Finding Balance In Choppy Waters

South Africa’s largest balanced funds are navigating uncertain times while still having to preserve retirement and other savings. Jaco Visser spoke to these funds’ managers about the strategies they are employing to stay the course.

- Jaco Visser

As the storm in equity markets subsides – hopefully not just temporarily – a thick mist is rolling in among those that manage billions of rand on behalf of savers and retirees. It’s an obscuring haze that makes predicting the origin of future returns uncertain.

For instance, will the enormous amounts of cash pumped into the global economy through quantitative easing encourage floundering consumers to spend more? Or will this money flowing into world economies lead to serious inflationary pain for those same consumers in the not-so-distant future? Let’s not forget how worldwide inflation in the 1970s and 1980s, coupled with other factors, destroyed the Golden Era of heightened income equality.

And still, investors in funds demand a return above the rate of inflation – although every individual’s inflation basket differs from the next based on their needs and wants. This will necessarily inform consumers’ expectations of their investment returns – much in the same way as inflation expectations are created.

Enter one of, debatably, the best vessels to save for retirement or future one-off outlays by consumers: the balanced fund, more officially known as the “multi-asset, high-equity sector” of unit trusts. Over the past couple of years, these behemoths have struggled to keep a-tide the force of inflation. Balanced funds typically invest in a multitude of asset classes, ranging from risky assets (stocks and real estate) to income-type instruments (such as bonds and other listed debt).