The macroeconomic environment continued to be supportive of income during the quarter.
Domestic inflation moved farther from the central bank’s preferred 4.5% midpoint after rising to 5.6% in February 2024, up from January’s 5.3%, slightly above market forecasts of 5.5%.

This has led investors to scale back expectations for rate cuts, with the forward rates agreements now pricing less than 30 basis points cut over the next 12 months.

The South African Reserve Bank also remained cautious, holding the repo rate steady at 8.25% in the two meetings it held during the first quarter of 2024 and maintaining a somewhat hawkish posture. Against this backdrop, the 27four Shari'ah Income Fund grew 1.78% during the first quarter, supported by strong performance from long-term SA Islamic fixed-term deposits, offshore sukuk, and gold holdings.

However, the fund lagged its benchmark, which gained 2.27% during the quarter, largely due to the detraction from platinum holdings and subdued returns from SA equity-linked notes.

Despite disappointing inflation prints in the first quarter, we still think interest rates have peaked. We remain optimistic that inflation pressures will recede, allowing the SARB to cut rates at some point, albeit later than initially expected.

We continue to proactively extend the portfolio's duration to lock in higher yields. The fund continues to adhere to its policy objective.

The 27four Shari'ah Income Fund is a Shari'ah compliant portfolio focusing on income generating assets. It aims to provide relative capital stability and optimal income returns. In order to achieve its investment objectives, the fund will utilise a combination investments in fixed income securities, listed property and other income generating securities that are Shari'ah compliant in both South Africa and internationally, which have a fixed maturity date and either have a predetermined cash flow profile or are linked to benchmark yields.