"Doubt is not a pleasant condition, but certainty is absurd."
– Voltaire

"As to methods, there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble."
– Emerson

The headline index performance for South African assets shows a somewhat disappointing but relatively benign range of outcomes, with rand returns for 2015 ranging between -4% from bonds, around 5% from shares, 6% for cash and 8% for listed property. But this tight range of single-digit numbers hides a lot. Arguably, the most significant trends of the year were the incredibly shrinking rand (losing another quarter of its value against the dollar) and the very narrow group of large, globally diversified companies (think SABMiller, British American Tobacco, Naspers, Steinhoff and Mondi) that were nearly solely responsible for a positive rand return from the local equity market. The market sectors with a local focus were almost universally decimated, with negative returns from banks (-13%), telecommunication (-28%), general mining (-36%), platinum (-62%) and industrial metals (-77%). In dollar terms, most global markets also ended the year on the wrong side of zero. Tony Gibson provides detailed insight into global market developments and confirms that the source of positive returns in the US equity market has been similarly narrow in 2015.

This backdrop explains the results produced by most of our funds, with Coronation Equity (+5%), Balanced Plus and Balanced Defensive (both +8%) as well as Strategic Income (+7%) delivering returns that should not be outside the margins of expectation given how the underlying asset classes performed. Calendar year returns from funds with relatively more assertive risk budgets such as Coronation Top 20 (-10%) and Capital Plus (+5%) were disappointing, and reflect a difficult part of the investment cycle for long-term valuation-oriented investors. You can read more about individual fund performance in the respective fund fact sheets available at www.coronation.com, or for a general overview, Duane Cable’s and Nishan Maharaj’s commentaries included in this issue.

Whilst it is our duty as custodian of your capital to report back on short-term performance, whether good or bad, we also think it is important to remind you of the pitfalls of shorttermism and pro-cyclical behaviour. Charles de Kock provides some perspective on where we currently find ourselves in the investment and economic cycles, while Karl Leinberger sets out the rationale underpinning our long-term investment philosophy, which promises with a high degree of probability to deliver superior rewards over a meaningful timeframe, but at the unfortunate cost of regular short-term periods of underperformance.

Finally, I also provide a personal financial management checklist. With a high probability of tax increases in the 2016/17 fiscal year, it is a good idea to restructure portfolios appropriately for the coming decades before the end of February this year. It may be time to overcome the administrative inertia that we are all prone to and externalise those rands, open that tax-free investment account or make that switch to the multi-asset fund best suited to your needs.

While we expect that the environment will remain tough in 2016, we will continue to set our sails for the prevailing winds, with the sole objective of maximising long-term outcomes for our clients. Please do not hesitate to contact us if we have not managed to live up to your expectations.

Best wishes for navigating the choppy waters out there.