Equity market returns have underwhelmed for much of the last year, with the 3rd quarter being no exception. The ClucasGray Equity Fund is down 3% over the last year, behind the Swix, and slightly behind the peer group, which declined 1%. Over the last 3 years, the fund has gained over 4%, comparing favorably to Swix of 2.6% and the peer group of 1.1%. It is now 8 years since the fund was launced in October 2011 - it has delivered a compound return of 11% per annum, compared to the Swix of 11.3% and the peer group of 8.4%.

It was a tough quarter for some large holdings - Sasol, Exxaro struggled in the Resources sector, whilst the Platinum shares, whcih we haven't owned, rallied strongly. Financials too struggled, whilst holdings in Clover and Zeder performed well on the back of corporate action. During the quarter, we took advantage of numerous opportunities where good companies were sold off into a void of liquidity, reaching valuations we deemed to be very attractive.

Please read the ClucasGray Asset Management September 2019 quarterly at www.cgam.co.za for more insights into our views and portfolio positioning.

Following the emerging market crisis that impacted many South African companies, July saw welcome relief to select sectors. Financials rallied over 6%, although this gain was offset by declines in Resources and Industrials. Year to date, only the Resources sector has shown positive returns (+16%), with Financials, Industrials and Property all declining in the case of Property the decline has been brutal, with the sector falling more than 20%. In an environment of subdued returns, the ClucasGray Equity Fund has gained over 12% over the last year, with the JSE Swix and the Peer group gaining just over 5% and 3% respectively.

We have made numerous changes to the portfolio over the last few months. New additions include Tiger Brands and Grindrod, and we increased weightings in Old Mutual, Clover, select banks and the combination of British American Tobacco and Reinet. To fund these purchases we have sold out of Quilter and Remgro, and reduced exposure to Naspers, Sasol, amongst others. The operating environment is always dynamic whilst uncomfortable at times, we remain resolute in our belief that patient investors will in due course reflect favorably on the opportunities that are currently being presented.

For a more detailed explanation of our views and positioning, please refer to the June 2018 quarterly commentary on our website, www.cgam.co.za.