The investment objective is to provide a medium whereby investors can obtain undivided participation in a diversified portfolio of money market instruments and assets in liquid form.

The fund switched Management Company from Cadiz Collective Investments to Boutique Collective Investments (RF) (Pty) Ltd. on 03 Sep 2020

Global markets ended largely in the black for the quarter as hopes for a phased-in US-China trade deal eventually started taking shape. Agreement was reportedly reached to partially roll back tariffs, to increase agricultural purchases and to ensure the protection of intellectual property. After further delays, the UK’s elections delivered some stability, clearing the way for progress on Brexit. The positive sentiment was supported by a third consecutive rate cut by the FED early in the quarter. The trend held firm despite the ongoing protests in Hong Kong. The positive sentiment spilled over into emerging markets including our equity markets which saw significant gains in the gold and platinum sectors as we moved towards the close of the year.

Global bond yields edged higher over the quarter. US bond yields drifted higher prompted largely by the Fed’s signal to pause in further policy easing after the rate cut at the beginning of the period. The US 10-year generic bond yield rose more than 25 basis points to end the quarter at 1.92%. European yields continued to move higher while the German 10-year generic yield became less negative to end the year at -0.19%. The French 10-year generic yield rose in tandem crossing over into positive territory to close at 0.12%.

Our local markets were largely driven by event risks. The first being a disappointing Medium- Term Budget Policy Statement (MTBPS) which initially prompted a sharp negative reaction in the local bond market. The minister of Finance, Tito Mboweni, provided a stark adjustment to current reality. Growth rates and tax revenues were revised lower while expenditure was revised higher. Debt to GDP levels are expected to increase with increased levels of short term debt issuance on the horizon. On the positive side, there were strong indications for support to state owned enterprises, the NPA and SARS with renewed support for infrastructure projects.

A further blow to economic stability was dealt in the middle of the quarter by ratings agencies, Moody’s and S&P putting our sovereign rating on negative outlook. They argued that the deterioration of our government finances was the main factor that motivated the move. The persistently high country risk premium was one of the major reasons why the SARB kept rates on hold despite declining growth and inflation that continued to surprise on the downside. Some solace can be taken from the fact that we have been placed on negative outlook as opposed to negative watch which spells a faster route to an inevitable ratings downgrade.

No help was forthcoming from our beleaguered state owned enterprises. Eskom’s generation fleet experienced an unprecedented level of breakdowns disrupting economic activity and forcing emergency reactions from government.
Despite all the negativity, the local currency edged firmer to end the year at about 13.99 to the USD, testimony to our attractiveness on a relative basis to other emerging markets. The bond market (All Bond Index) returned +1.73% for Q4 2019.

After some initial strength, early in the quarter, money market yields retraced to end the year largely unchanged. No rate changes were applied by the SARB over the period. Our view is that of a rate cut in January but the risk of maintaining the current levels has increased.

Factors that will influence the direction of rates in the coming months include currency volatility and event driven risk such as the nature of the budget to be delivered in February and the probability of a ratings downgrade.

The Fund continues to invest strategically across the money market yield curve to maximise yield while remaining within the risk parameters defined for money market funds. The Fund’s retail asset class delivered 1.88% for the quarter while the STeFI composite index was up 1.74%.