The delisting dilemma – Adapting your investment strategy to meet market trends
Specialist financial services provider Fedgroup has identified that many high-quality companies are delisting from the JSE.
There are two main reasons a business would do this.
Either the business believes it is worth more than the market has realised, or it realises it can generate more business value by removing the constraints of being a publicly listed company.
“When you are a publicly listed company, there are many reporting costs, and you often have reduced agility due to all the red tape that must be navigated to keep investors happy,” said Fedgroup General Manager of Investments, Michael Field.
The importance of agility
Field noted that these factors make investing in agile private companies more enticing than ever before – particularly when it comes to taking advantage of new and evolving industries.
“What we’re seeing is that nimble companies can react and fill the gaps in the market that are opening up, and that’s where the growth is happening,” said Field.
Smart capital is recognising these growth opportunities, which starkly contrast with investing in the JSE, where a large South African asset management industry struggles to take active positions in the relatively small JSE.
Identifying the right alternative investments
According to Field, alternative investment opportunities in South Africa are particularly valuable when they not only deliver good returns, but also do this in a stable manner.
It identifies good alternative investments by determining people’s primary needs for the foreseeable future.
As a result, it started investing heavily in renewable energy many years ago, as it could see Eskom was going down a bad path that could not be salvaged in the short term.
In fact, it was so early, that it started its own solar installation company.
It has also identified the agricultural sector, as “people may be poor, unhappy, wealthy, fulfilled – but they will still need to eat.”
Knowledge is key
No matter the sector you are investing in, Field says the most important thing is you must understand the product you are investing in.
This is why Fedgroup has actively engaged in industries like renewable energy and agriculture as part of its investment strategy.
It is also important that investors who work with asset managers understand these companies’ histories and know exactly how they will deliver the returns they claim to offer.
“No asset manager should be nervous telling you what you’re investing in – particularly if they’re claiming to offer great returns,” said Field.
Trusted asset managers like Fedgroup always offer this transparency, which is why they are one of the most trusted names in South Africa.
Click here to learn more about Fedgroup’s investment products.
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