The Aeon Active Equity Fund (Composite) outperformed its benchmark by 218 bps for the fourth quarter of 2022 and is outperforming its benchmark by 70 bps over a one-year period.
Overweight positions in Prosus and BHP Group were the main positive contribu-tors to return for the fourth quarter of 2022. Underweight positions in Capitec Bank and Richemont were the main detractors. The benchmark equity index was up 12.39% for the fourth quarter of 2022.

The quarter ended December saw a strong rebound in world markets as investors started factoring in an end to the interest rate hiking cycle. Investors have been concerned about a range of issues stemming from continued aggressive monetary policy tightening, the ongoing Russia/Ukraine conflict, increasing energy prices in Europe, a lower corporate earnings outlook into 2023, the Chinese CCP con-gress outcome, and a potential recession in multiple geographies. Monetary poli-cy tightening has raised fears that economic growth will be negatively affected while inflation persists resulting in a stagflationary environment.
The world’s central bankers have emphasized the importance of aggressively fighting inflation. The US and Eurozone’s inflation figures continue to be elevat-ed, however recent inflation numbers appear to be easing, with some numbers being below analyst expectations. Fed chairman Powell’s recent comments were unequivocally more dovish, signalling that the Fed could scale back on the pace of hikes. A wave of risk-on sentiment spread across global markets as a result, with almost all asset classes and geographies benefiting.
Locally, sentiment has been muted. The country still faces many structural growth obstacles such as energy supply as ongoing loadshedding impacts busi-nesses and consumer trade and confidence. South Africa’s fiscal position remains constrained by poor legacy policy decisions and ineffective implementation by the government. Financial conditions may be difficult for South Africa in the years ahead with low GDP growth rates and high unemployment translating into weak consumer spending and increasing inequality. The outcome of the ANC elective conference saw Cyril Ramaphosa elected once again into a second term, surviving the so-called “Phala Phala” scandal. Business welcome this outcome.
Looking forward, growth expectations for the local economy seem to be depend-ent on global growth, commodity prices, improving confidence, positive local government action, and inflation expectations and the management thereof. Astute stock picking with our Growth at Reasonable Price (GARP) philosophy that delivers value through the cycle and a focus on companies whose cash flows sup-port earnings is expected to benefit the portfolios moving forward.

As part of showcasing our portfolio, we aim to provide you with some insight into portfolio companies on a regular basis. This quarter, we highlight portfolio com-pany Naspers. Naspers is a leading global technology company operating in mul-tiple core disciplines such as its investment in Tencent, as well as other busi-nesses in the classifieds, food delivery, payments and Fintech, etail, travel, Edtech industries. During 2022, Chinese-related companies experienced a multi-tude of headwinds including punitive lockdown measures due to Covid, a regula-tory crackdown on Technology companies and negative sentiment by foreigners on Chinese-related companies. This saw Tencent fall almost 57% from the begin-ning of 2022 to its lows. As a result, Naspers also fell due to its high exposure to Tencent. At Aeon Investment Management, we continued to revisit our invest-ment case, build in conservative estimates of our expectations around earnings outcomes, and remodelled our risk analysis. This process led to our conviction not only being reinforced, but increased our conviction in the company, which warranted a purchase. As a result, we invested across client portfolios during the lows. As China began to reopen and sentiment began to shift positively once more, Naspers has performed well being up over 75% from its recent lows. We try to identify companies that may be unrecognized and unloved by the market and hence have the potential to lead to a positive surprise. Naspers is one of these and our funds and clients have realised the benefit.