Robert Cowen Investments was started in 1982 by Robert Cowen in order to manage private client assets, and is now positioned as a niche investment house, specializing in family wealth management. Robert Cowen Investments prides itself on being able to provide a comprehensive investment, administration and accounting service with a great deal of emphasis on personal service.
It is horrible to be proved correct. Mini-budget brings home risks facing South Africa. Following the mini- budget in October, the rand fell significantly and the country is now expected to suffer a downgrade – some believe as soon as 25th November, which could result in further rand weakness as many foreign investors will be forced to sell their South African bonds. We have expected this development for years as government policies have never been adapted for the much lower tax that lower metal prices will result in. The Government has increased employees, their salaries and social pensions and have had to increase borrowings to do so. Now, with tax revenue declining, we have reached a point where it is difficult to increase borrowings by the amount required each year. In anticipation, we have increased off-shore investments and rand hedges in client portfolios. In the tax year to February 2017, this did not work out so well as the rand strengthened and mining shares (in which we were lightly invested) did well. We think that many investors were only looking at the short-term and ignoring the medium-term threats. Suddenly, since the middle of October, the chickens have come home to roost and the rand has dropped – causing our client’s portfolios to rise in value. We expect this trend to continue. Please don’t get too bearish! South Africa has been through many tough times in the past. Local shares may over-react and might become good value at some time in the future when we will reinvest in them.
RCI BCI Flexible Fund closed October at 405.9, up 6.07% for the month and, with the drop in the rand over the past two weeks, is now at 410.02c. The Fund is up 11.6% for 2017 to 8th November. It was up 10.98% year
RCI BCI World Wide Flex closed October at 112.6, up 5.85% for the month. The fund is up 12.99% year to date. This unit trust is invested in about 20 worldclass companies. Most have a very high ROCE (return on capital employed) of over 40% (pre-tax) whereas it is hard to find South African companies producing over 20% ROCE. These types of companies produce strong, and growing cashflows, often with a high and consistent dividend. Most are household names such as Nestlé, Apple, Microsoft, Johnson & Johnson. When they get too expensive, we trim some off the top and seek to reinvest when the price stops falling. The growth in dollars has been good over the past 10 months so when the rand weakens, we expect the performance to be good.
The primary areas for investment were equities, bonds and cash in the South African markets. Our focus was to invest in shares listed on the Johannesburg Stock Exchange unless clients had a need for income. Equities have been the only asset class to outperform inflation on a long-term basis.
Individuals have been allowed to send ever increasing capital sums offshore in the form of exchange control allowances, and portfolio managers have been able to send 30% of assets under management offshore in the form of asset swaps. This has enabled the South African investing public to participate not only in South African investments but also in investments of a global nature.
Depending on the individual’s circumstances, we recommend that an appropriate amount be transferred offshore and that the client keeps what is required locally to fund the individual’s chosen lifestyle, subject to exchange control regulations in force.