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[OPINION] Investing: Talk to your 80-year-old self

The World Economic Forum annual meeting started in Davos, Switzerland, on Tuesday and gives everyone interested in investing an opportunity to carefully consider the macro themes we should be paying attention to in our portfolios.

And it is also the one time that talking to yourself might be a very smart thing to do.

Lynda Gratton and Andrew Scott from London Business School have published 'Talk to your 80-year-old self, and other tips for the 100-year life' on the Davos website. It addresses one of the most significant global megatrends: the expected markedly greater longevity of current and future generations.

They are also the authors of a book titled The 100-Year Life – Living and Working in an Age of Longevity.

To quote: We must overcome deeply ingrained tendencies towards short-termism. We already know that those who are more patient and invest for the long term do better than those who don’t.

This is an enormously important topic for all South Africans. And it becomes increasingly important to plan for longer and longer retirement horizons. It completely resonates with our philosophy to design long-term investing solutions.

We believe that alternative asset classes such as private equity, credit and real estate are important components of long-term investing portfolios. By their very nature, short termism is an anathema to these asset classes because patient long-term investing can achieve outstanding returns.

Private equity funds typically invest on a long-term basis in the equity of unlisted companies seeking returns in excess of 20%. Funds are usually deployed for between five and 10 years.

Access to blue-chip private equity investments, however, remain restricted for many individual investors in South Africa, being exposed to only a limited amount through their pension and provident funds.

Long-term infrastructure loans (especially in South Africa to the projects that are part of the renewable energy independent power producers programme) can generate returns in excess of CPI + 4% for around 15 years, as can loans to reputable property developers secured by long-term leases.

That discussion with your 80-year-old self is likely to be much more congenial if that 80-year-old self has had the appropriate mix of long-term assets in its investing portfolio.

Rob Hamer is head of Alternative Assets at Ashburton Investments.

For more news, analysis and insights on Davos 2017 go to EWN’s WEF portal in partnership with Ashburton Investments.