• HOME
  • LIBRARY
  • CLIENT
    PORTAL
  • UNCLAIMED
    BENEFITS
  • CONTACT

Placing all your eggs in one basket during uncertain times as we are going through right now, can be pretty unnerving, whether you coincidentally have chosen the ‘right’ manager or not. If you were so fortunate to have chosen the ‘right’ manager at the right time, you still have to be cognizant that times will change. Just when, and will you rely on your good fortunes to pick just the right time once again? I would rather not bank on it! If you were less fortunate, your manager is underperforming and this is unnerving too and it would take more conviction that most of us possess to stay put!

The obvious answer for greater peace of mind is to choose another manager. Your choice will be choosing between two with a similar philosophy or two with opposing philosophies. The first approach is probably more suited for someone intent on reducing his counter party risk, the second one, for reducing market risk. The first one is suited for someone with a strong conviction, the second one for someone who is undecided on where markets are headed.

Allan Gray has always been, and still is a ‘contrarian’ investment manager and is likely to produce investment performance quite different from the average prudential balanced portfolio. Under current global economic conditions investment managers and experts have widely diverging views on the course of the global economy. The course the global economy will take over the next 3 to 5 years will determine trends in global currencies and these developments and trends will determine the development of our local bourses specifically, and local financial markets in general, where the greater portion of local pension fund members’ capital is invested, as evidenced in the table below. The table below reflects the asset allocation of Allan Gray, Investec, Standard Bank and the average prudential balanced portfolio as at 31 March 2011, and is indicative of the diverging views our investment managers currently have on these developments.

Asset class Allan Gray % Investec % % Standard
Bank
% Average
Manager
Local Equities 42.3 43.0 50.7 44.0
Local Bonds 7.1 9.4 7.0 11.4
Local Cash 18.5 17.5 23.0 17.4
Local Property 1.8 2.1 0.0 2.3
Total Local (RSA/Nam) 69.7 72.0 80.7 75.1
Offshore Equity 16.5 18.9 19.3 18.8
Offshore Bonds 0.0 7.2 0.0 2.4
Offshore Cash 0.0 0.8 0.0 0.7
Offshore Other 12.4 1.1 0.0 2.2
Other 1.4 0.0 0.0 0.9
Total Offshore 30.3 28.0 19.3 25.0
Total Portfolio 100 100 100 100
Resources 31 17 15 28

Going by the asset allocation per table, Investec and Allan Gray appear to have a very similar view on expected developments in the global economy and global markets while the average prudential balanced manager, and Standard Bank in particular, appears to take a slightly different view. Allan Gray had this view for the past 3 years or so. Over this period global markets did not develop as expected by Allan Gray and hence its under performance relative to the average prudential balanced portfolio. Investec raised its offshore exposure closer to the statutory limit more recently (statutory limit is now 35%).

Depending on your personal views, you may wish to diversify between two managers with similar views if you foresee a reversal of trends seen since the global financial crisis, alternatively between 2 managers with diverging views if you foresee a continuation of these trends. In former case, Investec appears to have a similar view to Allan Gray, while in latter case Standard Bank displays the most divergent view, based on above table.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.  

PENSION CALCULATOR
How much will you need when you retire and are you investing enough?
GALLERY
CLIENT COM(PLI)MENTS
FREE INVESTMENT AND PENSION FUND NEWS
Subscribe now to receive our monthly newsletter.
We use cookies to make this site simpler. By using this site, you permit the use of cookies.
More information Ok