An integrated approach offers advantages – no matter where you’re investing

For South Africans, investing has always been a global game. It’s not only because Regulation 28 of the Pension Funds Act has allowed investors to include up to 45% offshore assets in their portfolios for the last three years, or even because South Africa’s economy and stock market are small compared to the rest of the world’s. It’s also because the JSE itself is becoming increasingly global in nature, with about 54% of JSE Capped SWIX constituents earning the bulk of their income from outside SA. 

We believe there is an increasingly strong case for adopting a globally integrated approach to portfolio management, and that it is more likely to deliver good outcomes for clients in the long run. Assessing the available opportunities, both locally and globally, requires a global mindset. 

In a digital world, should geographic borders still define your thinking?

Typically, local fund managers have followed one of three approaches to managing offshore assets. They have either partnered with a global manager for the offshore component, used a passive exchange-traded fund (ETF) or index tracker, or built offshore products in-house. We believe there is an excellent case for following the in-house approach.

Firstly, given the increasingly global nature of South Africa’s local stock market, even local investment teams must be able to assess stocks regardless of borders.

Secondly, following a globally integrated approach provides positive spin-offs in two distinct ways. It helps us avoid investing in local companies simply because they are index constituents, when global peers are better positioned to deliver for our investors (for example, favouring the global energy producer Shell over the JSE-listed Sasol). It also enables us to include some stellar local companies in our global portfolios – such as Glencore, Northam Platinum, and Discovery Holdings. 

Lastly, technology has increasingly levelled the playing field. A desk in London or New York does not guarantee investment success any more than a desk in Cape Town precludes it. The track records of the PSG Global Equity Sub-Fund USD and PSG Global Flexible Sub-Fund USD, both of which are in the top quartile of their respective categories over 1-, 3-, 5-, and 7-year periods for the period ending 30 September 2025, highlight this.

True active managers are rare, even globally

We have written extensively about why we believe what we are currently seeing is only the beginning of what will ultimately be profound changes in global markets. With markets poised to behave very differently in the years ahead, return drivers in portfolios will also differ from those of the past. Old portfolio diversification and protection strategies are likely to become less efficient as the correlations that underpinned them break down, and a fresh approach will be required to continue meeting investor needs in the years ahead. For example, we have already seen rising correlations between US bonds and equities, and in a higher-inflation environment, we expect this dynamic to continue. 

However, even in global markets, managers tend to align with consensus views and closely follow index weights, following tried-and-tested strategies that have worked in the past. Increasingly, we are finding evidence that this approach will struggle to keep rewarding investors. 

We believe our 3M investment process, with its emphasis on identifying overlooked quality trading at a discount to inherent value, is well-placed to secure sources of return for investors going forward and to add exceptional value to client portfolios in the long run. This is due in part to the valuable diversification benefits our approach brings to our clients. Our portfolios look considerably different from the index, yet have delivered stellar returns for our clients so far, with return drivers that look materially different from those of most typical portfolios. 

Differentiated positioning

Significant discount to market - Attractive growth – Active - Diversified

More importantly, however, we believe they are well-equipped to continue delivering strong returns for our investors, even as the macro environment evolves in unpredictable ways. We continue to find many investment opportunities in unloved, overlooked sectors of the market trading at attractive valuations, even as indices (on aggregate) hover close to record highs.

Looking ahead, we believe it will be increasingly important to partner with an active manager with a proven track record of delivering for clients through various market cycles. 

When it comes to global investing, there is no point in having a parochial mindset. An integrated approach will be crucial to achieving investment success, not only locally but also globally.

 “The PSG Angle is an electronic newsletter of PSG Asset Management.”