Here’s why YOUR South African retirement fund is at risk

There’s a worrying new phenomenon behind why your South African retirement fund is at risk if you don’t take action. The Johannesburg Stock Exchange (JSE) has nearly halved in size over the last 20 years. From 470 listed companies on the JSE in 2003, today, this number is only 287.

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The reason this puts any South African retirement fund at risk is because asset and investment managers simply have less to work with. Fewer stocks mean asset managers have to take larger positions in the remaining stocks, which is why your South African retirement fund is at risk, reports Daily Investor.

SOUTH AFRICAN RETIREMENT FUND IS AT RISK

The JSE’s spate of delistings is a trend that’s only projected to get worse in the future. 20 companies delisted from the exchange in 2022 in tough post-COVID trading. According to AmaranthCX, South Africa had 332 listed companies across the JSE (and other exchanges) at the start of 2022.

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However, during the first half of 2022, 18 companies were delisted, and 14 more companies were in the formal process of delisting. Not to mention there are 16 further companies that have been suspended from trading. Accordingly, AmaranthCX’s predicts at least 32 companies will delist from South African stock exchanges this year.

LIFE-STAGE STRATEGY

Most money in retirement funds is held as high equity multi-asset class funds. It is understood that these high-growth portfolios make up around 45% of South Africa’s listed shares. So, a shrinking JSE really has a big implication for retirement funds and the asset managers that manage them.

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Thankfully, there are measures to counter the shrinking JSE to make sure your South Africa retirement fund is not at risk. Fund managers have a regulation that allows a maximum of 45% of retirement funds to be invested offshore. This does bring with it a currency risk, but as the JSE continues to shrink, an optimal balance of local and offshore investments will have to found struck to protect peoples’ futures.

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