Investment returns (before tax and fees) for the quarter ending 31 December 2023 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 5.4% 13.5% 7.7% 9.6% 8.5%
Balanced Fund 4.9% 11.3% 5.2% 7.1% 6.8%
Income Fund 3.7% 6.1% 0.4% 2.0% 2.9%

All funds have performed remarkably well in the quarter that ended on December 31, 2023. This is due to the increasingly positive perception with regards to the interest rate outlook, which investors believe may have peaked and are on their way down. This perception has led the share and bond markets to respond positively, with inflation appearing to have been beaten or falling rapidly. Investors also hope for an economic soft landing, where growth slows but avoids a recession and unemployment remains low.

However, it is important to note the make up of the reported inflation declines. While international inflation saw a decline, domestic inflation saw a lesser decline. This puts central banks in a challenging position, where they must choose between cutting interest rates early and risking
re-igniting inflation or delaying cuts and risking a growth slowdown (or recession). Moreover, central banks had recently announced that interest rates would remain at these current higher levels for longer.

We do not believe that there is potential to cut interest rates sooner than expected. We acknowledge the risks to company earnings due to increased costs. In particular, the high share prices of some stocks pose a risk of a fall in all share prices. 

Several factors influence market performance, and actual performances are rarely achieved in a straight line. Therefore, we recognise that there can be many bumps within a performance period, such as geo-political events like the ongoing Russia and Ukraine conflict, Israel and Gaza conflict, and the Red Sea crisis. Ongoing tensions between China and the USA can also impact the market, and further disturbances are expected, such as the upcoming USA elections and the development of the China and Taiwan relationship.

Given this environment, we believe it is essential to remain cautious of asset prices. We continue to hold higher-than-normal amounts in cash and remain cautiously invested and diversified. However, we also recognise that there are several opportunities to be explored, and we are actively seeking new investment avenues to ensure that our clients’ portfolios continue to grow and perform well in the long run.