The Aeon Active Equity Prescient Fund (CIS) underperformed its benchmark by 91 bps on a net return basis for the fourth quarter of 2024 and is underper-forming its benchmark by 67 bps over a one-year period.

Overweight positions in Discovery and Super Group were the main positive contributors to return for the fourth quarter of 2024. Overweight positions in BHP and Mondi were the main detractors. The benchmark equity index was down 2.14% for the fourth quarter of 2024.

The last quarter of the year was driven by the US election, in which former President Donald Trump was re-elected. His victory drove global equities higher, particularly the US equity market, which reached new highs, while emerging markets faced some weakness due to concerns about increased tar-iffs.

In South Africa, the retail sector emerged as the top performer during the quarter, driven by companies like We Buy Cars, Cashbuild, and Pepkor. In contrast, the resources sector struggled, impacted by Sasol, Sibanye Stillwa-ter, and Glencore.

In the US, the threat of resurging inflation persisted, with the latest inflation numbers indicating an increase. This led the US Fed to adopt a cautious stance in cutting interest rates amid mixed economic data. The European Central Bank continued to lower interest rates, cutting by 25 basis points dur-ing the quarter.

Overall, global equities, as measured by the MSCI All Country World Index, posted a negative return of 0.9% in USD during the quarter. Emerging markets faced significant challenges, with the MSCI Emerging Mar-kets Index declining by 7.8% in USD, driven by potential tariff increases by the US.

On the commodities front, gold prices reached record highs of $2,790 per ounce, fuelled by heightened geopolitical risks surrounding the US election. Brent crude oil ended the quarter at about $75 per barrel, up 4%. Meanwhile, other industrial metals like copper, iron ore, and nickel faced downward pressure due to reduced demand from China and a strong US Dollar.

Locally, the latest CPI declined to 2.9%, below the lower end of the inflation target range of 3%. However, even with this low inflation rate, the South Afri-can Reserve Bank only reduced interest rates by 25 basis points in their last meeting in November, taking a cautious approach.

During the quarter, the latest GDP numbers indicated that the economy contracted by 0.3%, signal-ling an economy under strain. The currency faced some weakness due to un-certainty about the AGOA trade program and potential tariffs on exports to the US. On a positive note, S&P Global upgraded South Africa's credit rating outlook, signalling confidence in the country's economic reform progress.

This quarter, we highlight Prosus as a key portfolio pick. Its share price re-cently faced pressure following the US Department of Defence’s designation of Tencent, its major investment, as a "Chinese Military Company." Tencent has firmly denied this and plans to appeal the decision. While the designation has no direct financial impact on Tencent, it has dampened investor senti-ment. Despite this, Tencent’s fundamentals remain strong, supported by a capable management team and significant growth potential.

Meanwhile, Prosus con-tinues to trade at a substantial discount to its intrinsic net asset value. Under its ambitious new leadership, the company is making decisive efforts to un-lock value by optimizing its core assets and divesting non-core investments.

We remain confident in Prosus’ long-term potential and view the recent chal-lenges as short-term noise, preferring a steady, measured approach rather than any reactive decisions.

In general, the fund's focus on disciplined stock selection using a Growth at Reasonable Price (GARP) philosophy targeting companies with strong cash flows and earnings is expected to benefit the portfolio moving forward.