Even though developed markets experienced positive investment returns for most of 2017, we also cautioned against expecting this to continue in the short to medium term.

Now the investment tide has turned, and we are seeing very poor investment returns from most global investment markets, including South Africa.

The global atmosphere of economic uncertainty results in the volatile investment returns that we saw in the first three months of 2018.

Most members’ retirement savings are invested according to the Fund’s Life Stage Model. This is the Fund’s best-practice strategy and is carefully designed to meet the risk-return objectives for the average member throughout their membership of the Fund.

The Fund’s portfolios have felt the effects of the poor market returns over the past three months. However, you can see that the longer-term performance (returns measured over five years) remains good, and this is what we need to focus on.

Despite the turbulent quarter, over the longer term each portfolio is still performing within the range of expectations.

The chart below shows the performance of the three main portfolios that make up the Life Stage Model, compared to inflation for periods to 31 March 2018.

There are currently two particular drivers of global investment markets that are of interest.

What happens in the USA tends to affect the global economy as a whole. The direction of the changes in interest rates is an important signal of economic activity.

Now that interest rates in the USA are increasing, there is concern about the impact of this change on the global economy because of the likely knock-on effect of increasing interest rates in other economies. This is especially worrying in an environment where global debt levels are as high as they currently are.

Technology and media companies (such as Amazon, Apple, Facebook and Google) have become popular with investors. As a result of the demand for shares in these businesses, they often have inflated share prices that can fall sharply at the first sign of trouble.

Investors have high expectations of these companies, so any negative event tends to cause panic, resulting in a fall in the share prices. The technology sector performed particularly poorly over the recent quarter.