OPINION: South African investors urged to stick in their lanes
In today’s high visibility age many of us tend to be so concerned with trying to keep up with the Joneses, that we lose sight of our own unique needs and goals.
The same can be said for our investment habits where a focus is often placed on short-term, peer investment returns instead of our own long-term goals.
While chasing returns can satisfy our immediate urge to “keep up” with our friends and investment peers – it may in fact be compromising whether you can actually achieve your longer term goals.
This is why Momentum Investments chief investment officer, Sonja Saunderson, believes that outcome-based investing (OBI) is a game changer for local investors. “Considering South Africa’s current dire state of retirement savings, we know that mainstream investment thinking is not optimal, because it often misses the true investor requirements and how to solve for their needs.
“As such, the true essence of OBI (also referred to as goal-based or liability-driven investing) means a complete overhaul of the way we make investment decisions. Investors make their selection based on the outcomes they wish to achieve financially. This essentially makes your investment goal the only benchmark that matters,” she explains.
Based on these specific investment goals – from a comfortable retirement, to paying for university or buying a house – OBI drives the formulation of a tailored investment strategy and the regular review of progress thereon. This frames all communications and ongoing assessments in terms of the desired goal.
A key part of OBI, says Saunderson, is therefore placing priority on selecting the investment that best matches your goals first and foremost. “This is because we believe that a consistent and aligned philosophy is a better predictor of meeting required returns than the rear-view mirror of yesterday’s results. By moving away from the industry herd, we are also able to focus solely on the investment outcome and risk budget you are after, and then deliver on that in a seamless and re-assuring way.”
While the concept of OBI has been in the South African marketplace for some time, Saunderson says that Momentum Investments is the first local investment manager to really deliver on it in a way that brings clear value for the investor. “As an investor, you are usually forced to choose between working directly with single investment managers, through multi-managers or with an investment consultant, which has no in-house capability. We have re-organised our investment capabilities to offer an ability to be one or all of those things, depending on the right choice that best matches the need of the client.”
And, according to Saunderson, this approach can be delivered in a very cost-effective way in terms of fees. “When you hear about multi-managers or multiple anythings, you think of layers of fees, but we can deliver this optimal range of choice and flexibility in a very fee-competitive manner because of our in-house capabilities and an ability to achieve scale through our aligned investment architecture.”
Ultimately, everything should be designed to keep you invested, she says. “Our aim is to help you stay the investment course to achieve your targeted growth, rather than being distracted by chasing a peer group or short-term fads in the market in a way that damages your journey to financial success. We believe that OBI is the key to doing this successfully,” Saunderson concludes.
Sonja Saunderson, is Momentum Investments chief investment officer.