Sygnia Continues to Deliver Top Performance

Sygnia has always constructed its strategies to deliver consistent, risk-adjusted performance, which is the ideal investment approach for the current financial climate. Unfortunately, we expect the volatility we have witnessed to date in 2019 to continue, and perhaps even to intensify. Global ageing demographics, all-time-high debt levels, falling productivity and heightened geopolitical risks all hurt growth. Shorter-term, South Africa-specific risks such as a potential credit rating downgrade and Naspers’ unbundling of a portion of Tencent make us highly vulnerable to foreign investment outflows, and a return of prescribed assets is a real possibility. On the positive side, Sygnia’s strategies are designed to perform optimally in exactly this sort of environment. Don’t take our word for it, though: the numbers speak for themselves. All the funds that make up our Sygnia Signature multi-manager risk-profiled product range are ranked first or second in their respective risk categories over all time periods.

But there is so much more to this story. Here are some compelling reasons why we are the right partner to see you through this challenging time - and beyond.

Three reasons you should be invested with Sygnia – right now.

1. Strategic asset allocation optimised for a low return environment
Appropriate asset allocation is the key determinant of both returns and the risk inherent
in achieving such returns. Sygnia employs rigorous proprietary quantitative processes to
determine the optimised allocation of its portfolios, an approach which has proven to deliver optimal performance over all time periods. We incorporate credit portfolios, listed property, inflation-linked bonds and global ESG investments, amongst others, to diversify risk away from traditional equity-, bond- and money market-focused strategies. Sygnia’s strategic asset allocation models for each risk-profile fund form the foundations of portfolio construction. Strategic asset allocation is not static and is regularly updated to account for expectations of the medium-term market environment. As an example, in the past year we increased international allocation within our portfolios, reduced allocation to equity, increased allocation to higher-yield income instruments and introduced ESG investments.

2. Tactical asset allocation harnesses the high volatility environment
Our strategic asset allocation is overlaid with shorter-term tactical decisions made to steer portfolios to benefit from prevailing market conditions. A high volatility, evolving environment is ideal for the deployment of this strategy. Although our tactical asset allocation (TAA) decisions are always taken within narrow limits around strategic asset allocation, they tend to add significant value. Most decisions are driven by the objective of risk reduction and are made within a framework of weekly asset allocation meetings and monthly economic review meetings. Implementation is managed daily, based on optimum entry and exit points. Sygnia has a long track record of successful TAA that enables better returns in a low return world. We firmly believe that TAA is a distinct investment strategy that should be managed at fund level. Again, the proof is in the numbers: when asset allocation of global large managers is averaged out in the Alexander Forbes Manager Watch Survey, it is clear that the allocation does not change over time. It also shows that split-funding your assets among global balanced mandates eliminates the benefits of TAA as a strategy.

3. Active/passive split produces excellent returns while reducing costs

As shown below, predicting which asset manager will outperform in the next year is a fool’s errand. By definition, split-funding between a large number of managers produces average returns at active-management fees.

Sygnia prides itself on managing its equity manager selection from a “top-down” perspective. In bull markets, we prefer to appoint small, nimble boutiques that focus on stock selection. In bear markets, we prefer large managers with extensive research teams. This approach has worked well for our clients over time, as we have successfully navigated between the two styles at appropriate stages of the investment cycle. In addition, in all our risk-profiled global balanced portfolios we blend active managers with passive strategies. This significantly reduces both explicit and implicit costs, which are the only true aspect of future performance that you can control. Sygnia currently manages R40bn in passive assets and has, over time, become the leader in passive investment management in South Africa, with the largest and widest selection of exchange traded funds listed on the JSE.

Conclusion

As markets continue to struggle in the years ahead, it is important to structure portfolios
that will perform in a low return and high volatility environment. Deploying strategies such as low-cost passive allocation, tactical asset allocation, well-diversified strategic asset allocation and allocation to alternate investments, such as high-yield income instruments, is thus vital. As the past 14 years show, Sygnia has done all this and more, consistently delivering value and peace of mind to all of our clients.