In January the average prudential balanced portfolio returned -0.34% (December: 2.77%). Top performer is Allan Gray (1.17%), Metropolitan (-1.23%) takes the bottom spot. Allan Gray, top performer for the quarter outperformed the ‘average’ by roughly 1.9%, primarily through their maximum exposure to offshore investments paired with the significant decrease of the Rand against the USD. On the other end of the scale Investment Solutions’ underperformance of the ‘average’ by 1.7% was caused primarily by sector and asset allocation.

Global investment markets have not changed since our previous newsletter. Positive economic trends are still being registered in the US, a number of European countries, Japan and China. In accordance with the 1741 Asset Management global equity valuations as of December 2013, global equity markets currently present ‘fair value’, with fairly wide disparities between overvalued markets such as the US market (+45%) and undervalued markets such as Japan (-25%). To achieve superior equity returns, investors would have to find pockets of value outside the traditional developed markets, which would usually be associated with higher investment risks. Emerging markets have fallen out of favour with investors in developed countries who now prefer to put their money on their own markets, in particular the US market.

Despite this trend having led to a correction and even to overly optimistic views of equity markets in the developed world, we believe that this trend will persist for a while.