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Feeling slightly jaded or disillusioned by your investment portfolio? You’re not alone. For the best part of five years, investors could be excused for thinking that they’ve been trapped in a Groundhog Day of horrible market conditions. While global markets have rallied, especially in the US, South African investors have sadly missed out.
One would be forgiven for believing that institutional assets, such as life and retirement fund assets, ought to be invested with a long-term mindset in mind.
Hopes of a pre-Christmas rally on global equity markets were dashed last week. The optimism around a thawing in US-China trade relations following the G20 Summit in Buenos Aires lasted barely a day before it became clear that there was widespread confusion over what exactly the two countries agreed to. US President Trump’s message that “I am a tariff man” then set the cat properly among the pigeons. A day later, markets tumbled on the news that a top executive at Chinese telecoms giant Huawei had been arrested for alleged sanctions-busting in its dealings with Iran, a move that added renewed strain in the relationship between China and the US.
It has been an extremely challenging period in markets. Investors are disillusioned, while their portfolio managers have been humbled. A manager whose style maintains a bias toward the large-cap sector of the JSE likely suffered negative returns regardless of their selection decisions. Giants such as MTN, Aspen and Tiger Brands declined by over 40% during 2018, while a few other well-regarded names fell more than 30%. Naspers lost about a fifth of its value since the beginning of the year and even the ever popular property sector fell by a similar amount.
The strongest deterrent against FSP compliance missteps is or should be: