The year 2015 was by and large been an annus horribilis for investors around the world, with many portfolios battling to eke out a positive return for the year.
Add to that the continuation of a downward trend in global growth prospects, an acceleration of sociopolitical unrest and the suffocating pressure of regulation on financial markets, and it is easy to understand why the approach to 2016 is viewed with a healthy dose of disillusionment and scepticism – how will we ever be able to meet the rising financial demands of our own increased life expectancy, and the inability of a sluggish economy to meet the expectations of a “better life for all”?
A tough mountain to climb
The topics of economic inequality, lack of access to finance and capital and concentrated ownership of wealth-generating assets, sit uncomfortably with both ends of the haves-and-have-nots spectrum.
Populist calls for Robin Hood-style redistribution of wealth arguably do more damage than good and, rather than elicit positive action, result in an accelerated flow of investment capital out of the country by both concerned individuals and wary management of SA Inc.
None of this is aiding the calls for investment in growth and job creation, and as a country we find ourselves on a slippery downward spiral to undesirable destinations such as a sub-investment grade credit rating, and the worst-case scenario: a “failed state”.
So what can be done to stem the tide in 2016, reverse the brain drain and flight of capital, and put us on a renewed path of growth and improvement?
And in particular, what can you and I, the ordinary person on the street, do to make a positive contribution; to build a future for our children, whilst at the same time improving the here and now for us all?
Rethinking the strategy
Investment opportunities come in many shapes and forms, and are by no means restricted to buying shares on the stock exchange, having a debit order into unit trusts, or making regular contributions to your retirement fund.
In a sense, an investment can be considered in the same way as planting a seed with a view to enjoying the benefits of that seed growing, be it vegetables or a shady tree. And just as there are countless different seeds that may be planted, all resulting in different plants growing, one can consider alternative investment opportunities outside of the traditional financial markets.
Here’s a scenario: within one extended household, family or even community, there may be one individual who currently has money in a savings account, earning 5% interest a year, whilst another individual is in need of capital to start a small business and has to pay 15% p.a. on a loan.
By mutual agreement, at a rate of 10% interest p.a., the needs of both parties can be met in a win-win situation. Does such a process of disintermediation come at a higher risk?
In a traditional banking model it would be deemed as such, but within the informal construct of facilitation at this direct level, there is powerful risk mitigation in the knowledge of both parties that is far superior to anything that regulations such as Fica or credit affordability and lending scores can ever achieve.
A new view
High-net-worth individuals around the globe all struggle with two key questions: how do I “protect” my assets from the long arm of the tax man, and how do I transfer my wealth to the next generation in such a way that they too can be motivated by the entrepreneurial drive and work ethic that created the wealth in the first place?
Traditional wealth managers and financial advisers will be quick to propose complex trust structures to optimise (i.e. minimise) tax liabilities, but also restrict the spoilt/lazy/self-righteous (pick any suitable adjective) offspring of the wealth generator from getting undue access to the capital.
By contrast, if the accumulated wealth is perceived from an abundant point of view, rather than a repressive stance, this capital can be liberated to become the funding source for the next generation of growth engines, and in that way, serve multiple agendas and solve a multitude of problems.
May 2016 be the year in which we approach our investment decisions with abundance, and give our money leadership to build a better life for all.
Nerina Visser, formerly head of beta solutions at Nedbank Capital, is a regular market commentator and director of etfSA.co.za.
This article originally appeared in the 31 December 2015 edition of finweek. Buy and download the magazine here.