How investment fund managers deal with market volatility

It's not just death and taxes. Uncertainty and volatility have also become certainties you can count on.

- STAFF REPORTER

This has had significant implications for fund management.

Sound investment strategies are increasingly about rigorous processes, identifying opportunities and recognising and learning from missteps rather than trying to get it right 100% of the time.

Fund managers try to focus less on the noise and more on making the right choices - and learning from the wrong ones.

As Wessel Joubert, investment analyst at OysterCatcher, which manages the Amplify SCI Equity Fund and the Amplify SCI Managed Equity Retail Hedge Fund, points out, Roger Federer won almost 80% of all the tennis matches he played, yet he won only 54% of the points.

“Consistently making the right choices over the long term is what drives sustained top-level performance,’ Joubert says. “It is increasingly about knowing when to take opportunities and when to hold on when markets dip”

As with any good player or sports team, the fund’s managers analyse what they got right and wrong.

For example, they recently changed their view on Capitec’s share valuation following their investment process, where they model company earnings and dividends four years into the future and determine a suitable valuation on which to exit the stock.

“For Capitec we argued that they were a bank and once they reach a certain percentage of the bank sector market share, their valuation should revert towards that of a high-quality South African bank, as the growth will slow at that point”.