In January 2023, the average prudential balanced portfolio returned 5.5% (December 2022: -0.9%). The top performer is Namibia Coronation Balanced Plus Fund with 7.85%, while Hangala Prescient Absolute Balanced Fund with 3.1% takes the bottom spot. For the 3-months Namibia Coronation Balanced Plus Fund takes the top spot, outperforming the 'average' by roughly 1.99%. Hangala Prescient Absolute Balanced Fund underperformed the 'average' by 4.4% on the other end of the scale. Note that these returns are before (gross of) asset management fees.

The Monthly Review of Portfolio Performance to 31 January 2023 provides a full review of portfolio performances and other insightful analyses. 

The Default Portfolio is well-positioned for future political developments

In this column of last month’s newsletter, I described the Ukraine conflict as the defining event for global markets and economies. Unless the US-led anti-Russia and anti-China alliance prevails in this conflict, the world, its economies, and its markets will look different from todays. We will have a multi-polar world not dominated by the US Dollar and the US financial system. There will be more customs and currency controls and less free global trade and flow of capital. As the result, countries will have to become more self-reliant, and people will experience more shortages in many areas. If the US-led alliance should prevail, we will have a much more dominant and autocratic US advancing its economic and financial interests above everything else. China will not be an economic factor anymore but will be harnessed to advance US interests. In the worst-case scenario, the nuclear powers will use their nuclear arms, which will cause massive disruption in every respect across the world. Under all scenarios, we will experience a lot of uncertainty and volatility. One will find it difficult to invest elsewhere but a home, and it may not be possible to repatriate one’s foreign investments

In such a scenario, the cautious structure of the Default portfolio should produce better returns than the average prudential balanced portfolio. It can still underperform the average prudential balanced portfolio, particularly when shares do well. So, will shares do well or continue doing poorly as they did since the beginning of last year? The reason shares have done poorly is that central banks started to drain liquidity from the financial system and increased their policy interest rates. An investor now earns interest on interest-bearing investments and sometimes even earns a positive real return after inflation. The investor can no longer borrow money cheaply to invest in shares and other assets, which drove up the price of these assets until the end of 2021. Supply chain disruptions resulting from COVID lockdowns and a drastic increase in energy prices because of the Ukraine-Russia conflict, paired with a strong consumer demand recovery after the lifting of COVID lockdowns, led to a rapid increase in inflation, forcing the Fed, the ECB, and other central banks to unwind their super-accommodative monetary policy.

The Monthly Review of Portfolio Performance to 31 January 2023 also reflects the editor’s views on current developments and their impact on investment markets.