is a time to stay strong!yourfund.co.za/media24/useruploads/files/nestegg...2020/07/02  · jse all...

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Warren Buett - an American investor, business tycoon, and philanthropist, who is the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world and has a net worth of US$88.9 billion as of December 2019, making him the fourth-wealthiest person in the world. “Somebody’s sitting in the shade today because someone planted a tree a long time ago.” 1. IS A TIME TO STAY STRONG! This uncertainty has surely caused a lot of introspection, and many of us are trying to answer questions such as: There is no doubt that the outbreak of the novel coronavirus (COVID-19) has transformed our world, and has brought about huge medical, economic and humanitarian challenges. The implications of the COVID-19 outbreak are bigger than anybody could have foreseen and will surely have an eect on our lives for years to come. Will I or one of my loved ones be infected? Will I lose my job or security of income? (no job, no money) How will this aect my retirement fund and other savings? These are all important questions to ask and nding the right answers are not easy. Now, more than ever, is the time to ensure that your emotions don’t run away with you, leading you to make the wrong decisions, especially when it comes to your retirement and other savings. During times like these, it seems counter-intuitive to simply sit on one’s hands and do nothing. But that is likely to be the best advice for the long-term retirement investor. With your retirement fund being a long-term investment, you should wait out periods of negative returns. Do not be tempted to make hasty changes to your investment portfolios. The risk is that you will miss out on any market recovery, which will have a devastating eect on your savings over the long term. What you should be doing now is to focus on the responsible things to do, such as: What should I do now? You can rest assured that the investment experts of the Fund are extremely focused on doing their best to protect your retirement savings, while also generating long-term returns for you. coronavirus (COVID- 19) has Q2 2020 JULY 2020 Adapting your budget to ensure it is still appropriate – tighten your belt where you can. Ensuring your nominated beneciaries are up to date. Ensuring your risk benets remain appropriate – now is not the time to cancel your insurance. Making sure you have a long-term investment strategy and goal, and stick to it. Speaking to a nancial advisor who will have a holistic view of your nancial position. Now, more than ever ...

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Page 1: IS A TIME TO STAY STRONG!yourfund.co.za/media24/useruploads/files/nestegg...2020/07/02  · JSE All Share Index fell 12.1% and the SA Property Index sank 36.6%. However, while still

Warren Buffett - an American investor, business tycoon, and philanthropist, who is the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world and has a net worth of US$88.9 billion as of December 2019, making him the fourth-wealthiest person in the world.

“Somebody’s sittingin the shade today because someone planted a tree a long time ago.”

1.

IS A TIME TO STAY STRONG!

This uncertainty has surely caused a lot of introspection, and many of us are trying to answer questions such as:

There is no doubt that the outbreak of the novel coronavirus (COVID-19) has transformed our world, and has brought about huge medical, economic and humanitarian challenges. The implications of the COVID-19 outbreak are bigger than anybody could have foreseen and will surely have an effect on our lives for years to come.

• Will I or one of my loved ones be infected?• Will I lose my job or security of income? (no job, no money)• How will this affect my retirement fund and other savings?

These are all important questions to ask and finding the right answers are not easy. Now, more than ever, is the time to ensure that your emotions don’t run away with you, leading you to make the wrong decisions, especially when it comes to your retirement and other savings.

During times like these, it seems counter-intuitive to simply sit on one’s hands and do nothing. But that is likely to be the best advice for the long-term retirement investor. With your retirement fund being a long-term investment, you should wait out periods of negative returns.

Do not be tempted to make hasty changes to your investment portfolios. The risk is that you will miss out on any market recovery, which will have a devastating effect on your savings over the long term.

What you should be doing now is to focus on the responsible things to do, such as:

What should I do now?

You can rest assured that the investment experts of the Fund are extremely focused on doing their best to protect your retirement savings, while also generating long-term returns for you.

coronavirus (COVID-19) has

Q22020JULY 2020

• Adapting your budget to ensure it is still appropriate – tighten your belt where you can.• Ensuring your nominated beneficiaries are up to date. • Ensuring your risk benefits remain appropriate – now is not the time to cancel your insurance.• Making sure you have a long-term investment strategy and goal, and stick to it.• Speaking to a financial advisor who will have a holistic view of your financial position.

