Who we are
Umthombo Wealth is an independent, owner managed, boutique asset manager with a diversified offering in the South African financial services environment. Founded in 2013, the company is based in Johannesburg South Africa and focuses on managing institutional equities and fixed income within the local market
We leverage our team’s diverse collective experience of over two decades extensive market knowledge and disciplined portfolio and risk management to deliver superior fund returns by seeking out unique alpha generating opportunities. Our strength is rooted in our focus on our clients and our people.
Umthombo is a long-term, value driven fundamental investor that seek to consistently deliver risk-adjusted returns and alpha over long-term market cycles.
Our Equity funds blend traditional investment techniques with innovative data and research-driven quantitative and qualitative methods. Read more about our style-agnostic approach.
+ Umthombo’s Equity Investment Philosophy and Process
Umthombo’s Fixed Income funds aim to source and balance returns and alpha through various fixed income analytical opportunities. We constantly monitor and assess the macroeconomic landscape in terms of risk and apply three key investment principles. Read more our the three key investment principles.
+ Umthombo’s Fixed Income Investment Philosophy and Process
Umthombo is a long-term, value driven fundamental investor that seek to consistently deliver risk-adjusted returns and alpha over long-term market cycles.
Our Equity funds blend traditional investment techniques with innovative data and research-driven quantitative and qualitative methods. Read more about our style-agnostic approach.
+ Umthombo’s Equity Investment Philosophy and Process
Umthombo’s Fixed Income funds aim to source and balance returns and alpha through various fixed income analytical opportunities. We constantly monitor and assess the macroeconomic landscape in terms of risk and apply three key investment principles. Read more our the three key investment principles.
+ Umthombo’s Fixed Income Investment Philosophy and Process
Our Team
Our team has collective market experience of over two decades as well as a proven track record of generating long-term value across market cycle.
Our people are our greatest asset and embody the company’s culture of excellence, performance, accountability and high ethical standards. Embracing the cultural diversity of South Africa with diverse opinions and personalities are fundamental to our long-term sustainability and success.
Why choose us
Why choose us
Frequently Asked Questions
Our decision-making process is comprehensive and dynamic in nature. It embraces medium and long-term structural trends and themes for core and non – core stock selection.
Our comprehensive decision-making process requires analysts to conduct detailed analysis in accordance with Umthombo’s investment process. The respective analyst then presents the investment case to the investment team with a recommendation as well as their level of conviction. The investment team then debates the investment case with the objective of gaining a common understanding. Following this a decision is made regarding whether further analysis is warranted, if no additional analysis is required, the team will then conclude on the investment case with an agreed level of conviction. Our investment case encapsulates the team’s consensus. In the event that there is no consensus within the team regarding an investment recommendation, the most senior member of the portfolio management team will make the final decision.
Investment recommendations come with buying price ranges. Each investment has a continuously updated selling price levels and range. However, we always keep in mind that share prices can run well more than fair values/price. Share holding is primarily influenced by targeted tracking error, classification of core or non-core holdings, and our level of conviction in investment cases.
Dynamic decision-making is characteristically short- term with focus on portfolio risk management. This includes valuation, event-related themes, benchmarks, incidental bets, sector rotation and other related risks. A dynamic decision-making process allows the portfolio management team to respond to short- term market risks. This permits adequate leeway in making decisions without going through the comprehensive decision-making process.
Each investment in our portfolios has an investment case. When our initial investment case gets impaired based on new information (or due to change in valuation), we will then sell the share depending on the degree of impairment (reduction in margin of safety due share performance).
Our process emphasizes three distinct unique aspects that we believe gives us a competitive edge.
Detailed scenario and sensitivity analysis – Detailed scenario and sensitivity analysis is done on key forecast variables and valuation assumptions in order to determine the sustainability of each investment case (under different scenarios) and to define the true margin of safety. Our goal is to identify distinctive investment cases that can perform well over various scenarios (sustainability of investment case) and to buy these shares in the right price range (margin of safety) in order to control risk of permanent capital loss and to achieve optimal risk adjusted returns.
Earnings quality assessment – Earnings quality analysis entails the evaluation of an entity’s true financial strength. Companies with high quality earnings are more durable and thus more likely to outperform companies with low quality earnings under multiple scenarios (especially under difficult operational environment). We also believe companies with high earnings quality have less forecast risk, has more sustainable investment cases and tend to be supported by better corporate governance. As of a result we will not invest in companies that exhibits poor earnings quality characteristics irrespective of how attractive the other aspects of the investment case might be.
Behavioral finance – Investors’ emotions cause share prices to deviate from their true fundamental value owing to emotional and cognitive biases. The regular pendulum swing in emotions creates opportunities and risks that active investors can potentially exploit or mitigate. Therefore, behavioural finance forms an integral part of our investment process and risk management of day-to-day operations. By being cognisant of our own unique emotional biases, we accommodate them to reduce their effect on our decision-making.
Examples of this include emphasising detailed scenario and sensitivity analysis to mitigate biases such as conservatism, confirmation and emotional biases (including loss aversion and overconfidence). This is done through focusing on weighted expected returns based on different scenarios (eliminates point estimates or base case only forecasts).
The combination of the above three unique aspects and flexibility of investment philosophy gives us a sustainable competitive advantage over our competitors allowing us to generate consistent risk adjusted outperformance over long time horizons.
To mitigate the main risks of our investment process we emphasise the importance of producing risk adjusted returns. Risk adjusted returns incorporates the following factors into consideration (level of conviction, forecast risk, upside potential according to margin of safety, quality of company and sustainability of investment case, investment case sensitivity to macro related variables, quantitative risk measures: downside volatility, beta to benchmark, correlation of shares with each other (correlation matrix), and allocate portfolio weights on a return per unit of risk basis.
From a portfolio construction process we implement the following risk management measures. We first identify any incidental bets, sector rotation, currency, and country, political and other specific risks that can be addressed through our portfolio overlay process. We identify core/non-core shares, investment themes, and short term risks/opportunities and do portfolio scenario analysis (in order to understand in which scenarios our portfolio will out or underperform).
After the portfolio is constructed we also assess if the portfolio represents our qualitative investment view and we also aim to understand how the portfolios’ are likely to perform under different market cycles (including relative to respective benchmarks). Another important risk management aspect we are conscious of is the liquidity/tradability of shares we are investing or invested in; we analyse before investing and monitor during invested period.
There are also a few non-negotiable factors that need to be included in each investment case irrespective of how attractive it might be. These factors are:
• High margin of safety supported by detailed scenario and sensitivity analysis (forecast risk),
• Distinctive investment case that offers acceptable expected risk adjusted returns,
• Acceptable earnings quality. Will not consider investments with low earnings quality,
• Acceptable ESG (especially governance) and be able to engage if we have concerns, and
• Sustainability of investment case (quality investment cases are more resilient).
We seek specific opportunities that can be unlocked in numerous ways. The purpose is to create an investment case that can be clearly defined and understood, but also to have a thorough understanding of the risks involved. We tend to favour companies that have distinctive sustainable investment cases, which are supported by strong earnings quality and corporate governance.
