The consensus among Sanlam Investments’ active fund managers from across the risk-return spectrum, is that 2022 has been an exceptionally challenging year for investors across the globe. “Asset returns have been under pressure and exceptionally volatile, with the South African bond market going through one of the toughest years on record,” says Melville du Plessis, Portfolio Manager of the SIM Enhanced Yield, SIM Flexible Income and SIM Active Income Funds at Sanlam Investments. Despite this backdrop, the funds have delivered good outcomes this year by being invested in the respective ‘sweet spots’ of the domestic fronts for the year-to-date 2022.
In addition, investors in local fixed interest assets also benefitted from some positive ‘tailwinds’ in South Africa but faced headwinds from international bonds as interest rate hikes, off an exceptionally low starting point for base rates, resulted in quite significant capital losses on international bond markets. “We have seen a rising interest rate environment around the globe [as central banks] aim to tame inflation which has finally lifted in a significant fashion; an additional point now in focus is whether or not the global economy has a soft or hard landing, as well as the risk of global recession versus merely slower global growth,” says Vanessa van Vuuren, a portfolio manager at Sanlam Investments. The SIM Small Cap and SIM General Equity funds she manages sit at the high-risk end of the risk-return curve.
High inflation coupled with a range of macroeconomic factors has made life tough for equity funds, with major local indices down 7-10% so far year-to-date. Van Vuuren says the volatile market has suited stock pickers, with those who moved into banks, consumer and energy stocks doing relatively better than their peers over the period.