In August 2020 the average prudential balanced portfolio returned 0.9% (July 2020: 1.7%). Top performer is Stanlib Managed Fund with 2.1%, while Allan Gray Balanced Fund with 0.1% takes the bottom spot. For the 3-month period, NAM Coronation Balanced Plus Fund takes the top spot, outperforming the ‘average’ by roughly 2.2%. On the other end of the scale Allan Gray Balanced Fund underperformed the ‘average’ by 2.7%. Note that these returns are before (gross of) asset management fees.

The Monthly Review of Portfolio Performance to 31 August 2020 provides a full review of portfolio performances and other interesting analyses.

Pensioners beware - this is not the time to raise your investment risk!

...When one has been used to the longer-term achievements of the prudential balanced portfolio managers, one can understand that pension fund members and pensioners will be disappointed with the shorter term returns their pension investment will have produced. Tragically, shrewd brokers out in the market have seen this state of affairs as an opportunity to discredit proven prudential balanced portfolios and to coerce pensioners to transfer their retirement capital into high risk portfolios, using shorter-term investment returns some of these managed to produce, as the result of the distortions that occurred in the markets since the global financial crisis...

I strongly advise pensioners, in particular, to be cognisant of the following before taking a decision concerning the investment of their retirement capital:

• The prudential balanced portfolio has proven itself to offer the best risk adjusted returns to the pension fund member/ pensioner in the long-term;
• Clamouring for returns higher than what the prudential balanced portfolio typically produces, means taking higher excessive risk as a matter of course;
• Retail products are generally more costly than institutional products; latter offer economies of scale, former offers more personalised structuring;
• Do not put yourself at the mercy of a single individual who may no longer be around tomorrow;
• Understand how the investment returns of your capital are produced;
• Have a benchmark for comparing your returns;
• Understand all the costs associated with your investment that detract from the returns your capital earns; and
• Understand the termination conditions of the product you intend to invest in;

Last but not least, as a pensioner, you will lose confidence in taking your own decisions as you grow older. In a retail product you will then increase your dependence on your broker ever more, while many institutional products offer default options that the managers manage in the best interests of the member/ pensioner and that can relieve the member/ pensioner of the responsibility to take decisions when he no longer has the confidence or knowledge to do so. As a pensioner you must ascertain that you are at peace with the party/ies in whose custody your retirement capital is. You cannot afford and do not want to lose sleep over this!

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