Unlike most Decembers that are known as "quiet" months for financial markets, the last couple of years have been marred by important announcements. This year was no different as investors eagerly awaited the US Federal Reserve's (Fed) December meeting. After numerous data releases showed an improvement to the US economy (particularly in the housing market and employment) there was always the possibility that the Fed would announce the start of "tapering" to its bond buying program. This turned out to be the case with the announcement on 18 December that the bond buying program of $85bn per month would be reduced to $75bn, starting in January 2014.

Talk of "tapering" has dominated the headlines during 2013 and can be considered the most important theme to underpin financial markets during the year. Since talk of tapering surfaced in May, emerging markets have been under pressure. Emerging market equities ended the year down 2.3% (in USD terms) whilst numerous emerging market currencies have come under severe pressure. The rand, for example, has depreciated by over 23.0% to the US Dollar over the year. What is however interesting is the JSE All Share Index. Since May this year, the JSE All Share Index has returned over 19.0% (in ZAR terms) to the end of December. This is in contrast to what one would have expected for an emerging market. The reason for this is that some of the largest companies making up the All Share Index perform best in a weakening rand environment (a.k.a. rand hedge companies).

As we enter "uncharted waters" in 2014 with the retraction of quantitative easing, we expect continued volatility in financial markets. We also expect to see many investors focusing on short-term news (or "noise") to help them make investment decisions. This in our opinion could lead to very poor long-term investment decisions. Efficient Select remains dedicated to long-term investing and our objective for 2014 will be on trying to unpack the long-term effects on asset classes as we return to a normalised world without stimulus. Our focus remains on managing risk though superior asset allocation and investing in high quality companies likely to outperform the market over the long term. For this reason, we look forward to a successful 2014 with you.

The Efficient Balanced Fund will change it's name to Efficient BCI Balanced Fund, effective from 29 January 2014