In February 2020 the average prudential balanced portfolio returned -3.7% (January 2020: 1.1%). Top performer is Investment Solutions Balanced Fund with -2.1%, while Hangala Prescient Balance Fund with -5.4% takes the bottom spot. For the 3-month period, Allan Gray Balanced Fund takes the top spot, outperforming the ‘average’ by roughly 2.0%. On the other end of the scale Momentum Namibia Growth Fund underperformed the ‘average’ by 2.8%. Note that these returns are before (gross of) asset management fees.

The Monthly Review of Portfolio Performance to 29 February 2020 provides a full review of portfolio performances and other interesting analyses..

Will there be life after Corona?

By now we are all acutely aware of the sharp decline in global financial markets. The JSE Allshare Index declined by 33% from 57,084 at the end of December to 38,267 at the time of writing the column. Earnings of the index were 6.34% at the end of December while the dividend yield was 3.9%. If the underlying companies were able to maintain earnings at that level, earning should currently amount to 9.5% and dividend yield should amount to 5.8%. To put this into a more common context, if you let your house of N$ 2 million generating a return of 6.34% or a rent of N$ 10,600 per month. If you were to continue earning the same rent but your property agent tells you that the value of your house has dropped to N$ 1,3 million, why should you be concerned about this drop in value. Supply and demand should result in the market adjusting upward again in time to come.

Now let’s look at an investor who invests offshore. The S&P 500 index declined by 29% from 3,217 at the end of December to 2,284 at the time of writing. However, the Rand: US$ exchange rate at the same time weakened from 13.98 to 17.7. The value of the index at the end of December for a local investor would have amounted to N$ 44,974 while it now amounts to N$ 42,196, representing a decline in value of ‘only’ 6%. Something one can live with, I suppose. This once again shows the value of diversifying one’s investment across the globe. As readers will know, pension funds typically have invested around 30% offshore as the result of which one can expect the decline in value of pension fund investments to be ‘only’ in the region of 25% to the end of March.

Read part 6 of the Monthly Review of Portfolio Performance to 31 January 2020 to find out what our investment views are.