The document discusses managing investments during periods of uncertainty. It notes that uncertainty is high currently due to factors like slowing global growth, ongoing trade wars, and tightening monetary policy. However, it also argues that valuations are reasonable, the US dollar may weaken, and monetary policy still has room to support growth. The document advocates embracing investment opportunities while carefully managing downside risk through diversification and rigorous analysis.

1. STANLIB Absolute Plus Fund
Peter van der Ross

2. 2
When investing…
“Imagine you’re driving a car with a dark windshield
You have side windows and side mirrors
and your trusty rear-view mirror!
But that’s it; side or back are the only ways you can see.
And you’ll know if you hit anything.
Now decide how much to step on the gas.”
- Anonymous

3. 3
Yes, it really is that uncertain out there…
0
50
100
150
200
250
300
350
Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
Global Economic Policy Uncertainty Index
Source: Bloomberg

4. 4
Two ways to handle uncertainty
Run Embrace
UNCERTAINTY

5. 5
Preparation + opportunity = success
Source: CartoonStock.com

6. So how do we prepare?

7. 7

8. 8
Build a strong team and process
ANALYSIS VS EMOTIONS
Loss aversion
Confirmation bias
Herding
Chasing past performance

9. 9
Manage downside so we never have to get greedy
1000%
800%
600%
400%
200%
0%
-200%
-10% -20% -30% -40% -50% -60% -70% -80% -90%
RequiredGaintoBreak-Even
Loss Incurred
Loss incurred vs. required return to break-even
Loss Incurred
Required Gain
to Break-Even
900%
400%
233%
150%
100%
67%43%25%11%
-90%-80%-70%-60%-50%-40%-30%
-20%-10%

10. 10
Have a framework to assess markets
VALUATIONS
ECONOMICS
LIQUIDITY
SENTIMENT
MOMENTUM
VOLATILITY
Source: CartoonStock.com

11. 11
Embrace opportunities, manage downside
Source: STANLIB Absolute Return Strategies
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
01-Jan-16
29-Jan-16
26-Feb-16
25-Mar-16
22-Apr-16
20-May-16
17-Jun-16
15-Jul-16
12-Aug-16
09-Sep-16
07-Oct-16
04-Nov-16
02-Dec-16
30-Dec-16
27-Jan-17
24-Feb-17
24-Mar-17
21-Apr-17
19-May-17
16-Jun-17
14-Jul-17
11-Aug-17
08-Sep-17
06-Oct-17
03-Nov-17
01-Dec-17
29-Dec-17
26-Jan-18
23-Feb-18
23-Mar-18
19-Apr-18
18-May-18
15-Jun-18
13-Jul-18
10-Aug-18
07-Sep-18
05-Oct-18
02-Nov-18
30-Nov-18
28-Dec-18
SA Equity SA Property Offshore Equity
Offshore Property SA Cash & MM Offshore Cash & MM
SA Bonds US Treasuries SA Inflation-Linkers

12. 12
Embrace opportunities, manage downside
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
01-Jan-16
29-Jan-16
26-Feb-16
25-Mar-16
22-Apr-16
20-May-16
17-Jun-16
15-Jul-16
12-Aug-16
09-Sep-16
07-Oct-16
04-Nov-16
02-Dec-16
30-Dec-16
27-Jan-17
24-Feb-17
24-Mar-17
21-Apr-17
19-May-17
16-Jun-17
14-Jul-17
11-Aug-17
08-Sep-17
06-Oct-17
03-Nov-17
01-Dec-17
29-Dec-17
26-Jan-18
23-Feb-18
23-Mar-18
19-Apr-18
18-May-18
15-Jun-18
13-Jul-18
10-Aug-18
07-Sep-18
05-Oct-18
02-Nov-18
30-Nov-18
28-Dec-18
SA Equity SA Property Offshore Equity
Offshore Property SA Cash & MM Offshore Cash & MM
SA Bonds US Treasuries SA Inflation-Linkers
Source: STANLIB Absolute Return Strategies

13. 13
Embrace opportunities, manage downside
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
01-Jan-16
29-Jan-16
26-Feb-16
25-Mar-16
22-Apr-16
20-May-16
17-Jun-16
15-Jul-16
12-Aug-16
09-Sep-16
07-Oct-16
04-Nov-16
02-Dec-16
30-Dec-16
27-Jan-17
24-Feb-17
24-Mar-17
21-Apr-17
19-May-17
16-Jun-17
14-Jul-17
11-Aug-17
08-Sep-17
06-Oct-17
03-Nov-17
01-Dec-17
29-Dec-17
26-Jan-18
23-Feb-18
23-Mar-18
19-Apr-18
18-May-18
15-Jun-18
13-Jul-18
10-Aug-18
07-Sep-18
05-Oct-18
02-Nov-18
30-Nov-18
28-Dec-18
SA Equity SA Property Offshore Equity
Offshore Property SA Cash & MM Offshore Cash & MM
SA Bonds US Treasuries SA Inflation-Linkers
Source: STANLIB Absolute Return Strategies

14. 14
Performance: active downside management pays
Source: Morningstar STANLIB Fund Research
-5,0
0,0
5,0
10,0
15,0
20,0
25,0
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18
Cumulativereturn(%)
STANLIB Absolute Plus B1
ASISA South African MA High Equity
ASISA South African MA Medium Equity

