How fund managers adapt to market fluctuations

It’s no longer just death and taxes that are inevitable. Uncertainty and volatility have become permanent fixtures in the investment landscape, reshaping how fund managers approach decision-making.

In this environment, sound investment strategies are less about chasing perfection and more about applying rigorous processes, identifying opportunities, and learning from missteps. The goal is not to be right all the time, but to be consistently right more often than not.

Amplify Investment Partners’ fund managers are tuned into this reality. Their focus is not on market noise but on making informed choices, and just as importantly, learning from the ones that didn’t pan out.

Wessel Joubert, investment analyst at OysterCatcher, which manages the Amplify SCI Equity Fund and the Amplify SCI Managed Equity Retail Hedge Fund, draws a compelling analogy from sport. “Roger Federer won almost 80% of all the tennis matches he played, yet he won only 54% of the points. Consistently making the right choices over the long term is what drives sustained top-quartile performance. It is increasingly about knowing when to take opportunities and when to hold on when markets dip," he says.

This philosophy is embedded in the fund’s investment process, which includes modelling company earnings and dividends four years into the future and determining an exit valuation multiple. A recent example is their reassessment of Capitec’s earnings multiple.

“For Capitec, we argued that they were a bank and once they reach a certain percentage of the bank sector market share, their valuation multiple should revert towards that of a high-quality South African bank as the growth will slow at that point,” Joubert says.

But Capitec, says Joubert, has challenged that assumption, expanding into telecommunications with Capitec Connect and potentially into other sectors such as insurance and online gambling. Joubert notes that the valuation multiple must now reflect a longer growth runway and a more diversified market footprint.

Justin Hollis, fund manager at Abax Investments, which manages the Amplify SCI Flexible Equity Fund, echoes the sentiment that successful investing isn’t about being right all the time.

“Loss aversion causes investors to hold onto losing investments too long or sell winners too early. It can also cause excessive conservatism, where investors avoid opportunities even when the risk/reward payoff is favourable,” he says.

Hollis points out that heightened market volatility has exposed emotional biases that can cloud judgement, especially when deciding whether a drop in share price signals a buying opportunity or a warning to sell.

When US President Donald Trump announced tariffs in April 2025, triggering indiscriminate selling across global stock markets, the fund saw an opportunity rather than a crisis. Instead of panicking, they added quality companies trading at compelling valuations. One such move was the purchase of Capitec, whose fundamentals remained strong despite the market reaction. The share has since climbed by more than 30%.

Hollis says, of course, not every decision yields positive results. He admits there have been instances where the fund held onto positions too long.

“Sasol is a relevant example where we misjudged the severity of the challenges faced by the business, resulting in us holding onto the position too long,” he says. This kind of misstep can tie up capital that could be better deployed elsewhere.

To counteract loss aversion and improve long-term outcomes, the fund relies on several disciplines. These include recognising loss aversion as a natural human bias, staying disciplined and true to the investment philosophy, and reframing decisions with a long-term lens. Diversification also plays a key role, reducing the risk of material losses. And, as always, an experienced investment team remains central to success, he says.

Nomathibana Okello, managing director of Terebinth Capital and manager of the Amplify SCI Strategic Income Fund and Amplify SCI Diversified Income Retail Hedge Fund, adds another layer to the conversation. She notes that while the funds’ managers follow a structured investment decision-making process grounded in macroeconomic research and quantitative analysis, they cannot predict the timing of events. This unpredictability can affect conviction levels, especially when the market moves against an investment thesis.

Okello cites monetary policy as a case in point. After the Reserve Bank announced a 3% inflation scenario, the team listened closely to the Monetary Policy Committee’s guidance and “successfully introduced net receive positions in the hedge fund for later dates, even when the market was convinced that the cutting cycle was over”.

Still, Okello acknowledges the tension between risk management and conviction. “As a portfolio manager, I am not sure if the constant doubt and questioning of one’s view and adjustments to portfolio positioning will ever change. This journey is grounded in science and art, and one needs to be comfortable with the risk level in the fund.”

Joubert sums it up well: “In our industry, it is impossible to be 100% correct 100% of the time. The mark of a good fund manager is achieving a hit rate above 50% while recycling capital between different listed companies.” Hollis agrees, adding that even seasoned investors make mistakes, “but by learning from past miscalculations, investors can make smarter choices in the future”.

PERSONAL FINANCE