Investment Returns

Update on Private Security Sector Provident Investment Returns

The six-months ending 31 August 2022, saw global and local financial markets come under significant pressure. This is attributable to the challenging geopolitical landscape and the lingering effects of the COVID pandemic. Notably, 2022 has seen the invasion of Ukraine by Russia and China COVID lockdowns, both causing massive and persistent supply chain constraints. The result has been rising inflation globally and aggressive interest rate hikes from developed market central banks to try to curb this, with the result that investment markets globally have suffered large setbacks.

Prior to 2022, investment markets had delivered excellent returns for members and this despite the COVID pandemic and its affect on South Africa and the world. These longer term returns show up in the three and five year returns show in the table below where the Fund has beaten its benchmark and far outpaced inflation (CPI). The Fund’s assets are currently valued at R10.6 billion.

Unfortunately, during 2022, the assets of the Fund have experienced significant volatility and adverse performance for the six-month ending 31 August 2022. This is as a result of poor market performance globally as described above.

Fund Investment Returns to the end of August 2022

As always, financial markets provide ongoing opportunities and challenges, and against this backdrop, it is important to continue reflecting on some of the main factors that underpin retirement fund investing:

• Focus on the long term and stay invested: Retirement investing has a longer-term horizon. Even for those members who may be closer to retirement, remember that your retirement savings are meant to see you through the (hopefully many) years of retirement. In light of this, it is important to stay invested and to preserve or transfer if changing employment. The long-term effect of remaining invested can very rarely be caught up by beginning to invest again later on if investments have been depleted.
• Do not panic: The daily news serves as a constant reminder that anything can change in an instant, that markets can be volatile and react quickly to news like for example the impact of the current and very topical current Russia/Ukraine conflict. Despite this short term volatility, the Fund’s investments are set up in such a way that they can withstand volatility and navigate risky times.
• Long-term Strategic Asset Allocation (SAA): The Fund’s investment strategy (underpinned by a Strategic Asset Allocation) proved to not only see the Fund through the recent COVID crisis by protecting on the downside but also driving the positive returns as financial markets recovered. This strategy remains a key component of driving the Fund’s overall returns.

Looking ahead

While members have enjoyed the strong market returns delivered by the Fund in the 5 years prior to 2022 and despite the Covid crisis, we caution against expectations that such high, sometimes double-digit performances will continue to play out in the coming shorter-term periods. History and experience remind us that, while strong performance can continue for some time cumulatively, markets do go up and down, in response to global dynamics and there will be sometimes sustained periods of poor performance as a result. Nevertheless, rest assured that the Board continues to monitor the Fund’s investments in conjunction with its Investment Sub-committee and the RisCura Investment Advisory team on an ongoing basis, and remains alert for investment opportunities.

Returns shown are net of direct investment management fees.