Welcome to Ecsponent’s national roadshow November 2018
In 2010… 2
(Originally E-data) and for Ecsponent… 3
2011 - 2017 4
Seeing around corners Terence Gregory Ecsponent Limited CEO November 2018
Business as usual in unusual times Equity Holdings Credit Short and medium term debt facilities providing high gross profit and liquidity. Meet needs of: Longer term ▪ SME credit capital ▪ Enterprise development growth ▪ Specialist procurement objectives. and logistics Listed and private equity investments in high- Investment growth Services areas, with high IP and barriers to Capital raising through investment entry, products. offering Advisory services providing life insurance, high yields. retirement funding and short-term investment products. 6
Business as usual in unusual times 2015 2016 2014 2017 2018 7 7
Business as usual in unusual times 8
Resulted in exponential growth Focus Consistency Seeing opportunity in the face of fear Relentless stewardship of investors’ funds and trust 9
10
Fast forward to 2018 Trump and Only 12% Global More Credit trade wars economy is corporate policies are companies scandals improving part of the recovering but still Fortune excluding 500 in 1995 still some exist 11
Beyond 2018 What we expect Global and local Local Civil and political unrest, Rising interest rates • • terrorism Political policy uncertainty • Trump, UN funding cut etc. Poor market performance • o US/China fallout Effects of poor administration • • Global interest rates rising • Potential market crash • Growing youth unemployment • Growth of sharing economy • 12
Beyond 2018 - opportunities Trends influencing our operations and investments Africa’s infrastructure ▪ development Exploding population, o urbanisation China’s new silk road o Food security under o threat 13
Beyond 2018 - opportunities Trends influencing our operations and investments Renewable energy ▪ Improved technology o Global scramble for materials • (lithium, copper, cobalt, nickel, graphite Increased emphasis on climate o change South Africa losing in Africa’s energy o race Especially in delivering clean • energy solutions 14
Beyond 2018 - opportunities Trends influencing our operations and investments Fourth industrial revolution ▪ Fintech o AI o VR, gaming and entertainment o Second Third Fourth First industrial industrial industrial industrial revolution revolution revolution revolution Mechanisation The assembly Software Artificial of the textile line – revolution intelligence 20 th century industry – and the data 18 th century explosion
Beyond 2018 - opportunities Trends influencing our operations and investments Growing ▪ wellness movement Doctor Google o and self medication Biotechnology, o personalised medicine Wearables o 17
Beyond 2018 - opportunities Trends influencing our operations and investments Tax reforms ▪ Currency wars ▪ Cryptocurrency and blockchain o 18
How we adapt and help investors to secure and generate wealth More of the same… Remaining agile and responsive ▪ Investing for the short and long term ▪ Hedging and diversification ▪ Seeking sensible growth not just for the sake of it ▪ Capital growth ▪ 19
How we adapt and help investors to secure and generate wealth More of the same… Expanding vanilla product range ▪ Focus on costs and performance o Small, efficient fund managers o Personalised service, backed by technology not just o technology More tax-effective structures ▪ Bond o 12J o 20
Conclusion Despite uncertainty, volatility and fear, investors are never out of options. We will: continue to build on this success ▪ remain a learning organisation ▪ learn from the past… ▪ Progress happens on the fringes, not in headlines. o The best innovations don’t make money, it is the ability to o commercialise it that does. The world will remain unstable and the rate of change will o continue to accelerate at a dizzying speed. The best way to predict the future is to invent it. 21
Thank you ecsponent.com
“OUT THE BOX THINKING…” 13 NOVEMBER 2018 CEO : DUNCAN THERON Gray Swan Financial Services (Pty) Ltd (Reg No: 2010/009813/07) is an authorised Financial Services Provider (FSP No: 42290).
