Guest Contributor | Mar 12, 2019 | 0
Momentum launches new investment philosophy to market
Outcome-based investing is a game changer for investors, according to the CEO of Momentum Asset Management Namibia, Lesley Rukoro, who said that, while the concept of outcome-based investing (also referred to as goal-based investing and liability-driven investing) has been in the South African marketplace for some time, it is relatively new for Namibia.
Rukoro was speaking at the launch of Momentum Collective Investments Namibia and Momentum Wealth Namibia this week.
The two new businesses, together with Momentum Asset Management Namibia will fall under the Momentum Investments brand.
“With Momentum Asset Management Namibia boasting a long and proud track record of more than 10 years in this space, MMI Namibia has fully committed its policyholder assets to outcome-based investing as its underlying investment philosophy and the framework for managing clients’ investments and their investor journey through Momentum Investments,” he said.
The company is the first investment manager in the local market to really deliver on it in a way that brings clear value for the investor.
“Outcome-based investing represents a departure from the typical risk-tolerance framework and moves towards a more client-centric approach. It makes the investor’s goal the only benchmark that matters,” he added.
Rukoro believes mainstream investment thinking is not optimal because it often misses the true investor requirements and how to solve for their needs. “Investor behaviour is proven to be driven by greed and fear, without much consideration for any specific investment objective. The problem with this is it does not assist investors in tracking their real goals specifically customised to their risk profile and time horizon”.
“The industry, in turn, is product-driven, as opposed to solution-driven, and it leads to a vicious cycle of musical chairs and sub-optimal outcomes for investors,” he added.
Momentum Investments follows outcome-based investing as its philosophy, which has a dedicated vision to be being genuinely client-centric and delivering financial wellness.
Rukoro said this allows an investor, with the assistance of a financial adviser, to map out specific objectives and the timeframe in which they want to achieve those objectives.
“Investors should view risk not just as the volatility of their returns or the underperformance of a benchmark, but also as the likelihood of not achieving their individual goals. Risk is inextricably linked to an investor’s strategy, time horizon and the achievement of their goals. We build our portfolios to maximise the probability of achieving their objective,” he said.
Rukoro emphasised, however, that outcome-based investing is not a cover for poor investment returns.
“The key for us is framing the adequacy of returns solely in the context of the outcome set at the beginning and not being distracted along the journey. In fact, our South African outcome-based portfolios have proven to be world-class even compared to other providers in the market.”
He believes that after-sales service is generally something the industry does very poorly and intends to fix that for investors by delivering the re-assurance of having no surprises along the way, adding this approach can be delivered in a very cost-effective way in terms of fees.
“When investors hear about multi-managers and multiple anythings, they think of layers of fees, but we can deliver this optimal range of choice and flexibility in a very fee-competitive manner because of our in-house capabilities and an ability to unify the fee architecture.”
Based on the goals investors want to achieve with their savings – from a comfortable retirement, to paying for university or a house – outcome-based investing provides the tools to drive investment strategy and monitor progress in achieving these goals, Rukoro explains.
“A key part of outcome-based investing is therefore placing a priority on selecting the right investment opportunity first and foremost, as we believe a consistent philosophy is a better predictor of returns than the rear-view mirror of yesterday’s results. This helps us move away from the industry herd, by focusing solely on the investment outcome and risk budget sought by the investor, and then delivering on that in a seamless and re-assuring way.”
As such, Rukoro predicts that outcome-based investing will truly revolutionise the Namibian investment space. “We are very excited to launch this concept in the Namibian market, as we believe it will greatly assist investors to track and, if necessary, adjust and deliver on their specific goals,” he concluded.