LETTER: The answer is gilts linked to the JSE
Investment managers do have an opportunity to get us out of this looming economic disaster
The government will soon be forced to pump money into the economy or oversee its total collapse. This is all too predictable as it is hemmed in on all sides by seemingly insurmountable obstacles. There is the need to control money supply, keep interest rates low and ensure inflation remains within bounds. Money is fleeing offshore as fast as its legs can carry it to the place where all of SA’s hopes go to die.
However, investment managers do have an opportunity to get us out of this looming economic disaster. All they need is a safe and attractive home for domestic investment that doesn’t reek of political shenanigans. (I didn’t want to mention prescribed assets in the same sentence, so didn’t).
Nonetheless, it is the government’s job to come up with imaginative solutions in state funding endeavours. But while we wait with flagging anticipation, I’ll step in to help it out. Index-linked gilts have been around for decades, but since both interest rates and inflation are at rock bottom levels they have sadly lost their sex appeal. However, if an index-linked gilt was linked to the JSE instead of inflation, wouldn’t this just be the dog’s b*ll*cks? (Sorry, I’m English).
To explain, investment managers are by nature a neurotic bunch. They are caught between performance pressures and the safety requirements of their clients’ funds. The double guarantee of gilt-edged security coupled with a built-in uplift on any market recovery would be as manna from heaven to the procrastinating fund manager.
In case anyone should consider that a double-guaranteed gilt stock is far too generous, remember that the issue price can always be set by auction to align it with market expectations.
Robin Ducret, Franschhoek
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