The fund returned -10.4% for the quarter, against the -8.3% benchmark MSCI World Index (dividends reinvested) return. For the rolling 12-month period, the fund's return of -5.3% has lagged that of the benchmark (-4.6%).

After a modest start to the quarter in July, global equity markets sold off sharply in August and September as investors came to terms with economic woes in China and a US Federal Reserve (Fed) in tightening mode. Although Chinese equity markets had been selling off since the prior quarter, it was the decision to weaken the renminbi which indicated that the Chinese economy was in deeper trouble than anticipated, and which led to a sell-off in commodities and equity markets. With China no longer propping up global growth to the same extent it once had, and with the Fed about to initiate its first rate rise in 11 years, investors were concerned about global growth and deflationary pressures. There was some relief when the Fed ultimately did not raise rates, but this was short lived and the markets sold off into the end of the quarter.

North America was the best performing region, falling only 7.2% (in US dollar terms), while Asia ex-Japan performed the worst, declining by 16.0% (in US dollar terms). Europe fell 8.7% while Japan declined by 11.7% (both in US dollar terms). The fund's regional positioning had a marginal positive impact on performance during the quarter. Amongst the global sectors, the biggest fallers were energy and materials, which declined by 18.7% and 20.2% respectively (both in US dollar terms) as the global sell-off of commodity and energy stocks continued off the back of the economic woes in China and sluggish growth in the rest of the world. The best performing sectors were utilities (-0.1%) and consumer staples, which fell 1.6%. On a look-through basis, the fund was negatively impacted by an underweight to consumer staples and utilities and a small overweight to materials.

The fund's exposure to emerging markets had by far the largest impact on the negative relative performance over the quarter. The Coronation Global Emerging Markets Fund was hard hit by the general emerging market selloff, but also by the global emissions scandal engulfing Volkswagen. The fund's largest holding was Porsche, which owns a significant stake in Volkswagen and sold off 44% over the quarter in tandem with the Volkswagen share price. Other detractors included Kroton (-19.7%), Baidu (-20.4%) and Tata Motors (-22.2%). Vulcan Value Partners underperformed the index, with a number of its top holdings recording significant falls. Aberdeen Asset Management sold off 18.5% given its high exposure to emerging markets, while its media stocks, Discovery Communication (-21.0%), Time Warner (-21.9%) and Walt Disney (-14.8%) sold off on concerns about how online viewing is changing the viewing habits of consumers.

After a decent start to the year, Iridian had a poor quarter as its largest holding, Valeant Pharmaceuticals, sold off 30.7% after presidential hopeful Hilary Clinton criticised pharmaceutical pricing practises and vowed to make changes once in power. Smaller positions in Theravance (-53.1%), Halozyme Therapeutics (-42.4%) and United Therapeutics (-22.5%) added to the pain. On a more positive note, Adelphi Europe had a good month, with positions such as Pandora (+2.0%), Admiral Group (+1.4%) and Ryanair (+4.7%) all delivering positive returns and a number of their other positions fell by less than the benchmark index. Cantillon Global also made a positive contribution to performance, with strong relative performance from Auto Trader (-0.1%), Nestlé (0.1%) and Intertek (-0.7%).

Outlook
The US recovery is well underway and we would expect the Fed to raise rates sooner rather later. As such, markets will have to adjust to monetary stimulation leadership coming from Europe, Japan, and China in future. US growth will slow, but not stall, as a result of the lagging effect of the stronger dollar. Neither will slow growth in Europe and Japan, a slowdown in China, economic contraction in commodity-sensitive economies, or turmoil in the weakest, liquidity-squeezed emerging economies stop growth. Despite these severe headwinds, we believe the US recovery will slowly gain traction, leading a broader global cyclical upturn later next year and into 2017. Ideally, by late this year and into early 2016, the US economic resilience will result in capital rotating toward oversold industrial and producer equities (in both the US and other parts of the world); toward select companies dragged down by the exodus from emerging equity markets; and to an increase in exposure to Japanese exporters.

Portfolio manager
Tony Gibson

Please note that the commentary is for the US dollar fund. The feeder fund is 100% invested in the underlying US dollar fund. However, given small valuation, trading and translation differences for the two funds, investors should expect differences in returns in the short term. Over the long term, we aim to achieve the same outcome in US dollar terms for both funds.

The fund advanced 0.4% for the quarter, against the benchmark MSCI World Index (dividends reinvested) return of 0.5%. For the rolling 12-month period, the fund's return of 3.6% is ahead of the benchmark's 2.0%.

Global equity markets were subdued over the three-month period, rising a modest 0.5%. This can largely be attributed to inconclusive economic data and an underwhelming first-quarter earnings season. For the most part, the quarter was relatively uneventful until the final week when the Greek government called a shock referendum to accept or reject the Troika's "take it or leave it" bailout package. It remains to be seen how this plays out. The probability that it does not end well is high and the ongoing saga is not only dividing Europe but also preventing a focus on growth and employment for the region as whole. In China, sharp declines in their equity markets from mid-June raised concerns that the Chinese equity bubble has finally burst, and necessitated emergency measures by their authorities early in July.

