Balanced funds offer promising returns–learn more at the Wealth Conference
‘Currently, in the Prudential Balanced Fund, we are overweight global equities, which have the potential to deliver returns of around 12.6% p.a. over the medium term. Despite the long global equity rally, certain regions and sectors remain attractively priced, such as Germany, Japan, South Korea, China and Indonesia, while we are underweight relatively expensive US equities. We also believe global investment-grade corporate bonds offer good yields compared to their risk, while developed market sovereign bond yields remain too low, says van Breda.’
Ahead of the upcoming Wealth Summit hosted by Jenwil Bluestar in association with The Roots and the Potchefstroom Herald on 13 September, we spoke to Hamilton van Breda, head of retail sales at Prudential Investment Managers. ‘Despite the broadly disappointing returns from South African assets in recent times, particularly equities, at Prudential we believe many assets are currently valued to offer promising inflation-beating returns over the medium term. Therefore, investors have good reason not to switch to cash, but instead to have faith in diversified portfolios like balanced funds that can provide attractive returns with lower risk,’ van Breda said.
‘Currently, in the Prudential Balanced Fund, we are overweight global equities, which have the potential to deliver returns of around 12.6% p.a. over the medium term. Despite the long global equity rally, certain regions and sectors remain attractively priced, such as Germany, Japan, South Korea, China and Indonesia, while we are underweight relatively expensive US equities. We also believe global investment-grade corporate bonds offer good yields compared to their risk, while developed market sovereign bond yields remain too low.’
According to Hamilton ‘The fund is also overweight South African equities, where valuations are relatively attractive, being priced to produce a return of around 12.9% p.a. over the next 3–5 years. The fund holds companies with strong exposure to global growth, including resources companies like Anglo American, BHP Billiton, Sasol, Sappi and Exxaro, as well as Naspers and British American Tobacco. We also like financial shares, including Old Mutual, First Rand, Standard Bank and Barclays Group Africa, which have offered low valuations with relatively high dividend yields. Additionally, the fund is broadly underweight retail stocks given the financial stresses faced by SA consumers.’
Van Breda continues to say that ‘besides equities, we are moderately overweight SA government bonds, which help to cushion portfolio risk and should deliver around 9.7% p.a. over time, based on current valuations. However, we are neutral in listed property and inflation-linked bonds. Finally, prospective SA cash returns compare unfavourably overtime at 7.3% p.a. So, for medium- to longer-term investors, switching to cash now is not likely to give you better returns. Some patience is required: we believe that the current portfolio positioning of the Prudential Balanced Fund will allow it to continue to significantly outperform its benchmark and offer investors returns that strongly beat inflation over the medium term.’
We invite you to come and get more advice on your investments and positioning your personal portfolio at our annual Wealth Conference on 13 September 2018 at The Roots in Potchefstroom. Entrance is free, but booking before 10 September is essential. For bookings or further information, contact Susan Fouché at 082 048 6309 or e-mail: potch@jenwil.co.za.
