Rea­son­able year

Finweek English Edition - - FINFUND - Leon Kok

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.

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