THINKING OUT OF THE BOX 24
BLACKSWANS SOURCE: http://www.visualcapitalist.com/ 25
OUR NAME : GRAYSWAN 160 140 120 100 Variable 80 60 40 20 0 0 100 200 300 400 500 600 700 800 900 1000 Days 26
THE PAST IS NOT THE FUTURE GRAYSWAN IN NUMBERS > R20 billion > 90 years 10% profits offices assets under Gauteng & of investment to our advice experience charitable trust Western Cape
BIG DOES NOT MEAN SAFE! 28
LEHMAN BROTHERS 29
ANCHORING EFFECT How many pairs of animals into the ARC …? 30
SA CORPORATES ARE WORLD LEADERS BUT … South Africa produces best investment returns over 100 years: global survey Source: biznews.co.za 31
THE PAST IS NOT THE FUTURE LAST 10 YEARS P.A. (ZAR) 10 YEAR FORECAST P.A. (ZAR) LOCAL EQUITY 12,5% 8 - 12% GLOBAL EQUITY 14,8% 8 - 12% LOCAL PROPERTY 13,5% 9 - 12% LOCAL BONDS 8,6% 8 - 9% GLOBAL BONDS 8,6% 4 - 5% CASH 6,8% 6 - 7% INFLATION 5,2% 4 - 6% Source: Coronation – Latest Update 30 September 2018 32
THE PAST IS NOT THE FUTURE
OLD VERSUS NEW THINKING 34
THE WORLD HAS CHANGED… 35
HOW TO FIND THE SHORT TERM WINNERS? Kingston Jamaica (2.8 million people). 3 gold medals at 3 consecutive Olympics for a total of 9 gold medals over the course of his Olympic career. Source: The Goldmine effect 36
FOOLED BY RANDOMNESS “No. It’s not the YAM potato.” 37
WHAT YOU SEE IS NOT WHAT YOU GET? 38
SHORT TERM THINKING … GRAYSWAN IN NUMBERS > R20 billion > 90 years 10% profits offices assets under Gauteng & of investment to our advice experience charitable trust Western Cape
US 10 YEAR MINUS 2 YEAR : NOT IN RECESSION YET BUT … 40
US RATES STILL LOW – STILL ROOM FOR INCREASES Source : Prescient 41
BEAR AND BULL MARKETS 42
GLOBAL EQUITY MARKETS…….TECH DRIVING THE MARKET 43
CUMULATIVE NEGATIVE REAL EQUITY RETURNS 44
US MARKETS – WHAT HAPPENS AFTER A FALL? *Source: Morgan Housel
VALUE VS GROWTH?
REST OF WORLD HAS STRUGGLED 47
SA EQUITY MARKETS 48
SA EQUITY MARKETS 49
SA INVESTMENT SUMMIT: 25 – 27 OCTOBER 2018 Sandton 2/3 audience 1000 Convention was South delegates African Centre R290 Billion in fixed investment spending, mot from SA Companies Sector focus included agro-processing, mining, energy, manufacturing, communication, transport and water. 50
GOVERNMENT BONDS SA 10 Year Government Bond Yield % 10,0 10,5 11,0 6,0 6,5 7,0 7,5 8,0 8,5 9,0 9,5 2003/06/20 2003/11/20 2004/04/20 2004/09/20 2005/02/20 2005/07/20 2005/12/20 2006/05/20 2006/10/20 2007/03/20 2007/08/20 2008/01/20 SA 10 Year Government Bond Yield 2008/06/20 2008/11/20 2009/04/20 2009/09/20 Buying Opportunity 2010/02/20 2010/07/20 R186 > 9.2 2010/12/20 2011/05/20 2011/10/20 2012/03/20 2012/08/20 2013/01/20 2013/06/20 2013/11/20 2014/04/20 2014/09/20 2015/02/20 2015/07/20 2015/12/20 2016/05/20 2016/10/20 2017/03/20 2017/08/20 2018/01/20 2018/06/20 51
USDZAR : HEDGING STRATEGIES USDZAR Exchange Rate 11,0 11,5 12,0 12,5 13,0 13,5 14,0 14,5 15,0 15,5 16,0 2017/07/03 2017/07/24 2017/08/14 2017/09/04 2017/09/25 2017/10/16 USDZAR Rate 2017/11/06 2017/11/27 2017/12/18 2018/01/08 2018/01/29 Bought Put 15.04 2018/02/19 2018/03/12 2018/04/02 2018/04/23 2018/05/14 2018/06/04 Sold Put 13.05 2018/06/25 2018/07/16 2018/08/06 2018/08/27 2018/09/17 Bought Put 15.04 2018/10/08 Sold Put 13.05 2018/10/29 2018/11/19 2018/12/10 2018/12/31 52
ZAR IS OVERSOLD, SHOULD RECOVER 53
USDZAR : MINIMISE THE TIMING 54
THINKING OUTSIDE THE BOX … GRAYSWAN IN NUMBERS > R20 billion > 90 years 10% profits offices assets under Gauteng & of investment to our advice experience charitable trust Western Cape
HOW TO FIND THE LONG DISTANCE WINNERS? Bekoji Ethopia (17000 people). 10 Olympic gold medals, 32 World Championships and have set 10 world records. Source – The Goldmine Effect 56
PRIMARY RESEARCH 57
STRUCTURAL MEGA TRENDS 58
STRUCTURAL MEGA TRENDS Total US Household Net Worth as % of GDP (1952-2017) ✓ Asset prices have grown much faster than GDP since the early 1980s and, in the long run, one cannot outgrow the other. ✓ Every single time US wealth has deviated meaningfully from 370% of US GDP, it has regressed to the mean, and US wealth is now 500% of US GDP. Source : ARP Investments 59
OFFSHORE INVESTMENT OPPORTUNITY : CREDIT 60
OFFSHORE INVESTMENT OPPORTUNITY : CREDIT 61
OFFSHORE INVESTMENT OPPORTUNITY : CREDIT 62
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