Portfolio Performance 2023 Q3

Newsletter   •   Quarter 3   •   2023

Woolworths Group Retirement Fund

Portfolio Performance

Image
The chart above shows the investment performance of the Fund’s main investment portfolio – the Balanced Growth Portfolio. All returns are net of fees. The investment returns of the Balanced Growth Portfolio are compared to inflation and to the returns of the Index Reference Portfolio. The Index Reference Portfolio is approximately the returns you would earn if a similar investment strategy was followed without using investment managers to make active investment decisions. This can be thought of as the general return of the market or, in other words, a 'passive' return.
Unless you Are CLOSE TO retirement, it is crucial to focus on the long term when LOOKING AT the investment performance of your retirement savings.

Set your sights on the long term

Over the long term (ten years or longer), the Balanced Growth Portfolio has comfortably earned an investment return higher than inflation. This is a significant and positive outcome.
This means the Fund's investment strategy is adding value and is greater than the fees paid to implement the strategy. Unless you are close to retirement (over the age of 57), saving for your retirement is a long-term project. Therefore, the ten-year returns of the Fund are where your focus should be when looking at the investment performance of your retirement savings.
Image

The impact of inflation and rising interest rates

This year, investment markets have been dominated by expectations of inflation and rising interest rates, and what impact these will have.

After an extreme rise in global inflation in 2022, global central banks have been increasing their interest rates to levels not seen for decades. This has caused uncertainty in global financial markets. The dilemma plaguing these markets is – will inflation fall further, will it increase, or will it remain at the current levels? As a consequence, will central banks continue to hike interest rates, reduce them, or keep them at current levels? And if so, when?

Interest rates are an essential pricing tool in investment markets and are directly related to inflation. For many years, investment markets have become used to ultra-low global interest rates. The sudden and significant increase in interest rates over the past year has created uncertainty about the pricing of investment assets.

The challenge for investment decision-makers is that forecasting outcomes becomes difficult when crucial factors like inflation and interest rates are hard to predict.

The benefits of global assets

Over the past year, the Fund’s performance has benefited from its exposure to global assets (investments held outside South Africa). This is for two reasons:
  • The USA market has performed exceptionally well – this was driven by the performance of a few large US technology companies, including Apple and Microsoft.
  • The South African rand has weakened relative to the US dollar, meaning that more rands are earned for each dollar invested offshore.

In This Newsletter: