Magnus Heystek investing in South Africa again
For years, investment strategist Magnus Heystek has advocated for South Africans to invest a large part of their money offshore. However, he’s recently changed his tune in light of positive local developments.
Heystek is the director of Brenthurst Wealth, a boutique asset manager he built from the ground up when he co-founded it in 2004.
For a long time, his strategy has revolved around large offshore allocations – to great success.
Heystek said they were lucky to have started the company in 2004. It was at the start of a big bull market in South Africa, bolstered by a big commodity upcycle.
The bull market continued for four to five years, and Brenthurst invested in great funds, including John Biccard’s Value Fund.
Biccard’s fund returned over 40% per year for multiple years. “Our assets grew very quickly,” Heystek said.
This growth ensured that Brenthurst Wealth’s clients achieved strong growth and were happy with the advice they received.
However, the South African bull market ended abruptly with the global financial crisis and Jacob Zuma’s election as president.
The good news for Brenthurst Wealth clients was that Heystek, a former journalist, and his team started to follow local politics and global markets.
They quickly identified structural problems in South Africa, including signs of state capture, political greed, and institutional collapse.
At the same time, the wealth manager identified good investment opportunities in the United States, especially around technology.
To exploit these opportunities, Brenthurst Wealth partnered with some of the world’s biggest fund managers, including Franklin Templeton, Fidelity, and Vanguard.
It also established two offshore funds – the Brenthurst Global Balanced Fund and the Brenthurst Global Equity Fund.
These initiatives ensured that Brenthurst Wealth clients benefitted from the decade-long bull cycle in United States technology shares.
Their exceptional track record helped Brenthurst Wealth to become one of the most successful boutique wealth managers in South Africa.
It manages R17 billion on behalf of its clients and has focused strongly on investing offshore with significant success.
Brenthurst Wealth has been ranked among South Africa’s leading boutique wealth managers for seven consecutive years in the Intellidex Private Bank and Wealth Manager awards.
Throughout this process, Heystek became well known for his brutally straightforward views on the economy, and it has often been a point of contention between him and other local investors.
“I have personally been attacked by various people in the media for being a ‘financial pornographer’ or for being disloyal and unpatriotic for recommending offshore investments,” Heystek has previously said.
“The pushback from the industry was also immense, and one of the reasons why I was booted as a commentator from the RSG radio programme Geldsake was for ‘talking too much about offshore investments’.”
However, Heystek has always defended his pro-offshore views.
“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.
However, Heystek has recently started to turn a corner and become “cautiously optimistic” about South Africa’s prospects as an investment destination.
This was in light of several positive signs he identified that pointed to the country’s heading in a more positive direction.
“I have always steadfastly indicated that ‘when the facts change, I will change my views’,” Heystek wrote for BizNews.
One of the key financial indicators Heystek tracks is the net buying and selling of foreigners of equities and bonds on the JSE.
One of the biggest factors depressing the JSE has been foreign investors’ massive exit from the bourse, mostly large fund managers and pension funds.
He said cumulative outflows from the JSE’s bond and equity markets since 2019 now stand at over R1.71 trillion – with each year recording a larger outflow.
“It remains my view that any talk about a ‘booming JSE’ is premature before this outflow is halted and we see a return of foreign investors back to our market,” he said.
“But yes, we have started to see some positive flows into our equity and bond markets, and as undertaken, I need to point out that foreigners have been net buyers of South African equities and bonds over the past few weeks, which has resulted in a very welcome uplift. Long may it continue.”
Other positive signs that changed Heystek’s tune are –
- South Africa’s budget reported its first primary budget surplus in 15 years
- Extended load-shedding relief
- A peaceful and globally endorsed general election
- Slight improvement in the mood of businesspeople and investors
- Signs that interest rates have peaked, and we could start seeing one, maybe two, interest rate cuts before the end of the year
“After 10 years of saying things are bad, I’m saying things are starting to look generally a little bit better, provided the Government of National Unity sticks to its task and manages to cobble a coalition together and do the right things,” Heystek told BizNews.
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