Now, more than ever ...

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2.

During times of crises (like we are experiencing now), investment market performance and investment markets are highly volatile, and your retirement fund savings are likely to be lower than before. March 2020 was one of the worst months in history for the SA markets, as the JSE All Share Index fell 12.1% and the SA Property Index sank 36.6%. However, while still not enough to erase the losses during March, the SA markets improved over the past three months, with the JSE All Share Index and SA Property Index rising 23% and 18% respectively.

It is important to remember that trustees of retirement funds construct the fund’s investment strategies across a wide range of asset classes, so that members can benefit from having a diversified allocation to different investment portfolios. However, depending on which portfolio(s) you are invested in, the value of your investments could still have fallen by up to 12% during March 2020.

Warren Buffett is a good example of a patient long-term investor, and he thinks investing is a lot like growing a tree. You may plant the seed today, but the forces of nature are all that it needs to grow. You don’t dig it out and store it in your garage when winter comes. And although its leaves may fall and it stops growing for a season, it does not die but rather sprouts again in spring. Give the tree enough room, light and time – and then leave it alone to do its thing. Ultimately, you will have to wait many years to enjoy the shade.

And just like investing for your retirement, we believe that there is no need to make radical changes to your investments during this uncertain season. Rather ensure that you are invested in an appropriate long-term strategy and wait out this storm.

How have my retirement savings been affected?

Patience in investing

Not making changes to your investments and sticking to the long-term investment strategy sounds good for younger members, but if you are retiring soon, you may well be concerned that there may not be enough time for your investments to recover from the recent losses in the financial markets. This is a valid concern.

However, it is important to remember that the annuity you purchase at retirement not only depends on the value of your retirement savings, but also on the cost of purchasing an annuity at the time of your retirement. The cost of buying an annuity changes over time and is mostly determined by the changes in interest rates on government bonds. This means that the price of buying an annuity may also decrease.

But what if I am retiring soon?

If is very important that you understand all your options and the consequences of the decisions you make regarding your retirement fund savings when you resign or retire from your employer. Make use of the free retirement benefit counselling service offered by your retirement fund.

Are you about to resign or retire from your employer?

Content provided by Sanlam

Hopefully, in years to come, your patience and good investment decisions will help you to enjoy the shade of a comfortable retirement.

However, these losses are simply what is called “paper losses” and you should not become spooked by it. Saving for retirement is a long-term matter – there will be good times and bad.

Tel 021 406 3326Email [email protected] http://yourfund.co.za/media24

How to contact a counsellor

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Disclaimer: The information contained in this communication, including attachments, is not to be construed as financial advice in terms of the Financial Advisory and Intermediary Services Act of 2002 or any other form of advice. No warranty is provided that the information is appropriate or suitable for any particular purpose.

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GOOD INTENTIONS CAN GO WRONG!Why you should be cautious when taking investment advice from family and friends

NO ONE-SIZE-FITS-ALL

When giving advice, our friends and family are likely to base their position on their own lives. Your loved ones who have more disposable income than you may suggest investing in pricier shares than you can actually afford. Know your specific means and needs so that you can make the most out of every investment. Any decision you make needs to take into account your unique circumstances, for example your risk profile, your other savings if any, and your number of years to retirement. To be effective, your financial plan should be tailored to your individual needs and priorities.

HYPE DOESN’T EQUAL VALUE

The investment market is largely driven by trends and group movements. Sometimes the media coverage of quick-fix financial ventures may sway you to make impulsive decisions to invest without doing the necessary research. Markets are also susceptible to sudden movements based on negative news. It’s important not to panic, and never to invest or disinvest due to emotional decisions. Trying to time the market is almost impossible, even for experts.

SHORT-TERM PERFORMANCE

An investment’s short-term success doesn’t always translate into long-term earning potential. Investment noise may be encouraging now, but may not necessarily serve your long-term goals. Remember that investing is a marathon, not a sprint. Also remember that any investment that promises high returns over short periods should put you on alert. Not all of these will be scams, but many are. Ponzi schemes essentially rely on family and friends to continue operating, so it is wise to do thorough research whenever a venture seems too good to be true.

Did you know?

