Emperor Asset Management
A recent study showed that household net wealth increased to R7 797.4 billion by the end of Q4 2020. This is R236.3 billion higher than a year before. The increase in household net wealth was even more spectacular when measured in nominal terms (current prices). We asked Craig Turton, Head of Wealth, Emperor Asset Management, for his thoughts around this, especially in light of a difficult year economically.
How was this value created?
Covid sent our world and economies into a spin. During this time there was so much uncertainty around where we were headed. Some businesses suffered in varying degrees, while others thrived during this time. The same thing happened with people and their wealth. So many factors could have played a role in how your wealth either declined or increased in value.
So how did people manage to increase their wealth during this time?
EasyEquities was one of the businesses that benefited from the pandemic, our investors grew exponentially as well as the investments placed on our platform. We put this growth down to people having spare cash as they could not spend it on luxury items as well as time. People had time to look at their finances, they could not use a person to invest for them during this time, so they went digital. There were opportunities created in the markets around the world that the investor would want to take advantage of. And they did.
The wealth created in Q4 came from people that had money to invest or who already had investments in place. For example, the Alsi index from the end of March 2020 to April this year returned over 50%. If you were brave enough to remain invested, you would have enjoyed these returns. Even if your investments were held in Pension or Provident funds, the growth would have come from these structures too.
Where does this wealth lie?
The survey referenced in this article talks about the wealthy in South Africa. There is a difference between high earners and wealthy individuals. High earners may not be wealthy in terms of their asset to debt value. This wealth lies with the population that is invested in Pension or Provident funds, share portfolios, unit trusts, ETF’s, etc. A lot of this wealth could also sit in offshore structures as this is a popular investment choice.
What are the trends in financial advice for HNW individuals?
HNW individuals are seeking diversification from traditional-based investment structures to more alternative structures. Eg. Hedge Funds, Private Equity portfolios, share portfolios (both local and offshore) as well as crypto. There also seems to be a move in this low return environment for HNW individuals to re-evaluate the fees they are paying in some of their investment structures. Forever in search of value.
We have also seen an increase in demand for sustainable investment options. Investments made in protecting our environment and our futures. Technology has evolved at a rapid rate recently and more investors are looking to invest in the tech industry. Think Tesla and Zoom.
A massive trend is for South Africans to diversity away from South Africa and gains access to other markets around the world. They are also diversifying away from the Rand and investing in more stable currencies, like the USD, Pound, Euro, and Australian dollar. The world has become a lot smaller for an investor and the ease of investing offshore now is attracting more and more HNW clients to invest overseas.
Has the requirement for this type of investor changed?
Yes, it has, the move to more complex investment structures, ones that are potentially higher risk but with more reward long term. They have become more cost-sensitive and with technology around, they can do their own research and make investment choices for themselves. These investors are learning more every day about investing, they can build their own portfolios now, with ease and flexibility. We are seeing more bulky investments coming through on EasyEquities which shows us that the HNW individual is trusting technology and using resources available to them to make choices.
These types of investors also want information at their fingertips. They know how to use apps; this is the new world we are living in.