In December the average prudential balanced portfolio returned 0.42% (November: 0.59%). Top performer is Prudential (1.31%); while Allan Gray (-0.19%) takes the bottom spot. For the 3 month period Prudential, takes top spot, outperforming the ‘average’ by roughly 1.7%. On the other end of the scale EMH Prescient underperformed the ‘average’ by 1.3%.

What will 2017 bring us?

From June 2014 to end of December 2016, the JSE Allshare index made no progress and has been hovering around the 2016 year end level of 50,000. The investor in the JSE Allshare index thus had a return of zero percent. Taking into account dividends of around 3.3% would have still produced a negative real return of 1.4% to end of December with an average inflation rate of 4.7%!

Now consider the above graph. This depicts the performance of the more common investment portfolios employed by pension funds in Namibia. The blue bars to the right represent balanced portfolios comprising of a mix of asset classes with an equity exposure of between 60% and 65%. The grey bars represent more conservative portfolios comprising of a mix of asset classes but an equity exposure of mostly below 40%. Bearing in mind that the investor’s real return on the JSE Allshare index would have been minus 1.4% over the very same period, most pension fund investors should take comfort in the picture presented by the above graph. Over this period the typical balanced pension fund portfolio still returned 2.2% above inflation before asset manager fees, an outperformance of the JSE Allshare index plus dividends by 3.6%. Still, this is a very low real return considering that pension funds are built on the premise of investments returning 5% above inflation, after fees. Clearly this shows that rebalancing is under way in financial markets and this we expect to continue for the next year and longer!