People may see a butterfly, but I see a bat – Magnus Heystek

Brenthurst Wealth Management director Magnus Heystek said investing internationally has been an excellent strategy for their clients.

Heystek told delegates at the recent BizNews Conference in Hermanus that he was widely criticised for his pessimism about the South African market.

He said between 2002 and 2008, the world experienced a tremendous commodity boom that helped bolster the JSE.

“There was no question – during the commodity boom, the JSE was the best place to invest your money,” Heystek said.

However, things in the country started to change after the financial crisis and the construction boom linked to the 2010 FIFA World Cup.

South Africa faced slowing economic growth and increasing political uncertainty under former President Jacob Zuma.

This was also when technology rose as a big investment theme globally, with companies like Apple, Microsoft, Google, Facebook, Netflix, and Amazon showing strong growth.

It was impossible to benefit from the growth in the technology sector through the JSE, which prompted Heystek to partner with global funds.

Brenthurst Wealth Management partnered with Templeton, Fidelity, and Vanguard to gain access to growth stocks, such as the big technology companies in the United States.

These partnerships worked extremely well and helped Heystek’s clients show great returns over the last decade.

“The market in the United States has been running for a few years, and it kept on running year after year,” he said.

While it is clear where the growth was, Heystek’s views that it was good for South Africans to take money offshore were unpopular with local fund managers.

One of the reasons was that many South African fund managers could not manage money in the global market.

Heystek was criticised as a pessimist and a doomsday profit, trying to scare people away from investing in the local market.

However, history proved Heystek was right. Over the last 16 years, the S&P 500 had a cumulative return of 427%.

The South African market, in comparison, only produced a 22% return in dollar terms over the same period.

Since Ramaphosa took office in February 2018, the Nasdaq-100 increased 147%, the S&P 500 75%, and the MSCI World 49%.

The JSE ALSI, in comparison, declined by 22% in US dollar terms. It was one of the worst-performing exchanges globally.

I see a bat – Magnus Heystek

Heystek remains pessimistic about the South African market and continues to advise his clients to invest internationally.

He said the local economy has been mismanaged and faced widescale corruption and theft, costing the country dearly.

Heystek said the late Simon Marais, who served as chairman of Allan Gray, said the first thing to look at before investing in a country is law and order.

“This advice stuck with me. Based on law and order, South Africa is not a good place to invest your money,” Heystek said.

The flow of money from foreign investors confirms the view that South Africa is not a good investment destination.

“Since Ramaphosa came into power, more than R1 trillion has left the JSE. So far this year, R28 billion has moved out of the local market,” he said.

Heystek does not see a quick end to South Africa’s problems and the flow of money out of the country.

He admits that there are many fund managers and economists who see a much brighter future for South Africa. However, he does not share their optimism.

He said things like land expropriation without compensation, prescribed assets, and national health insurance (NHI) are all on the table.

He likened his pessimism towards the South African market to a Rorschach test where people are shown inkblots and asked what they see.

“Some people see butterflies, and others see bats. Nobody is right or wrong. This is the same with the economy and financial markets,” he said.

He explained that the economy and financial markets are too complex and large for anyone to predict what will happen accurately.

“Regarding the local market, some people see a beautiful butterfly. Unfortunately, I see a bat,” Heystek said.