Japan was the best performing region, advancing 3.1% (in US dollar terms), while Asia ex-Japan performed the worst, falling 2.4% (in US dollar terms). Europe advanced 0.7%, while North America rose 0.3% (both in US dollar terms). The fund's regional positioning had a marginal negative impact on performance during the quarter. Amongst the global sectors, healthcare and telecommunications performed best, rising 1.2% and 2.2% respectively over the quarter. The worst performing sectors were utilities (-4.0%) and energy, which fell 1.8%. On a look-through basis, the fund benefited from an underweight position in energy and utilities and an overweight position in consumer discretionary. In total, the underlying managers made a small positive overall contribution to performance, with most funds finishing more or less in line with their benchmarks. Arcus Japan had a good quarter, returning 9.6% against the Nikkei Index return of 6.7% (in yen terms). Positions in Japan Airlines (+14.2%), Mitsubishi UFJ Financial (+18.3%), Japan Tobacco (+14.7%) and Sumitomo Electric Industries (20.4%) would have contributed to this outperformance.

Magellan Global returned 1.1%, marginally ahead of the index return of 0.5% with its top holdings - Microsoft (+8.6%), Yum! Brands (+14.4%), Lloyds Banking Group (+8.9%) and Mastercard (+8.2%) - all making strong contributions to overall performance. This was only somewhat offset by the holdings Qualcomm (-9.7%), Google (-4.8%) and Woolworths (-8.6%).

Among the detractors, Schroders Global Recovery Fund underperformed mainly due to its second biggest position, Apollo Education Group, falling 32% over the quarter on a profit warning and lower forecasts as students continue to shun their expensive, poor quality degrees. Additional exposure to the 'for profit' educators such as DeVry (-9.6%), Bridgepoint (-0.9%) and Strayer (-19.3%) also hurt performance. Our exposure to emerging markets through the Coronation Global Emerging Markets Fund also detracted from performance over the quarter.

Despite a softening of growth prospects in the US, our expectation is that the Federal Reserve (Fed) will commence with interest rate tightening later this year. This is partly because the demand side of the equation (consumer spending) appears to be gathering pace after a winter season lull. This inexorable approach to rate rises, coupled with anxiety in Europe over Greece and a bubble bursting in China, will no doubt lead to bouts of volatility, especially in emerging markets. There is also a small risk that the market is wrong on its benign inflation outlook, which may cause the Fed to adopt a more aggressive tightening stance. There is little to be gained by delaying a move to normalising rates in the US, and we believe that such a move may actually boost confidence in the economy.

Portfolio manager Tony Gibson

The fund advanced 1.9% (6.8% in ZAR) for the quarter, lagging the benchmark MSCI World Index return (dividends reinvested) of 2.5% (8.6% in ZAR). For a rolling 12-month period, the fund's return of 7.7% (24.2% in ZAR) is ahead of the benchmark's 6.6% (22.8% in ZAR).

Although global equity markets rose over the quarter, currency fluctuation was the key theme during the period with the US dollar showing strength against the pound and the euro showing weakness against most other currencies. The euro weakness was on the back of the European Central Bank's firm commitment to its asset purchase programme and expansionary monetary policy. This led to a sharp increase in European equity markets in local currency terms. Global monetary policy generally remains supportive, but developments at the US Federal Reserve (Fed) remain a key area of focus as Governor Yellen's comments were interpreted to signal September of this year as the likely start of the Fed's hiking cycle. China continues to face economic challenges following further growth disappointments in March, but we expect there will be a firm policy response from authorities on this. Commodities also declined, especially iron ore (-28%), oil (-10%) and sugar (-18%).

Japan was the best performing region, advancing 10.3% (in US dollar terms), while North America performed the worst, rising only 0.9%. Europe advanced 3.6%, while the Pacific ex-Japan rose 3.2% (both in US dollar terms). The fund's regional positioning had a marginal positive impact on performance during the quarter. Among the global sectors, healthcare and consumer discretionary were strong leaders, rising 7.7% and 5.5% respectively over the quarter. The worst performing sectors were energy (-4.6%), which was impacted by the volatile oil price, and utilities (-5.6%). On a look-through basis, the fund benefited from underweights in energy and utilities and an overweight to consumer discretionary. The underlying funds, however, detracted from overall performance for the quarter.

Our exposure to emerging markets, via the Coronation Global Emerging Markets Fund, was a source of negative relative return as it was particularly affected by currency weakness, especially the steep decline in the Brazilian real versus the US dollar. Although this investment has hurt recent returns, it remains a source of significant relative outperformance in previous quarters and we are confident that it will continue to generate alpha going forward.

Schroder Global Recovery Fund, a relatively new investment, had a weak quarter, principally from the poor performance of one its largest investments, Apollo Education Group, which fell 44.5% on poor results and a weak outlook. Investments in other "for-profit" education stocks also fell on this news.

