multi-management approach is centred on a practical risk management framework which allows us to carefully consider all potential outcomes and manage any risk that might arise in the process.
This means that we are uniquely positioned to employ a diverse set of investment strategies and asset managers that are responsive to market changes, and better positioned to deliver the highest likelihood of achieving clients’ long-term investment objectives.
We urge our clients to be patient and to stay invested for the long term and be comfortable that their retirement and personal savings are in safe hands.
B7: What is your message to people worried about the knock they suffered in 2020?
TN: As with any typical journey where we may experience both smooth and bumpy periods, the investment journey is no different. Clients are reminded of the importance of remaining invested through the short-term noise and volatility. Staying committed to long-term goals is critical; the market can be a scary place at times, but long-term investors shouldn’t panic.
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