<\/p>\n
This interview was recorded in Afrikaans. The transcript below has been\u00a0translated into English.<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
RYK VAN NIEKERK:\u00a0Natalie Phillips joins me now, she is the deputy managing director of asset management group Ninety One. Natalie, a very warm welcome to the programme.<\/p>\n
There is a continual debate about the best approach when looking at investments: active management funds, where a fund manager personally makes the investment decisions, versus so-called passive funds which usually follow a guideline, such as a specific index.<\/p>\n
Now Ninety One is an active manager and you do very well with this. So how do you view this \u2018active versus passive funds\u2019 debate?<\/p>\n
NATALIE PHILLIPS: Ryk, thank you very much for the opportunity for Ninety\u00a0One to chat with you for a bit this afternoon. Thank you. We look forward to this conversation.<\/p>\n
Yes, as you said, Ninety\u00a0One is unashamedly an active manager. We think the argument is wrong. It is not \u2013 in our opinion \u2013 a debate about which approach is the right approach.<\/p>\n
We just believe that active and passive investments should not be competitors; both do it well in their own way.<\/p>\n
If I can use an example \u2013 we, as an active manager in the market, believe the skill and research of our investment team give us the advantage to deliver very good returns, specifically when we look at emerging markets. And if we look there, for example, over the last 15 years our emerging market equity strategy has beaten the index or guideline by 2% per year.<\/p>\n
This shows that there are different ways to hopefully get the outcomes that investors are looking for, so we think the two complement each other and there are different ways to do things.<\/p>\n
RYK VAN NIEKERK: However, passive funds have also performed exceptionally well over the past couple of years, especially in America. Many people look at the short-term performance of certain funds and the investment decisions based on those. So why have the funds in America specifically performed so well?<\/p>\n
NATALIE PHILLIPS: That is an excellent question and it\u2019s precisely that. If we look to the USA, or America as you call it, that is where passive \u2013 if we look at the last few years \u2013 has done incredibly well. But importantly there is concentration risk.<\/p>\n
So yes, if you simply followed the index over the last year, looking at 2025, you would have done very well in the US. If you look at the top 10 stocks, they make up roughly 40% of the S&P 500. So yes, you would have done very well, but within those there are also stocks that did much better, one versus another, but with risk.<\/p>\n
If you just look at those Top 10, you would have seen that a stock like Alphabet delivered a return of 66% and Nvidia 41%.<\/p>\n
So again, if you followed the S&P alone last year, yes, you would have done well, but there are also shares that did far better comparatively speaking.<\/p>\n
This is where we think you need an active manager, where it is not just a low-cost option but actually looking to appoint that active manager with the experience to ensure outperforming the index.<\/p>\n
We also believe the index holds sway in relation to the size of the company, but that is regardless of that company\u2019s prospects, whereas an active manager of course looks at where the returns are, the prospects of a company, and what it looks like into the future.<\/p>\n
So, by relying only on passive we don\u2019t think you are going to get the investment outcome you are looking for. When we specifically look at small group equities, where the index is much narrower \u2013 passive is not necessarily going to give you that return.<\/p>\n
So we think concentration risk is important.<\/p>\n
But yes, you are completely right. If you invested only in the US and the S&P\u00a0500 last year, you would have done very well, but that also holds risk.<\/p>\n
If you held more Alphabet than Nvidia you would have done much better \u2013 and that is what we talk about in terms of active management and the opportunity it provides.<\/p>\n
RYK VAN NIEKERK: You mention concentration risk. The argument there is that one should not just stare blindly at the return; one needs to look at the risk accompanying it. A lower return against less risk is often a better outcome for the investor, and that\u2019s a principle that I think doesn\u2019t always hit home.<\/p>\n
Where can active investments truly add value in a portfolio, and is there any sector you look at that excites you?<\/p>\n
NATALIE PHILLIPS: Just to continue with that argument, if we look at some of the strongest performers that many people are not aware of, in 2025 \u2013 and so far in 2026 \u2013 these are companies that are completely outside the US mega-capitalisation stocks.<\/p>\n
So as if we look at TSMC, a technology company in Taiwan, AND if we look at Hermes Testing Solutions, a smaller company but also listed in Taiwan, they have done incredibly well and much, much better than those top 10 stocks of the S&P\u00a0500 in the US.<\/p>\n
Those are two examples of companies listed outside the US, and where their exposure in the global equity index is far less.<\/p>\n
If you look at the large companies in Asia \u2013 such as in India, China and Taiwan \u2013 their representation in the global equity index is much less, less than a quarter of the weight. And that is the big opportunity that we see at the moment.<\/p>\n
Also, if you look at last year\u2019s returns, you will see that emerging markets did very, very well. They did better in 2025 than the US S&P 500.<\/p>\n
So that is our argument. If you look right now, we think the big opportunity remains in emerging markets. If we look at this year so far, the performance has been incredible.<\/p>\n
We now see the valuations of many of these companies in the US are very high. That is a concern for us, and we believe you must have more exposure in emerging markets.<\/p>\n
If I continue with that position of ours, we also believe that, with the political situation in the world at the moment, things do not look very good, they look very unstable.<\/p>\n
That is also where diversification is very important and where there is a big gap at the moment \u2013 where you want to diversify out of the US into other markets. We believe those are the emerging markets.<\/p>\n
RYK VAN NIEKERK: But we live in South Africa. It\u2019s an emerging or a developing market. Many people already have local investments \u2013 especially with retirement products. Is that not going to result in too large an exposure to developing markets?<\/p>\n
NATALIE PHILLIPS: Ryk, we often get that question. It\u2019s a fantastic question, and we believe that living in South Africa, which is an emerging market, is not the same as investing in it.<\/p>\n
That\u2019s the big question. The JSE is one market, but the sector composition is quite different from that of China or Taiwan or India.<\/p>\n
That is the big opportunity we think you won\u2019t see if you invest only in the JSE.<\/p>\n
The other important thing, if you look at the correlations between emerging markets, you will see in our local market the correlation is extremely low. It is currently around 0.15.<\/p>\n
So if you add exposure to an emerging market in your portfolio, plus your South African exposure, you will have greater diversification, fewer sharp falls, and you will see better growth exposure.<\/p>\n
For example, of you look at emerging markets outside South Africa, they represent more than half of humanity \u2013 4.3\u00a0billion people live in the so-called Valeriepieris circle, and this is basically India, China, Korea, and other countries in Asia.<\/p>\n
If you look at those, and at their growth, it is expected that by 2030 those countries\u2019 GDP growth will be 75%.<\/p>\n
That is massive and why we believe you cannot think that getting your emerging market exposure in the local market alone that is enough.<\/p>\n
We believe that you will lose a massive opportunity and not recognise it.<\/p>\n
RYK VAN NIEKERK: Natalie, thank you very much. That was Natalie Phillips, the deputy managing director of Ninety\u00a0One.<\/p>\n
Brought to you by Ninety One.<\/p>\n
Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.<\/p>\n
#Active #passive #investing #Navigating #global #markets #risk<\/p>\n","protected":false},"excerpt":{"rendered":"
This interview was recorded in Afrikaans. The transcript below has been\u00a0translated into English. You can…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[7482,423,40,166,10584,69,749],"_links":{"self":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/16256"}],"collection":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16256"}],"version-history":[{"count":0,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/16256\/revisions"}],"wp:attachment":[{"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}