Six out of ten people in South Africa turn to their family and friends for financial advice. When our loved ones tell us that they’ve come across a worthwhile investment, we are likely to assume that there is value in it.

This is especially true if those close to us have enjoyed even momentary success from these ventures. But before you sign up to buy the same shares your uncle did, or join your friend’s multi-level-networking movement, there are important things to consider.

DO YOU HAVE A FINANCIAL ADVISOR YET?

The best way to make good decisions about your financial future is to be open to professional advice. While our friends and family mean well, taking advice from an unqualified person can result in monetary losses. Speak to a financial advisor about structuring your investments to keep yourself on target with your financial goals.

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Regulation 28 of the Pension Funds Act limits what amount retirement funds may invest in particular assets and asset classes (e.g. bonds, shares, property, etc.). The most important Regulation 28 asset class limits are as follows:

These rules are in place to protect all retirement fund members and to ensure that their portfolios are properly diversified, for the sake of healthy long-term returns in line with their investment profile and time horizon.

- Equity 75%

- Listed Property 25%

- Offshore Assets 30% (plus 10% in Africa, outside of South Africa)

- Hedge Funds 10%

WHAT IS REGULATION 28?

4.

9 Tough questions

to ask your financial advisorWhat are your qualifications and how many years have you been advising people on their money?

Are you accredited to recommend products from one company only, or a range of products from various companies?

Do you earn more by recommending some products over others?

How do you charge for your services? Do you have different fee options? Is there a maximum amount that you charge?

What are my total fees? (They should include all costs – i.e. advice fees, admin fees, fund manager fees, etc.)

Are there upfront fees? Why?

How much money can I expect to lose in a big stock market crash? How much should I hope to get in the long term? (The advisor should be able to provide estimates from worst- to best-case scenarios, and everything in between.)

Will you invest any of my money in index portfolios? Why not a portion?

On what basis do you select funds and fund managers?

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9.

What’s in the news?

Regulation 28 does not make specific provision for infrastructure as an asset class. There is a call from the ruling party and industry bodies to amend Regulation 28 to allow greater investment in public infrastructure by retirement funds. It is important to note that changing the pension fund regulations is not an Act of Parliament. It will only be possible after a full consultation process has been followed, and after the issue has been debated in Parliament.

The retirement industry and various other role players will be part of the debate to ensure that the best interests of members are looked after. It is an administrative law and requires that National Treasury puts out a proposal for change, accepts industry-wide comment, and then makes amendments. It will be a lengthy process and will not happen overnight.

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AT retrenchmentRetrenchment is an unfortunate event that can cause a lot of uncertainty and anxiety. With it come many financial and retirement implications. Instead of living in fear of retrenchment, rather take proactive steps so that you can be more resilient if and when it happens.

What happens to your retirement fund money?

Below are some guidelines to help you navigate some of the decisions you may need to make.

One or more of the following components will become payable as a lump sum:

Consult a financial advisor to assist you with your decisions.

This may seem fantastic! BUT remember, you will receive a maximum of R500 000 tax free only once in your working life – this is across all your different retirement savings vehicles and it includes any previous retrenchment lump sum you may have received.

5.

Financial considerations

It can be made paid-up in the retirement fund.It can be transferred in full to a pension preservation or retirement annuity fund (at any service provider of your choice). There is no tax consequence for this.You can take a partial withdrawal from the fund (taxable), and the balance will the transferred to a pension preservation or retirement annuity fund (at any service provider of your choice).You can decide to transfer the fund credit to your new employer’s pension fund.

• Create a monthly budget • Evaluate your expenses • Pay off debts such as credit cards, car and housing loans.

• Salary for notice period

• Accumulated leave

• Pro-rata bonus/incentives

• Retrenchment lump sum (or “severance pay”)

Taxed according to your marginal tax rate, in other words, it will be reflected on your final payslip and income tax will be deducted.

Taxed according to the same table that would have applied at normal retirement. This table applies regardless of your age: if you are retrenched at 35 you will pay the same rate of tax as someone who is retrenched at 55 or older.

Retrenchment packages and tax issues

Withdraw only what you need from your severance pay

Key is self-discipline during this time!

