Investment update May 2020
Good day,
I trust that you are all keeping well.
Following from our recent economic update, members are well aware of the spread of the Coronavirus pandemic on a global scale and the rising local infections. The uncertainty created by the spread of the virus, the lockdown restrictions, the soaring unemployment figures and the impact on small, medium and large businesses, resulted in some severe market reactions. Both local and global equity, bond and currency markets remained volatile, especially during March (please click here for our most recent webinar on the March impact).
The world is first and foremost facing a major public health crisis and our thoughts go out to those affected by this human tragedy. The response by authorities to contain the spread of the virus will have some negative consequences for various economic sectors, businesses and employees/workers. However the measures announced to support the global economy through various liquidity and fiscal measures will offset some of the negative consequences.The magnitude and duration of the impact on the markets and the investment environment remain uncertain, and until such time as more tangible changes become clear (i.e. infection rates decline or a vaccine is developed), members should expect the market to remain extremely volatile.
There is, however, some good news for members, as for April, the NFMW life stage portfolios have recovered much of the losses suffered in March. Please have a look at the table below which shows the returns up to 30 April 2020 for various periods.
| Portfolio | 1 Month | 1 Year | 3 Years Ann | 5 Years Ann | 10 Years Ann |
|---|---|---|---|---|---|
| Shari'ah Portfolio | 7.48% | -5.81% | 1.86% | 2.80% | n/a |
| Capital Protector | 0.63% | 6.77% | 7.61% | 7.70% | 6.48% |
| Stable Growth | 4.50% | -6.87% | 1.97% | 4.19% | 6.67% |
| Capital Growth | 8.95% | -4.91% | 2.65% | 4.83% | 8.44% |
| Aggressive Growth | 10.35% | -3.47% | 2.89% | 4.59% | 9.10% |
| CPI (inflation) | 0.61% | 4.48% | 4.45% | 4.99% | 5.18% |
Over the longer term, all portfolios achieved their respective investment objectives, and we expect this to remain the case over time.
All investments of the NFMW are governed by a set Investment Policy Statement. All investment portfolios have a long-term investment strategy with investment objectives to outperform inflation by a certain percentage per annum (after fees). To achieve these objectives, the assets of the various portfolios are invested in accordance with their respective long-term investment strategies across various asset classes including local equities, bonds, cash, listed property, alternative assets and international assets.
The current NFMW individual choice portfolio positioning is as follows:
- All portfolios remain well diversified and defensively positioned.
- The offshore exposure in the Capital Growth and Aggressive Growth portfolios remains close to the regulatory maximum.
- Our local bond exposure is overweight.
- Our local equity exposure is underweight
As with life, economies experience cycles that involve periods of growth and expansions, but also periods of hardship and downturns – in market terms, some periods are also defined by their magnitude of volatility, which is especially high when investors and governments face a lot of uncertainty. We also fully understand that in times like these, volatility and performance can be worrisome for members, but members are reminded that it remains of utmost importance to focus on longer-term return prospects and investment strategies, as short-term volatility and any reaction thereto could easily result in incorrect investment decisions.
The highest likelihood of achieving one’s investment objective and goals is still to remain invested over time and participate in an upward trending market. As the old saying goes, “Time in the market is better than timing the market.” This is clearly illustrated by the fact that on average, the annual return on the SA equity market is roughly 10% over the past 20 years. However, if one missed the best 10 days out of more than 5 000 trading days, that annual return drops by 30% to under 7% per annum.
Having a longer term view, remains one of the most important principles of investing.
Please remember, we are always here to help if you need any information or assistance with a fund-related query.
Kind regards
Leslie Ndawana
Principal Executive Officer
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