The Absa Inflation Beater Fund has returned 6.4% p.a. for the 3 years to September 2015, ahead of CPI over this period of 5.8% p.a. The Fund has also returned 7.6% p.a. over the past 5 years, which is 2.0% above CPI for the 5 year period.

CPI inflation has been running at 4.6% over the past year, but is likely to accelerate over the next few months because of rising food prices, as well as the lagged effects of a weaker Rand.

Over the past number of years, worldwide governments and central banks have created a generally positive backdrop for risky assets by means of accommodative monetary policy. There is significant debate at the moment about the effect that a normalization of US interest rates will have on share prices. Although the US will likely hike interest rates during the next 12 months, global interest rates are not expected to increase rapidly. That said, valuation levels of global markets are on the high side, so our funds are positioned somewhat cautiously, with below average equity weightings.

Recent economic data from China has generally been below consensus expectations. China has been the main source of new demand for commodities in recent years and softer Chinese export data and the slowdown in Chinese infrastructure spending do remain a headwind for commodities and mining shares and related industries. Currency devaluation has not fully compensated.

There are various country-specific risks being faced by South Africa as a result of trade and budget deficits, poor economic growth and general political uncertainty. The South African equity market is fairly expensive compared to both its own history and other emerging markets. Our equity exposure continues to be focused on stocks that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flows.

In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, whilst targeting a return in excess of inflation, by holding a diversified portfolio of assets including an exposure to equities, though this is limited to 20% of the total fund.

The Absa Inflation Beater Fund has returned 7.9% p.a. for the 3 years to 31 Mar 2015, comfortably ahead of CPI over this period of 5.2% p.a. The Fund has also returned 8.2% p.a. over the past 5 years, which is 3.1% above CPI for the 5 year period.

During 2014, the Monetary Policy Committee of the South African Reserve Bank (SARB) increased interest rates by 0.75% in aggregate, but with the recent plunge in the oil price, and lower maize prices, inflationary pressures have been reduced and thus the need for higher interest rates in SA has reduced in the short term. However, inflation is expected to rise towards year end, and consequently the probability of an interest rate hike increases later this year.

Although the Rand continued to weaken against the dollar during the first quarter, it strengthened slightly against the pound and substantially against the euro. As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative.

Over the past number of years, worldwide governments and central banks have created a generally positive backdrop for risky assets by means of accommodative monetary policy. There is significant debate at the moment about the effect that a normalization of US interest rates will have on emerging markets. Although the US will likely hike interest rates in the second half of 2015, global interest rates are not expected to increase rapidly. That said, valuation levels of global markets have been on the high side, so our funds are positioned somewhat cautiously, with below average equity weightings.

Commodity prices have corrected quite sharply, which has led to the negative performance of resource shares. China has been the main source of new demand for commodities in recent years and softer Chinese export data and the slowdown in Chinese infrastructure spending do remain a headwind for commodities (and mining shares).

In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, whilst targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 7.6% p.a. for the 3 years to 31 June 2015, comfortably ahead of CPI over this period of 5.6% p.a. The Fund has also returned 8.0% p.a. over the past 5 years, which is 2.6% above CPI for the 5 year period.

CPI inflation has been running at 4.6% over the past year, but is likely to accelerate over the next few months because of rising electricity, fuel and maize prices, as well as the lagged effects of a weaker Rand.

Over the past number of years, worldwide governments and central banks have created a generally positive backdrop for risky assets by means of accommodative monetary policy. There is significant debate at the moment about the effect that a normalization of US interest rates will have on emerging markets. Although the US will likely hike interest rates in late 2015 or early 2016, global interest rates are not expected to increase rapidly. That said, valuation levels of global markets are on the high side, so our funds are positioned somewhat cautiously, with below average equity weightings.

Commodity prices have corrected sharply, which has led to the negative performance of resource shares. China has been the main source of new demand for commodities in recent years and softer Chinese export data and the slowdown in Chinese infrastructure spending do remain a headwind for commodities and mining shares.

There are various country-specific risks being faced by South Africa as a result of trade and budget deficits, poor economic growth and general political uncertainty. The South African equity market is fairly expensive compared to both its own history and other emerging markets.

In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimise the risk of capital loss, whilst targeting a return in excess of inflation, by holding a diversified portfolio of assets including an exposure to equities, though this is limited to 20% of the total fund.

The Absa Inflation Beater Fund has returned 8.3% for the past 12 months and 8.4% p.a. for the 3 years to 31 Dec 2014. The Fund has also returned 8.3% p.a. over the past 5 years, which is 3% above CPI for the 5 year period.

The Monetary Policy Committee of the South African Reserve Bank (SARB) increased interest rates by 0.75% during 2014 in response to a deteriorating outlook for inflation. However, with the recent plunge in the oil price, inflationary pressures are likely to ease significantly in 2015. Consequently, there is less need in the short term to raise South African interest rates further.

Although the Rand continued to weaken against the dollar during the fourth quarter, it strengthened against the euro and the pound. As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative.

Over the past number of years, worldwide governments and central banks have created a generally positive backdrop for risky assets by means of accommodative monetary policy. In recent months, the economic recovery in the Developed World has been somewhat uneven, with the sharply lower oil price likely to lead to deflation in some European economies. Global central banks are thus unlikely to hike interest rates aggressively in the near term.

China, which has been the driver of demand for commodities in recent years, has most recently reported GDP growth still above the 7% level. Nevertheless, commodity prices have corrected quite sharply. With falling commodity prices (only partially offset by the weaker Rand) and labour issues surrounding South African mines, mining shares are under something of a cloud right now.

In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, whilst targeting a return in excess of inflation.