Granted, we’re unlikely to get a repeat this year of the JSE’s real return during the past 12 months, it is, however, unlikely to be negative. As Old Mutual’s MacroSolutions unit has pointed out, last year it was a phenomenal 15.2% and indeed well above trend on an 80-year period. The 10-year annualised f igure was 12.8% and the 50-year f igure was 8.3%. This year we’re probably looking to a nominal 12%-15% rise.
As an aside, several managers commented on new rules being considered in Europe to cap pay to financial institution executives, including fund managers. The EU has asked some top executives to justify why they earn 120 times more than their staff. Initiatives are also emerging to give shareholders a bigger say on pay. The fear expressed was that South Africa may well follow suit.
One analyst commented that we’ve entered a period of history where capitalism has been distorted into something that rewards failure and stif les incentives for success and performing well.
Said Dominic Johnson, deputy chairman of New City Initiatives: “We want to establish a code of best practice where pay is transparently demonstrated, not controlled by a Government department and we want a revolution in the culture of asset management that puts the client and the performance first and foremost.
“Every move by regulators and legislators goes in the opposite direction. There is a desire to try to reduce risk, a desire to ensure that investors can never lose money and a seemingly populist desire to somehow punish financial services for the recessions in the developed world.”
Johnson also quoted Warren Buffett’s esteemed partner, Charlie Munger, who said: “Show me the incentive and I will show you the outcome.”
As always, our contributors have added enormous insight to this edition and we trust that you’ll find it extremely useful and a good read.