Lodestar’s tech-led approach ensures investor confidence despite global volatility.
The investment landscape was irrevocably changed by Covid-19 and the financial markets have not been the same since. Combined with decades of low inflation and interest rates, we now find ourselves in an environment that is governed by high inflation and high interest rates – with the Fed signally that rate cuts may only occur later in the year. This has created a choppy, volatile and uncertain global marketplace.
This as clients seek greater investment guidance and education while demanding an increase in returns, a decrease in fees and improved efficiency and flexibility.
Without doubt, transformation of the asset management sector, as investors and their financial advisors adjust their overall financial strategies to adapt to this new normal, is essential.
The answer however is not obvious: simply adopting the latest in technological innovation through AI integration, or taking a more active investment approach, both of which are gaining in popularity for reasons which are easy to understand, will not address core investor concerns which is to protect their wealth and increase returns. Indeed, both have their place, but the approach that offers a greater guarantee and instead thrives in a bear market is technologically led and rules-based.
Despite the muscle of the Magnificent 7, times are difficult, with recessions in the UK and Japan. Taking a diversified approach to clients’ portfolio construction is critical, as it is in any economic climate. Using a robust, technology-led approach mitigates risk and enhances investor confidence.
Tech-led does not necessarily mean AI. While the latter indeed presents an opportunity for the investment industry, such as enabling improved manual, time-consuming tasks and customising data through management systems for clients, it cannot answer ‘why’ asset managers should buy this stock or sell that equity. Of course, using AI as a step towards rebalancing portfolios is viable, but only when its insight is informed by manual analysis and subjective decision.
To us this is clunky. There is a shorter, and in our view, better path, one that is based on mathematics, fact and fundamentals. Having developed our proprietary tech-led approach 12 years ago, our portfolios are based on models that we have created. Our stock selections are rules-based meaning that they follow a systematic approach to making investment decisions by formulating a predefined set of rules to buy or sell a particular equity.
With more than R2.7-billion under assets, we manage clients’ portfolios using scientific principles that are trustworthy and deliver stability. In fact, our portfolio performance has typically been 10% to 20% less volatile than traditional investing approaches. This gives clients confidence that their wealth is protected from the pendulum swings of the markets that we are currently experiencing and will do for some time.
With no crystal ball to reveal what the future holds, it is in an investor’s best interest to follow a strategy that is stable, less affected by poor market conditions and based on a portfolio construction built on fundamental principles that answers ‘why’. Maths and man meet in this approach and market mitigation is maintained, despite economic headwinds.
At Lodestar we don’t follow financial fads or market hype, we trust our investment principles that have been proven time and time again to guide sound investment advice and that offer a stable asset management outcome for clients.
Visit www.lodestarfunds.com to find out more about our unique investment philosophy and approach.
Lodestar Fund Managers (Pty) Ltd is an authorised financial services provider, FSP 49808. All relevant disclaimers available on the Lodestar website.