In October the average prudential balanced portfolio returned 0.12% (Sep: 0.25%). Top performer is Prudential (0.91%); while Allan Gray (-1.50%) takes the bottom spot. For the 3 month period Stanlib takes top spot, outperforming the 'average' by roughly 1.1%. On the other end of the scale EMH Prescient underperformed the 'average' by 0.9%.

Our graph of the day below depicts the R: US$ exchange rate as the blue line, the scale shown on the right hand of the graph, overlaid by the SA Allshare index as red line, its scale shown on the left side of the graph. This graph shows a few interesting trends. Firstly it shows a close correlation between a weakening Rand and a growing Allshare index.

The trend lines overlaid on the two lines run virtually parallel. This means in broad terms the Rand has been weakening virtually at the same rate as the rate of growth of the SA Allshare index, over the period of over 27 years. A foreign investor on the trend line would thus have had no return on his investment in the SA Allshare index other than dividends (averaging 3% over the past 27 years). Bringing inflation into this picture, from a foreign investor perspective US inflation averaged 2.8% p.a. over the past 27 years), his return over this 27 year period would have been very close to zero. Not exactly a convincing investment case for a US investor.

Of course, right now a foreigner who invested in March 1987 would have had the index return him 6% per annum in US$, had he sold his investment in October 2014, and this excludes dividends. Based on the trend lines, the Rand is significantly undervalued while the Allshare index is significantly over valued right now, however the investor would currently receive more US$ for his investment in the SA Allshare index then he would if both indices were to return to their trend line. For both foreign and local investors this indicates that it should be a good time to exchange an investment in the Allshare index with an offshore investment.