In this newsletter:
Benchtest 09.2016, smooth growth vs market linked portfolio, who qualifies as a beneficiary upon death, MIP goes live and more...
Do you need a smooth growth portfolio protect your retirement nest-egg?
Let’s look at the Graph 1 which depicts rolling 12 month returns. Firstly, it shows that the AGP portfolio commenced in January 2008 when the market was on a steep downward slope and just before its trough in consequence of the financial crisis. One may argue that the first 12 months’ or performance to January 2009, probably even longer, are not representative of the characteristics of the smooth growth portfolio compared to the market linked portfolio. The graph shows that at the worst of times, in January 2009, the worst performing market linked portfolio had a one year return of minus 22%, the Benchmark Default market linked portfolio had a one year return of around minus 8% while the best performing portfolio had a one year return of around minus 3%. At the same time the smooth growth portfolio had a one year return of 10%. As depicted by Graph 1 above, markets have recovered rapidly from this trough as the result of the quantitative easing program.
If we now look at the same portfolios but over rolling 5 year periods as depicted by the Graph 2. This graph shows that the smooth growth portfolio outperformed the market linked portfolios from commencement to late 2013 and underperformed since then. To what extent the initial outperformance was the result of perfect timing of the introduction of this portfolio, history will show. Going by the principles and assuming Old Mutual will be able to produce average returns over the long-term one should expect this portfolio to underperform the average manager because of the cost of the guarantee it offers.
Graph 3 depicts the cumulative return of the smooth growth portfolio and the market linked portfolios since 1 January 2009
If a fund member nominated a beneficiary found to not qualify as a nominee, such as having predeceased the fund member, the remaining nominees would not be entitled to receive the non-qualifying nominee’s share. The board of trustees is only allowed to pay such a portion of the benefit as is specified by the member. This portion would then have to be paid to the estate of the deceased.
Asset managers’ view of the current SA Equity market
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My questions are as follows:
Read this interesting exposition on how the reader should go about achieving his income objectives with the available capital by Nikki Taylor in Moneyweb of 3 October 2016, here...
Read the full article by Dr Travis Bradberry in Linkedin, 12 October 2016, here...
Here is an excerpt on these 3 key characteristics:
Read this interesting article by David Schonthal in Linkedin of 4 October 2016, here...
Read the post by Graeme Codrington in ‘Tomorrow Today’s Tips on Tuesdays’ of 10 October 2016 here...