The portfolio will have at least 80% exposure to markets outside of South Africa

The Northstar SCI Global Flexible Fund will change it's name to Northstar BCI Global Flexible Fund, effective from 25 August 2023

The fund switched Management Company from Sanlam Collective Investments to Boutique Collective Investments (RF) (Pty) Ltd. on 25 Aug 2023

2022 was an awful year for global asset classes with the traditional tools of currency and
asset class diversification, hurting more than helping. That said, the Northstar Global
Flexible Fund outperformed its benchmark and had a good relative year, albeit not delivering
absolute returns for our investors.

The MSCI All Country World Index fell 17.73% last year, global bonds did almost as poorly,
down 16.25% and the fund’s 60% MSCI and 40% Global bond composite benchmark
delivered a rather depressing -16.77%. Against this, the Northstar Global Flexible fund
returned -14.03%, an outperformance of 2.73%, with the largest alpha generated by the
equity component, our equities fell 12.96% for the year, whereas, as mentioned above, the
MSCI AC World Index, fell nearly 18%.

From an asset allocation perspective, the Northstar fixed income team called bonds right,
bond exposure through the year averaged a low 12.23% against the fund’s bond benchmark
being at 40%, considering the tough year for global bond markets, this underweight
meaningfully assisted in generating benchmark outperformance.
At times, equities sold off and through the year, we averaged equity exposure of 68.8%, in
retrospect, this should have been lower, especially in that we had expected a poor 2022 as
equity valuations were too high at the end of 2021.

Not owning energy, utilities and materials detracted from our performance, energy gained
47.6% in 2022. However, being underweight information technology and consumer
discretionary was value adding as these sectors fell 30.6% and 33.1% respectively. In
addition, being overweight consumer staples (-5.6%) and healthcare (-5%) were big wins for
the fund due to the significant outperformance of those sectors against the market.
Once again, our year was defined by our stock selection, the equity selection effect in the
fund was 3.93% (choosing the right stocks), the allocation effect 0.84% (being weighted
properly in the right sectors) and being predominantly dollar exposed helped too, the currency
effect generated 0.48% of positive alpha. We expect the currency effect to reverse as we
believe the dollar is overvalued and we hold a basket of currencies to deal with this.
The largest stock alpha came from overweight positions in Philip Morris (up 12.4%) and
Elevance Health (11.8%) and avoiding Tesla, which collapsed by 65%. 9.4% of gold in the
fund also added significant value, being flat for the year, versus the stock market that was
down almost 18%.

Despite many good calls, we also made mistakes; Walt Disney, Blackstone, Intertek and
Jones Lang hurt our returns and in hindsight, considering our cautious view on markets in late
2021, we should have been more circumspect owning some of the higher beta counters.
The fund is currently 65.6% invested in equities, 14.4% in fixed income, 12.6% in cash and
7.4% in gold, this diversification caters for the degree of uncertainty presently evident in
markets. We expect that our equity exposure could be further reduced in the months ahead
as the discount to intrinsic value on our global buy list has reached lower than average levels.

In conclusion, 2022 was a tough year for investors as global asset classes performed poorly.
Despite a year of negative returns in the fund, it generated significant outperformance against
its 60/40 benchmark, against global stock markets and against important peers.