As is common at this time of year, we reflect on where we’ve come from and look towards where we are going. As we ease into 2024, reviewing what was a wild west year is noteworthy – the shock of high interest rates and inflation in the US and the end of cheap money, an increased focus on climate change, sustainable investing and ESG, the start of two wars namely between Russia and the Ukraine and more recently Israel and Palestine, low economic growth in South Africa but also world-wide as well as a volatile rand – points us towards some form of direction for the 12 months ahead. While we can speculate, for everyone who experienced Covid-19 knows, predicting the future is impossible. Let’s also not forget that very importantly it’s an election year for South Africa and the US too.
While these macro events have shaped the investment universe, and the coming ones of 2024 will do so too, we offer a haven for investors who may feel that they are consistently experiencing the market on a volatility roller-coaster.
Despite this background, none of these events matter that much to us. In fact, we thrive during negative macro events. That might sound counter-intuitive but our rules-based, tech-led process significantly reduces large losses and lowers overall risk by as much as 20% compared to the market and industry peers.
This may appear to be too-good-to-be-true, but time and time again over the past seven years since Lodestar launched, our robust and unique investment process, that relies on a tech-led portfolio construction, has provided safety for investors during tough financial times, adding a layer of protection to clients’ wealth, while during good times our approach holds firm.
Lodestar Global Equity Fund Performance – 2022-2023 Market Cycle
Why? How does Lodestar consistently buffer its clients from a bear market and by such a large degree? The key to our approach and performance is that we don’t rely on luck. We are not swayed by subjectivity, we do not make personal stock selections, we do not follow which local and international companies are up and which are down, we do not sell and buy according to our own ‘hunch’ – all of which are common among traditional fund managers. Rather, we designed a tech-integrated, portfolio construction process that can be applied in all liquid markets. There is no emotion, no deviation from our systematic process. This affords us the opportunity to operate as a lean, though highly experienced, team and pass on cost savings as lower fees to our clients.
Where’s the catch? We get that a lot. How can a boutique asset management firm protect investors during huge market draw downs, keeping their funds relatively regular and stable?
In practice it looks like this: we launched our flagship Global fund and a Local fund in 2017 and 2021 respectively. Both funds are available as CIS and as segregated mandates, upon request and both aim to enhance long-term market performance in a reliable and predictable manner. Further, our products range from core equity products that provide efficient exposure to risk premiums to low-cost absolute return strategies that seek to deliver an asymmetric return profile.
With over R2.5billion under management, Lodestar has created a name for itself among long-term institutional clients, and more recently retail clients, as being the fund managers that can be relied upon during the bad times.
As we head towards the elections this year, we can expect it to be a volatile period politically. Polling suggests that the ANC is losing support, which will cause wide-spread political and economic uncertainty. South Africa’s debt to GDP is high and rising – around 73% – while economic growth prospects remain very low. It’s also key that sustainable asset classes are taken seriously as we move towards a world of net-zero emissions and identify businesses and organisations that make this central to their own offering.
Before Covid hit we operated in a period where money was cheap and global investment opportunities high. Today it’s a different day and investors must make choices on how to buffer their investments from future financial storms that is not expected to go away any time soon
. Lodestar provides the shelter that is needed from volatile markets, while delivering returns that are regular, stable and less affected by major macro events than its peers.
Lodestar Fund Managers (Pty) Ltd is an authorised financial services provider, FSP 49808.