Anchor Asset allocation summary, 4Q23

The following table illustrates our house view on different asset classes. This view is based on our estimate of the risk and return properties of each asset class in question. As individual Anchor portfolios have specific strategies and distinct risk profiles, they may differ from the more generic house view illustrated here

The most recent quarter (3Q23) ended on a difficult note as the US Fed signalled higher rates for longer, sending bond yields higher and risk assets lower. Our return expectations for the various asset classes have shifted because it is difficult for yields to rise much higher before something in the economy breaks, and we see the US Fed cutting rates in reaction. We, therefore, think that the most likely path for bond yields is lower over the next year while equities appear to be fully valued.

Figure 1 below highlights the US dollar return outlook for the various global asset classes. The bar in Figure 1 represents the reasonable range of possible outcomes, with the dots representing our estimate of the outcome in the various scenarios. We have an unusual set of outcomes for an equity-centric business. From total return and risk-adjusted return perspectives, we find bonds to be more attractive. Global bonds and global cash have become compelling. Nevertheless, we remain bullish on equities over the medium term.

Figure 3 below highlights the rand return outlook for several domestic asset classes. The bar represents the reasonable range of possible outcomes, with the dots representing our estimate of the outcome under the various scenarios. From a domestic perspective, the weak economy, failing state-owned enterprises (SOEs) and the poor state of government finances are a few of the factors detracting from our outlook. There is already much negativity in the price of domestic assets, and we have a neutral stance amongst equity, listed property and bonds. We believe that domestic factors may improve into 2024, though there is much uncertainty around this view.



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