••

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UPDATE FROM

THE PRINCIPAL OFFICERDear Members

In this edition of The NestEgg we focus mainly on the current global pandemic and its effects on the financial markets, retirement savings and people at large. We have provided information on the COVID-19 outbreak relating to your financial position, and we answer questions that members who are close to retirement might have in these uncertain times.

The COVID-19 pandemic and the impact it has on our lives once again made us realise the importance of saving and the need for proper financial planning. An article on the topic of financial advice from family and friends shows our members that it is best to be cautious when taking financial advice and to rather consult with an accredited financial advisor. We therefore included nine tough questions to ask your financial adviser, to ensure that you will receive proper advice.

We have provided you with an update on what’s in the news, as well as a reminder of what Regulation 28 of the Pension Funds Act is and the protection it provides to members.

The current economic circumstances have brought about restructuring in companies and members have been affected by this. We have included some financial considerations at retrenchment in this edition.

We also have a look at the current investment markets, the challenges and volatility during this quarter and the resilience of these markets throughout the global COVID-19 outbreak. We are pleased to see that the investment returns of the various portfolios showed a good recovery over the past quarter.

Stay safe and healthy during these unusual times.

Fund regards

Lynn van der Merwe

6.

Page 7: IS A TIME TO STAY STRONG!yourfund.co.za/media24/useruploads/files/nestegg...2020/07/02  · JSE All Share Index fell 12.1% and the SA Property Index sank 36.6%. However, while still

Q22020JULY 2020

INVESTMENT PERFORMANCE report

Performance Summary as at 30 JUNE 2020 (Net of fees)

HISTORICAL PERFORMANCE of the Fund

INTERNATIONAL

Click here to read the full article

Click here to read the full article

Growth

Balanced

Stable

Money Market

Old Mutual Shari’ah

CPI

Quarter

15.72%

15.69%

14.79%

1.53%

9.25%

-1.55%

1 Year

3.08%

2.06%

1.76%

7.77%

-1.98%

1.25%

3 Years

4.35%

3.80%

3.73%

8.02%

2.32%

3.35%

5 Years

4.74%

4.50%

4.87%

7.98%

n/a

4.28%

10 Years

9.68%

8.60%

7.33%

6.93%

n/a

4.88%

Annualised Fees

0.50%

0.47%

0.43%

0.11%

1.71%

n/a

The easing of lockdown measures globally, continued central bank support and early signs of an economic recovery stimulated risk-appetite in the second quarter. It was not, however, a smooth ride, with markets swinging between enthusiasm and negativity. Fears of a second wave of Coronavirus, ongoing trade tension between the US and China and the limited progress on the Brexit deal tempered investors’ enthusiasm.

Although some market analysts are expecting a V-shaped economic recovery, world bodies such as the International Monetary Fund (IMF), World Bank and Organisation for Economic Cooperation and Development (OECD) have issued low growth forecasts for 2020. The IMF slashed its forecast for global economic growth, predicting a 4.9% contraction in the world economy.

SOUTH AFRICA

South African investors had a much improved second quarter of 2020, despite the country being in severe lockdown for much of the period. The SWIX gained nearly 17%, led by an increasing resources sector (30.8% higher). The ALBI generated a gain of 9% and the struggling property market recovered somewhat, rising 9.7%.

The gains, however, are a reflection of global risk appetite, rather than of country-specific fundamentals. The outlook for South African GDP growth is bleak. The World Bank forecasts that South Africa’s growth rate will contract by an alarming 7.1% in 2020. National Treasury’s estimate is for 7.2%. Recent data shows that the country has already entered a recession: South Africa has recorded its third consecutive quarter of negative economic growth, with GDP falling by 2% for the first quarter of 2020. These figures do not yet reflect the impact of the lockdown. It is expected that second-quarter figures will make for stark reading.

7.

Click on these links to access the following additional information:

Website Investment Page Old Mutual Shari’ah Balanced Portfolio Factsheet

MARKET OVERVIEW

Growth Balanced Stable Money Market CPI Shari’ah

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%

1000%

Jun - 11 Jun - 12 Jun - 13 Jun - 14 Jun - 15 Jun - 16 Jun - 17 Jun - 18 Jun - 19 Jun - 20Jun - 10

Page 8: IS A TIME TO STAY STRONG!yourfund.co.za/media24/useruploads/files/nestegg...2020/07/02  · JSE All Share Index fell 12.1% and the SA Property Index sank 36.6%. However, while still

8.