15. 16
Markets on a knife edge
...the bad news
QUANTITATIVE
TIGHTENING
GROWTH
SLOWING
TRADE WARS
UNEMPLOY-
MENT
US YIELD
CURVE

16. 17
Is quantitative tightening hurting?
QUANTITATIVE
TIGHTENING
GROWTH
SLOWING
TRADE WARS
UNEMPLOY-
MENT
US YIELD
CURVE

17. 18
Growth is slowing rapidly; is the Fed trying to catch a falling
knife?
QUANTITATIVE
TIGHTENING
GROWTH
SLOWING
TRADE WARS
UNEMPLOY-
MENT
US YIELD
CURVE
-80
-60
-40
-20
0
20
40
60
80
30
35
40
45
50
55
60
65
70
Dec-…
Jul-95
Feb-…
Sep-…
Apr-97
Nov-…
Jun-98
Jan-99
Aug-…
Mar-…
Oct-00
May…
Dec-…
Jul-02
Feb-…
Sep-…
Apr-04
Nov-…
Jun-05
Jan-06
Aug-…
Mar-…
Oct-07
May…
Dec-…
Jul-09
Feb-…
Sep-…
Apr-11
Nov-…
Jun-12
Jan-13
Aug-…
Mar-…
Oct-14
May…
Dec-…
Jul-16
Feb-…
Sep-…
Apr-18
Nov-…
US Manufacturing PMI China New Export Orders PMI South Korea Exports YOY
Source: STANLIB Absolute Return Strategies

18. 19
Trade wars: shaky global trade = shaky global earnings
QUANTITATIVE
TIGHTENING
GROWTH
SLOWING
TRADE WARS
UNEMPLOY-
MENT
US YIELD
CURVE
-1
-0,8
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1
-50
-40
-30
-20
-10
0
10
20
30
40
50
Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09 Dec-12 Dec-15 Dec-18
South Korea Exports YOY MSCI World EPS YOY (Trailing, RHS)
Source: STANLIB Absolute Return Strategies

19. 20
QUANTITATIVE
TIGHTENING
GROWTH
SLOWING
TRADE WARS
UNEMPLOY-
MENT
US YIELD
CURVE
Unemployment: growth cycles tend to end, not start,
from here
0
2
4
6
8
10
12
14
Dec-80
Oct-81
Aug-82
Jun-83
Apr-84
Feb-85
Dec-85
Oct-86
Aug-87
Jun-88
Apr-89
Feb-90
Dec-90
Oct-91
Aug-92
Jun-93
Apr-94
Feb-95
Dec-95
Oct-96
Aug-97
Jun-98
Apr-99
Feb-00
Dec-00
Oct-01
Aug-02
Jun-03
Apr-04
Feb-05
Dec-05
Oct-06
Aug-07
Jun-08
Apr-09
Feb-10
Dec-10
Oct-11
Aug-12
Jun-13
Apr-14
Feb-15
Dec-15
Oct-16
Aug-17
Jun-18
US Germany
Source: STANLIB Absolute Return Strategies

20. 21
US yield curves: it’s getting late in the party. Care for
a last dance?
QUANTITATIVE
TIGHTENING
GROWTH
SLOWING
TRADE WARS
UNEMPLOY-
MENT
US YIELD
CURVE
(1)
-
1
2
3
4
5
Mar-87 Mar-90 Mar-93 Mar-96 Mar-99 Mar-02 Mar-05 Mar-08 Mar-11 Mar-14 Mar-17
US 5-2 curve US 10-2 curve US 30-2 curve
US 10-5 curve US 30-5 curve US 30-10 curve
Source: STANLIB Absolute Return Strategies

21. 22
Markets on a knife edge
...the good news
VALUATION
WEAKER
DOLLAR?
MONETARY
POLICY

22. 23
Equity valuations are average to cheap: forward PE’s
VALUATION
WEAKER
DOLLAR?
MONETARY
POLICY
0
5
10
15
20
25
30
Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
US Europe EM SA (ALSI)
Source: STANLIB Absolute Return Strategies

23. 24
Positioning (and price action) suggest the Dollar will
weaken
VALUATION
WEAKER
DOLLAR?
MONETARY
POLICY
65
70
75
80
85
90
95
100
105
-50
-40
-30
-20
-10
0
10
20
30
40
50
Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18
Net USD long positions Dollar Index (RHS)
Source: STANLIB Absolute Return Strategies

24. 25

25. 26
No inflation pressures: the Fed can afford to wait and
see
VALUATION
WEAKER
DOLLAR?
MONETARY
POLICY
-2
-1
0
1
2
3
4
5
6
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 Dec-18
2yrs 5yrs 10yrs 20yrs Fed Funds rate
Source: STANLIB Absolute Return Strategies

26. 27
China has started stimulating and has room to do
more
VALUATION
WEAKER
DOLLAR?
MONETARY
POLICY
0
5
10
15
20
25
30
Feb-99 Feb-02 Feb-05 Feb-08 Feb-11 Feb-14 Feb-17
China M2 YOY% China Deposit Reserve Ratio

27. 28