Categories: Finance NewsNews
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2023-11-29 9:00 AM

South African Investors Buck Global Trends with Bullish Outlook

  • Optimistic Outlook: South African wealth investors anticipate better returns compared to global counterparts in the coming year amid a shifting investment landscape characterized by high inflation and interest rates.
  • Investment Adaptation: Respondents, particularly those with advanced investment knowledge, are gradually adjusting their strategies in response to the changing market dynamics, showcasing a measured yet adaptive approach.
  • Preference for Diverse Investments: South African investors display a keen interest in real estate and alternative assets like private equity, infrastructure, and renewable energy, alongside a growing attraction to sustainable investments driven by environmental and societal considerations.
By Miriam Matoma

South African wealth investors are navigating a shifting investment landscape with optimism, expecting more promising returns compared to global counterparts in the forthcoming year, as per findings from the Schroders Global Investor Study 2023. This study, encompassing insights from over 23,000 investors across 33 locations, including 400 from South Africa, sheds light on the evolving investment strategies and sentiments prevailing in the country’s financial market.

The prevailing environment, characterized by heightened inflation rates and escalating interest rates, has prompted approximately 80% of investors to recognize a significant shift in both policy and market dynamics. Globally, more than half of the respondents indicated a strategic shift in their investment approaches due to these market conditions. Though South African wealth investors are slightly more measured in their responses, a substantial number are planning to recalibrate their strategies in response to the changing landscape.

Notably, those South African respondents possessing advanced investment knowledge demonstrated a swifter adaptation to the evolving environment, with 60% having already implemented changes in their investment strategies. Moreover, Schroders highlighted a heightened interest among South African investors in digital assets and cryptocurrencies, distinguishing them from their global counterparts.

Despite the challenging economic backdrop, the majority of global investors maintain an optimistic outlook, with nearly 90% anticipating similar or enhanced returns compared to the previous year. Particularly, ‘expert’ investors showcased pronounced optimism, with a mere 4% expecting diminished returns in the upcoming year.

Expectations for Returns Over the Next 12 Months:

AnswerGlobalSouth Africa
Significantly higher18%16%
Higher42%48%
No change28%19%
Lower9%15%
Significantly lower1%2%
I don’t know2%1%

South African investors emerged as the most optimistic cohort, foreseeing an annual return of 16.8%. This projection significantly exceeds the 9.46% annualized return of the MSCI World Index for global stocks between 1987 and September 2023.

“In an investment landscape increasingly influenced by the ‘3Ds’ – deglobalization, decarbonization, and demographics – investors are grappling with the reality of enduring high inflation and interest rates,” remarked Johanna Kyrklund, Schroders’ Group CIO and Co-Head of Investment. “Assets are undergoing repricing to compete with bank cash yields, emphasizing the renewed importance of valuation. The study’s findings underscore varying paces of adjustment among investors in response to these evolving dynamics.”

Preferred Investments:

South African wealth investors demonstrated a strong inclination towards real estate, with 75% expressing interest, a figure notably higher than their global counterparts. Additionally, private equity, infrastructure, and renewable energy also garnered substantial interest, each attracting 64% of South African investors.

Top Private Asset Choices for Investment:

Asset classGlobalSouth Africa
Private equity59%64%
Real estate58%75%
Infrastructure and renewable energy68%64%
Insurance-linked securities45%42%
Microfinance and investment for societal impact28%23%
Private debt (loans to companies)19%25%

Moreover, the study revealed a growing attraction towards sustainable investments, driven by their positive environmental impact and alignment with societal principles.

Reasons for Attraction to Sustainable Funds:

AnswerSouth AfricaGlobal
Yes, because of the wider environmental impact57%55%
Yes, because of my societal principles37%42%
Yes, because they are more likely to offer higher returns36%34%
No, because they won’t offer higher returns4%6%
No, because they don’t align with my principles1%2%

Interestingly, 36% of investors acknowledged the potential for sustainable funds to offer higher returns, marking a significant shift from the previous year’s sentiments. Active ownership, involving direct engagement with companies to enhance business outcomes, emerged as a crucial aspect of sustainable investing, with 79% of South African investors displaying more confidence in the long-term value creation of sustainable funds compared to their global counterparts.

“This year’s findings emphasize the widespread acknowledgment of active ownership’s significance in sustainable investment,” noted Andy Howard, Schroders’ Global Head of Sustainable Investment. “Companies across industries face diverse challenges and opportunities, compelling them to adapt and evolve in response to mounting pressures.”

As South African wealth investors navigate this evolving investment landscape, the study reflects a prevailing sentiment of cautious optimism, a pronounced inclination towards real estate and alternative assets, and a growing interest in sustainable investments driven by both environmental and societal considerations. These insights serve as a testament to the adaptability and resilience of South African investors in response to changing market dynamics, positioning them optimistically for future opportunities.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: miriam@rateweb.co.za Twitter: @MatomaMiriam