4%

23%

26%

4%5%

34%

4%

32%

4%19%5%4%

31%

5%

Asset allocation per portfolio

Inflation Linked Bonds

Local Shares

Local Cash

Local Property

Local Bonds

International

Africa Equity

MANAGER PERFORMANCE (Gross returns) as at 30 JUNE 2020

Futuregrowth 2 = Futuregrowth Long Dated Passive ILBDuring September 2019 the Fund’s Cash investments were moved from Sanlam and Investec to Taquanta.

TOP TEN Domestic ShareholdingsNaspers Limited British American Tobacco PLCProsusAnglo American PLCStandard Bank Group Ltd

10.8%5.1%3.6%3.4%3.2%

12345

Impala Platinum Holdings LtdFirstrand LimitedNortham Platinum LimitedAnglogold Ashanti LimitedBHP Billiton PLC

2.9%2.4%2.1%2.1%1.6%

678910

Tel 021 406 3326 | Fax 086 721 3447Email [email protected] | Website http://yourfund.co.za/media24

Fund Contact Details

Growth Balanced Stable Money Market

100%39%

5%12%4%4%

31%

5% 4%5%5%

ManagerDate of

AppointmentAsset Class

Allan GrayCoronation ABAXFairtree

15% Capped SWIX Futuregrowth

BEASSA all Bond Index (ALBI)Futuregrowth 2

ILB BenchmarkSesfikileABSA

All Property Index (ALPI)Taquanta

All Seasons

South Suez

STeFI Composite Index

Morgan Stanley Capital International All Country World Share index (MSCI)

China

Shares (Equity)

Bonds

Inflation Linked Bonds

Property

Cash

Africa Equity

Africa Benchmark

International

CatalystInternational PropertyInternational Property benchmark

01-Oct-0201-Feb-0701-Oct-1801-Oct-18

Prudential 23-Oct-19Investec Credit Opportunities 01-Nov-19

01-Sept-17

01-Oct-17

01-Aug-1401-Oct-18

01-Oct-19

01-Sept-19

19-Sept-19

International

All Seasons Venture Partners 01-May-19

Allan GrayHosking Global

01- Oct-0201-Jan-20

Sands Capital 01-Mar-20

01-Mar-20

Morgan Stanley 01-Apr-20

Blackrock

Old MutualBlackRock portfolio benchmark

China benchmarkInternational

Shari’ah Balanced portfolio benchmarkShari’ah Balanced

01-Nov-18

01-April-16

01-Feb-16

10 Years5 Years3 YearsQuarter 1 Year

20.36%20.00%19.46%37.93%25.44%25.76%23.27%9.39%9.94%7.41%7.60%14.22%25.75%18.73%1.67%1.46%5.42%

-21.42%11.24%17.91%16.07%31.86%-1.84%-2.95%15.98%-0.59%1.89%16.11%12.67%15.84%15.91%9.78%15.9%

-15.28%-5.73%

-10.66%11.91%

n/an/a

-7.04%2.33%2.90%

-15.53%-15.05%-34.75%-28.07%-40.24%

n/a6.90%

n/an/an/a

23.99%n/an/an/a

34.40%25.82%

n/an/a

51.28%38.29%25.00%25.21%-0.26%

4.7%

-3.32%0.50%

n/an/an/an/a

0.85%n/a

8.11%n/an/a

-13.95%n/a

-19.75%n/a

7.19%n/an/an/a

11.01%n/an/an/an/a

16.60%n/an/an/an/a

16.07%16.12%5.13%7.5%

1.01%0.76%

n/an/an/an/a

1.63%n/a

7.48%n/an/a

-5.19%n/a

-11.04%n/a

7.21%n/an/an/a

13.70%n/an/an/an/a

14.37%n/an/an/an/an/an/an/a

6.4%

8.76%10.56%

n/an/an/an/an/an/a

8.29%n/an/an/an/a

3.78%n/a

6.49%n/an/an/a

15.05%n/an/an/an/a

18.46%n/an/an/an/an/an/an/an/a