32
Section 2
How investment managers performed in 2021 By many accounts, 2021 has been a rewarding year for investors, with the global equity market delivering a solid return in the fourth quarter. The MSCI World Index (MSCI World) returned 6.7% in US dollars as market participants focused on economic resilience and corporate earnings, which continue to be strong.
Emerging markets underperformed the MSCI World by 21% in US dollars in 2021. The outcome is in stark contrast to 2020, where emerging markets outperformed developed markets by over 2% in US dollars. The main driver of this outcome was the regulatory crackdown and ensuing economic slowdown in China, and a challenging year from another notable emerging market player, Brazil. Other large emerging market countries such as Russia and India outperformed the MSCI World. Global bonds struggled in the last quarter to cap off a challenging year where the asset class had to contend with high actual and expected inflation risks. The FTSE World Government Bond Index (WGBI) delivered a return of -1.1% for the quarter and was down 7% for the year in US dollars. Emerging market bonds were not spared either as local currency bond yields rose, especially in markets where central banks continued to raise rates as a countervailing measure against rising inflation. Emerging market bonds returned -2.5% for the quarter and were down 8.7% for the year in US dollars as they underperformed developed market bonds. High-yield bonds held firm for the quarter, supported by a risk-
on environment that was spurred on by more robust corporate earnings. The Bloomberg High Yield Index was up 0.7% for the quarter and 5.3% for the year in US dollars. Local property staged a strong recovery from the difficulties of 2020, where the sector saw an earnings collapse, to end the year as the best-performing local asset class with a return of 34.9% in rand. Local bonds were among the best-performing bond markets globally, despite South Africa’s inflation prints of 4-year highs over the quarter. The asset class ended with a return of 8.4% for the year in rand. Inflationlinked bonds were strong for the year posting the best annual return since 2012, as investors took the opportunity to hedge portfolios in the face of rising inflation. Returns for the asset class was 5.7% for the year in rand. SA cash underperformed inflation in 2021 as interest rates remained low for much of the year. However, during the past quarter, the SARB moved to hike interest rates to herald the start of an interest rate hiking cycle. The rand shed 5.6% against the US dollar for the quarter and lost 8.7% over the year.
