In May 2018 the average prudential balanced portfolio returned -1.61% (April 2018: 3.4%). Top performer is Stanlib (-0.56%); while Namibia Asset Management (-2.52%) takes the bottom spot. For the 3 month period, EMH Prescient takes top spot, outperforming the ‘average’ by roughly 1.09%. On the other end of the scale Momentum underperformed the ‘average’ by 0.75%.

Will we see investment markets improving anytime soon?

Year-to-date investment returns look rather depressing! Over this 5 month period, the best low equity portfolio produced only 3.2%, the best prudential balance portfolio produced 1.5% while the average prudential balance portfolio produced minus 0.2%. This state of affairs does not come as a surprise. In July 2014, we already expressed our opinion that “…we will see negative short-term interest rates, low to negative returns on longer dated stocks and muted growth in equities that are dependent on a growing economy and low interest rates. We would therefore not expect returns on equities to exceed 4% in real terms over the next 3 years…”

Well we were too optimistic about our expectation of muted returns for the next 3 years. In fact the JSE Allshare index, CPI adjusted produced minus 2.4% per annum over this nearly 4 year period. Adding back dividends of 3.2% the total return of the JSE Allshare index, CPI adjusted produced 0.8% per annum over this period – muted indeed as suggested. In contrast the average prudential balanced portfolio returned 7.7% nominal and 2.5% real per annum, outperforming the Allshare index, CPI adjusted by 1.7% per annum. The bond portfolio we are monitoring returned 7.6% per annum in nominal terms, just below the 7.7% produced by the average prudential balanced portfolio. Cash returned 7.7% in nominal terms or 2.1% in real terms. Clearly, in hindsight there was little to choose as between the different asset classes over the past 4 years.

For interest sake, the Benchmark default portfolio produced a return of 8.8% in nominal terms, or 3.6% per annum in real terms, outperforming the average portfolio by more than 1% per annum over this period.

Will we see investment market improve anytime soon?

Read part 6 of the Monthly Review of Portfolio Performance to 31 May 2018 to find out what our investment views are.