Director of Old Mutual Investment Group
What were the most impactful events of 2017 for Old Mutual Investment Group?
It was a breakout year for stock markets generally, and we saw synchronised global growth for the first time. [The markets] in Europe and the US were improving, and China continued to develop. India was growing north of 80%, and Africa carried on making headway.
Globally, the economic backdrop is very powerful and that came through in corporate earnings, which drove the stock markets higher. We will see markets at new records on a regular basis.
The backdrop is positive for clients, for savings and pools, which need to strengthen. Both the market and economic background were high and it came through in South Africa in the second half of 2017, when the equity market went up by 20%, despite all the political issues in the country.
We have to contend with political drama and there is the ANC National Conference to get through, which will influence what happens in 2018. Despite these headwinds, the global tailwinds pushed money into South Africa and the market responded.
Do issues abroad balance the spreadsheet?
They have so far and South Africa has been fairly fortunate in that regard, but that can’t go on forever. We need progress in the country in terms of clarity from a political point of view for initiatives to promote growth.
There is still unemployment at unfeasibly massive levels in South Africa, which needs to be solved. That comes down to incentives for businesses to partner on infrastructure projects, which the country so badly needs, as well as education and training initiatives. South Africa’s [government] must play its part so we can benefit from the better global backdrop.
Do environmental, social and governance (ESG) factors play into this?
ESG is huge. It is paramount that companies focus on how they govern themselves in their social, communal and environmental responsibilities. Working this [concept] into our investment process, so that we can deliver those companies in our clients’ portfolios, is positively seen as doing the right thing in South Africa and globally.
It’s increasingly being proven that if you pick the right types of companies, you’ll get the right performance outcome, which is of great benefit to our clients.
SOUTH AFRICA’S [GOVERNMENT] MUST PLAY ITS PART SO WE CAN BENEFIT FROM THE BETTER GLOBAL BACKDROP.
The implications of another downgrade?
It’s a challenging signal to the country from the global community and a terrible message for our domestic economy. In terms of the equity and bond markets, a lot of it has already been discounted. So in that sense, we are not going to get too much volatility around it. It should send politicians a signal to do the right thing; we are hoping they’ll listen.
Goals realised by Old Mutual Investment Group in 2017?
It’s been a big year for our business. Old Mutual is coming home to Africa. The separation of our broader group, in terms of our UK business going its own way along with the US company being sold, leaves us with a Nedbank stake plus a great African business with its primary listing in Johannesburg, which will happen in March 2018.
This gives us the opportunity to focus almost exclusively on South Africa and Africa, as well as delivering investment returns for clients and desired outcomes across the business. That has been a powerful narrative.
Is this focus on Africa a big driver behind the decision?
I think the focus is a good thing; to be masters of our destiny in a more direct way is powerful. It means we will have more cash to deploy to the benefit of our clients, as opposed to sharing that money with the UK entity. The African focus will be compelling for our clients and the companies.
Where does Africa stand in relation to other developing economies? Africa is continuing to grow at 5.6% per annum, a similar rate to China. South Africa needs to step up and play its part in the Africa story, but we first need to get through our political challenges to prosper.
There are wonderful opportunities in the country for this economy to really fly; however, we need the political will to help make that happen. Nigeria must also come back to the party, as it is another big building block of Africa.
Globally, Latin America is picking up strongly. So the emerging markets will continue to grow in mid-single digits, maybe a touch higher, and Africa will play its part in that if South Africa fulfils its role.
What can we expect in 2018?
The backdrop globally will be extremely supportive. I suspect economies will continue to grow and interest rates will remain relatively low. If inflation doesn’t pick up materially, the status quo should continue.
We expect a decent economic growth scenario, which will support equity markets. For our clients, it will be beneficial into 2018. For us as a business, listing in 2018 will be a big deal, especially looking at the focus that it will bring to the company.
For asset management, there’s a huge focus on growth within the group. This is so our ability to develop will be matched by our delivery to our clients; that means responsibly delivering exceptional investment performance for the long term.
We have a fantastic opportunity to do more with our clients and grow the business to their benefit. For instance, Old Mutual Investment Group has an acute focus on how we partner with machines. Artificial intelligence (AI) is becoming a big part of peoples’ lives.
The impact this is having on us as an asset manager is profound. Partnering with machines in the right way is something we’ve been doing for quite a long time in our quantitative business and it’s delivered wonderful results for our clients.
We’ll continue to build on that as we’ve got the resources to deliver strongly for clients. These resources allow us to grow as a business across both institutional and retail local clients.
We have also set up a global capabilities hub in South Africa, whereby we run global emerging market portfolios and global equity portfolios, both quantitative and fundamental. This is a big development for us.
Some effort has gone into creating this capacity and it will be of great benefit to our clients as they look increasingly to overseas markets to fulfil their goals.