Harris Global were hurt by Ralph Lauren (-29%), Intel (-13.8%) and Richemont (-11.8%) and generated negative alpha of 1.9%. Although there were good returns from positions such as Daimler (+30.2%) and Allianz (17.7%), these were not enough to offset the weaker performers or the currency impact on the fund. Among the positive performers, Egerton European benefited from strong returns in Apple (+12.7%), Blackstone (+15.0%), McGraw Hill Financial (+16.2%) and Safran (+26.8%), while fallers were limited to the smaller positions. Cantillon Global Equity also had a good quarter, generating 2.4% alpha off the back of strong returns from Aalberts Industries (+19.3%), Reckitt Benckiser (+11.3%), Willis Group Holdings (+7.5%) and HCL Technologies (+22.8%). In the short to medium term, the fundamentals are supportive of a continued recovery in developed markets, which will offset any headwinds faced by emerging markets. Resilience in the US economy and liquidity injections in Europe, Japan and China should give rise to global growth of around 3.5% in 2015 and 4% in 2016. Europe has surprised in recent weeks and the weak euro should provide a welcome boost for businesses in coming months.

Portfolio manager
Tony Gibson

The fund advanced 3.0% (5.5% in ZAR) for the quarter, against +1.1% (2.7%) from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of 4.7% (15.7% in ZAR) is lagging the benchmark's 5.5% (16.7% in ZAR).

Global equity markets advanced marginally over the quarter, although this number masks a wide dispersion in performance amongst individual countries and sectors. Election concerns in Greece and its future in the eurozone rippled through the equity markets of Spain, Italy and Portugal, and caused a sharp decline in the euro. Deflationary concerns for Europe did not help. Declining commodity prices, especially oil which declined 45%, also caused concern for some. Particularly hard hit by the falling oil price was the Russian market, and the rouble had its worst year since the country's default in 1998. Economic growth also continues to diverge with the US growing well, whereas China, Europe and Japan continue to disappoint. The European Central Bank will need to (and is expected to) do more to facilitate growth in Europe, while Japan will maintain its accommodative stance.

North America was the best performing region, advancing 4.2% (in US dollar terms), while Europe performed the worst, falling as much as 7.0% (in US dollar terms). Japan fell 2.2% and Asia Pacific ex-Japan fell 5.9% (both in US dollar terms). The fund's regional positioning had a marginal negative impact on performance during the quarter. Amongst the global sectors, materials and energy had another poor quarter, declining 4.7% and 14.8% respectively (in US dollar terms) as commodity prices, especially oil, continued to fall in the three-month period. The best performing sectors were consumer discretionary (+6.2%), information technology (+4.1%) and utilities (+3.9%). On a look-through basis, the funds benefited from an underweight position in energy and commodities and an overweight position to IT and consumer discretionary. The underlying fund performances were mixed over the quarter with a number of strong performances masking one or two weaker returns.

Adelphi European Select Fund had a very strong quarter and significantly outperformed its benchmark index. Holdings in EasyJet (+17.3%) and Ryanair (+29.8%) benefited from increasing passenger numbers as well as the oil price decline. Schibsted (+35.8%), Amadeus (+11.7%) and Aztrazeneca (+2.6%) also contributed to the excellent performance.

Egerton Capital also performed well, generating alpha of 5%. This fund also benefited from a holding in Ryanair, but has holdings in American Airlines (+51.2%) and Southwest Airlines (+25.3%) as well. Other significant gainers included Zodiac Aerospace (+10.5%), the London Stock Exchange (+18.9%) and Wolseley (+13.7%).

Vulcan Value Partners and Magellan Global Fund both had good quarters. For Vulcan, many of their positions finished the year on a strong positive note, but returns were driven mainly by Visa (+22.9%), Mastercard (+16.6%), Parker-Hannifin (+13.0%) and Oracle (+17.5%). Magellen also held Visa, Mastercard and Oracle, with other significant contributors including Lowes (+30.0%), Target (+21.1%), Wal-Mart (+12.3%) and Home Depot (+14.4%). A notable detractor for the month was the Coronation Global Emerging Market Fund which, after a very strong run over many quarters, underperformed mainly due to its holdings in Russia and Brazil. The fund's Japan managers also underperformed over the quarter.

Outlook
Monetary tightening by the US Federal Reserve (Fed) and the fallout from the declining oil price are key risks for 2015, particularly in emerging credit markets. If, as expected, the Fed begins to raise rates in the second half of 2015, investors will need to be on guard for an unexpected tightening in emerging market financial conditions. However, although the US and UK are ending their monetary accommodation, Europe and Japan will continue to be accommodative and a concerted effort from China and other emerging market nations will be made to fight against deflation. This would point to a combined effort to stimulate the global economy in the medium term. With equity markets at reasonable valuations, the stage is set for further gains over the year, albeit with some volatility as the US moves to a modestly tighter monetary stance.

Portfolio manager
Tony Gibson Client