Focus on achieving long-term objectives

Despite recent poor returns, the Fund's long-term returns (10 years) have been good, achieving its long-term investment objective.

The graph on the right shows the returns that most members would have earned, compared to inflation, over different time periods.

What has been driving the recent investment performance?

In 2018 the financial markets across the world experienced poor performance, but there have been improvements in 2019. We are not yet out of these challenging times – the investment environment remains tough and the issues that drove the poor performance of 2018 have not yet disappeared.

The USA and China

The USA has been accusing China of unfair trading practices, and China believes that the USA is trying to put a stop to China's economic rise. Both have imposed tariff restrictions on each other’s goods, which makes it more expensive to buy Chinese imports in the USA and vice versa.

The USA is the largest economy in the world and China is its largest trading partner – a dispute between the two creates a lot of uncertainty since both have enormous influence over the global economy.

The Brexit Issue

In 2016 the United Kingdom voted to leave the European Union and return to using only its own currency, the British pound. There are many complicated repercussions of this vote, including trade uncertainty, as the UK would then no longer form part of the EU trade block and will have to renegotiate trade deals with all its trading partners.

South African domestic issues

Our country continues to face challenges on multiple fronts – economic, social, environmental and political. Regrettably, there are no quick solutions to these challenges.

Eskom is arguably our biggest challenge – a stable, dependable and cost-effective supply of electricity is essential to economic growth at any level.

Government debt is increasing, and tax collections are decreasing. This means the government is paying off more debt with less income, which is not a healthy position for any economy.

THE good news

  • The corruption which gripped our economy has been exposed and corrective action is being taken.
  • Investors factor in negative issues when determining the fair price for investments. This is known as being 'priced in'. When enough bad news is priced in, we can expect that local financial markets will react favourably to improvements.
  • The Trustees, while being mindful of the short-term issues, remain focused on achieving the long-term objectives of the Fund, namely to earn inflation-beating returns over the long term.

Summary and conclusion

Financial markets continue to be influenced by geopolitical developments, particularly those that affect global trade among the big economies. In addition, we have serious challenges to deal with in South Africa, many of which could take years to resolve. However, there are some positives amid these unfavourable conditions – when things are bad, investors tend to expect them to remain bad. For those who are patient, this creates opportunities for markets to perform better in the far-off future – off the base of lower prices. Our Trustees remain focused on maintaining the Fund’s well-considered investment strategy, in order to achieve the Fund’s long-term objectives. The most important thing that you can do is to remain disciplined, saving as much as possible for your future retirement and keeping your savings invested for as long as possible.

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