I initially thought I’d send this letter to income dependent clients only, then I thought to all Marriott investors, then I decided to send it to everyone as others might also find it interesting.
It is feedback about conversations that were had amongst other IFAs (Independent Financial Advisors) together with Coronation Fund guys when I was in Cape Town for that Coronation Head Office day I attended in June. Over the past while, there have been many writings by asset managers around coping with South African markets, which have stayed pretty flat for most of the last 3 years. (The term ‘flat markets’ would be meaning little or no growth in the value of your money.)
While this is not a problem, and actually a good thing, to those of us still investing monthly via debit orders, or regular additional lump sums or reinvesting income inside an investment – because we continue to buy assets each month that are not increasing in price meaning we continue getting good value for our money with each purchase – it is a problem for investors who have to sell capital to fund their income. [The Conundrum: buying growth assets over your lifetime of investing or buy income focused assets? A conversation for another time.]
To the point of the conversations that day in the Coronation board room, conversations to which I added no comment. One IFA initiated the discussion with: “We’re battling a bit, losing 5% per annum on our client’s living annuities and its the 3rd year already. The client is down 15 to 20% of capital value over 3 years and they’re needing an income going up each year. What can you or are you doing about it?” To me, it really was a stupid question. An asset manager cannot make share prices or markets go up. They can only make sensible shopping decisions.
This situation: when a retired or income dependent investor is needing income each month but they are liquidating a portion of capital each month to get it…. is unsustainable. (It can sometimes be a necessary, calculated bet when someone hasn’t saved enough money.) This is when the investment and income management strategy of Marriott sits above most other asset managers.
The senior asset manager that pioneered Marriott’s strategy many years ago said, after finishing his PhD on the matter and structure of the philosophy, that he was surprised there was not a greater uptake for the method amongst other managers.
There is actually, another asset manager now coming into the picture and emulating Marriott’s style of investing and income. But they are very new and a direct product is not available yet. They have visited me and I am watching their progress. Interestingly, both primary managers at this business cut their teeth with Marriott many years ago.