Absolute Return
Solutions
Investing is a lot like getting fit. The journey is as important as the destination. Preparation is key too; drink water and eat right. Most importantly, don’t forget your gear – whatever activities you chose to participate in, show up ready. It’s not always the most appealing fashion statement and you’ll pick up some resistance along the way, but you never know when you might take a tumble. Whether you’re wearing a helmet for cycling mountains, or pulling on gloves to enter the ring, it’s about being prepared. The added safety won’t stop you from winning, but it will definitely help when things don’t go your way. Sometimes, it’s that extra padding that helps you enjoy the journey just as much as the destination.
Absolute return solutions are part of the protective kit available to investors. We give up a bit of steam in order to gain protection against market falls. We enjoy the journey and the destination.
How absolute return solutions work
Absolute return investments focus on two key aspects – managing losses and growing capital. The focus is on protecting against market falls, while still aiming to participate as much as possible when markets rise. This process helps to smooth the underlying investment journey – returns do not fluctuate as much as the market.
To be more precise, the portfolio aims to: rise up 67% with the market, but only fall 30% with the market (equity and property) or rise up 75% with the market, but only fall 25% with the market (bonds). Over time, this helps keep the portfolio on track to produce consistent returns that aim to beat the portfolio objectives.
The proof
Absolute return investing is about protecting capital during periods of market turbulence and growing capital during periods of market strength.
Want proof?
Here it is.
This graph shows the South African All Share Index (ALSI) compared with a hypothetical asymmetric return portfolio. The orange line represents the market (ALSI) and the blue line represents the asymmetric portfolio (absolute returns). The hypothetical absolute return portfolio presented here captures 30% of the drawdowns and 67% of the upside.
The graph shows us that if we can effectively protect capital during the downside then we do not need all the upside to achieve the same result or outperform the market, and at a far lower level of risk.
Even better, we can sculpt portfolios to your needs
At Sanlam Investments’ Multi Manager we create portfolios to match your objectives and returns target. We have the flexibility to put a portfolio together from a list of proven building blocks. Each building block is supplied by managers we specifically select as part of the portfolio. These managers are expected to be top quartile performers with strong track records and have consistently followed their investment philosophies and styles.
Flexible Equity Strategies
Equity returns at half the volatility
Flexible Property
Property returns at half the volatility
Flexible Income
Bond returns at half the volatility
Foreign Equity, Bonds or Cash
Rand provides a natural asymmetry
Inflation Linked Bonds
Assist in matching liability, particularly in low CPI target portfolios
Cash
Used as protection and to wait for opportunities
Pure Equity, Bonds or Property
Used only for special opportunities
Meet the team
Portfolio Management
Lilian Lerm
Portfolio Manager
Client Management
Corita van Wyk
Account Executive
Marie du Plessis
Head: Pooled Investment Solutions
Contact us
Partner with us on your investment journey.
Interested? Email coritavw@sanlaminvestments.com or send us a message below.
