In our past two newsletters we discussed the misleading effects of statistics and returns numbers. This effect was perfectly highlighted this month where, for example, the one year return for a balanced fund went from 3.5% at the end of May to 8.7% at the end of June. Rand weakness in June resulted in good returns in these funds, while a terrible June 2017 fell out of the numbers.




The current investment environment, with offshore markets having been on a 9 year upwards trend and SA markets having flattened out slightly over the past 3 years, is further going to test us to make sure that we are seeing our investments in the right context. With the flattening out of the JSE, 3 year return numbers are looking low, and without some strong returns in the next year or two, this could impact 5 year numbers.


While global growth has been robust at around 3% for the past 8 years, SA has fallen behind, with growth becoming negative two years ago. While growth looks to be improving, it remains to be seen whether we can make up for the lost 8 years.


Graph 2


At this point in the cycle, when all asset classes are expecting more muted returns going forward, it is important for us to look at whether you are invested in the right assets for your time horizon, which we do at review stage, and with the right managers to squeeze out those extra returns over time. Often, it is best to do nothing and keep on the same path to get the best outcome, rather than make changes.


Making sure that we are using the right fund managers is an ongoing process including regular investment committee meetings, meetings with the fund managers, external fund research and quantitative analysis. This process has resulted in our clients having had returns 2%-3% per year more than competitors over the past 10 years.