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Jeremy Thomas And Michael Schmidt
Add inflation of around 9% to that, and
the loss comes to a colossal 21%.
This means that South Africans from all
walks of life - from factory workers to managers - would have done much
better to have their money in bank savings accounts than in pension funds.
People retiring soon and those who face
retrenchment will be hardest hit since fund managers are unlikely to
recoup the losses in the short term.
And statistics show the median return
by the 28 managers has not beaten inflation since 1998.
Over the past three years, the funds
have made just 5% while inflation over the same period was 9%. Over the
past five years, they earned only 7% while inflation was running at 7.5%.
The losses were sustained by
professional money managers who can invest anywhere in the world, in any
asset class. Yet only one management company, Allan Gray, managed to
produce a positive return - 3.93% - in the past year.
Jan Mahlangu, Cosatu's retirement funds
expert, said the government should require fund managers who fail to keep
pace with inflation to explain themselves. He warned that the shocking
figures meant a "very bleak" future for many South Africans.
"But it is not only about
retirees," he warned. "We have been reading throughout this week
that because of the strengthening of the rand, the mining industry and
others are looking at retrenching many workers. For a person who is
[newly] unemployed, you can't look at preserving those funds until there
are positive returns: those people need cash now to survive."
James Downie, managing director of
Assetbase, said: "Asset managers are fond of using the euphemism
'negative returns' but let's not be coy about it - in a defined
contribution fund, a negative return is a loss to the members concerned.
The industry also tries to sell the very long term to members, but members
don't think long term."
Much of the uniformly bad performance
can be attributed to chasing after so-called benchmarks, Downie said. If
the benchmark is an underperforming index such as the FTSE/JSE All Share
Index, beating the benchmark becomes meaningless - at least to a
retirement fund member who is losing money.
Peter Armitage of Stanlib said the
bonuses of retirement fund managers depended on their beating their
Downie said: "Most of the asset
managers are petrified of being different to their competition, because
that will demonstrate that they have deviated from the benchmark.
"Managers know they won't be fired
for being poor as long as the competition is equally poor. In some cases
members will be told to be happy since they lost less than members of
Financial companies and the pension
fund trustees who appoint them to look after their members' money should
be offering different solutions, Downie said.
"Most South African asset managers
offer investment products specifically designed to beat inflation by 6%.
Benchmarks such as the All Share Index mean little to the average member.
It is the inflation rate that is enemy number one and it should be
targeted as such."
But fund managers remained optimistic
about the outlook. Charles de Kock of Old Mutual Asset Managers said he
believed market performance would improve.
Stanlib's Peter Armitage said: "It
may be volatile but the worst is over."