Although the global economic is stuttering as a result of a number of unusual occurrences so far this year, signs of recovery are on the cards. The political unrest in North Africa and the Middle East (MENA) caused a sharp rise in oil prices, boosting food inflation even more, from already high levels, which was aggregated by extreme weather conditions in many countries. The Japan earthquake in March caused a sharp decline in output in Japan, with nasty knock-on effects on global production. The sovereign debt crisis in Europe (PIIGS) is flaring up from time to time, as was the case with Greece during June, which is adding to market uncertainty. Volatility in financial markets therefore remains high. Nevertheless, the rising inflationary pressures are starting to force central banks to normalise monetary policy. We, however, expect the normalisation of monetary policy to be gradual and to remain accommodative. On the domestic front the recovery has become more broadly based, but also still remains uncertain and the Reserve Bank has noted in the May MPC meeting that the risks to the inflation outlook have increased. The dilemma facing the Reserve Bank is a modest growth outlook with incipient inflationary pressures emanating from exogenous and administrative prices. Uncertainty on when the hiking cycle in interest rates will start still remains high. We, however, believe the Reserve Bank's preference is to keep rates on hold for as long as possible as to encourage growth and job creation. The risk to consensus is therefore that hiking may only start in 2012.Little relative value is to be found anywhere across the money market curve, since the curve still remains fairly flat. While the timing of the hiking cycle remains uncertain, we shall continue to utilise value opportunities as and when they arise from data announcements and surprises, but will also try and lock-in good levels on some floating rate notes for as long as possible. From a philosophy perspective we remain a fundamentally conservative fund manager and will continue to actively avoid extremely risky investments, and invest only in vanilla instruments with A1/F1 or better credit-rated counterparties. We are confident that the good long-term performance history of the Gryphon Money Market Fund is intact and our short term relative performance on a daily basis is see-sawing between number one, two or three. Performance volatility of the fund remains low; best in the industry.

The global economic recovery, although uneven, is broadening, gaining strength and is expected to continue. Markets typically had a knee-jerk reaction on the March 11 earthquake and tsunami in Japan and although it will initially accelerate the slowdown in the East, the rebuild may have positive spinoffs for especially commodity supppliers. The geopolitical tensions in the Middle East and North Africa (MENA), as well as the sovereign debt crisis in Europe (PIIGS), both remain as concerns driving market volatility. Rising inflationary pressures, fuelled not only by strong commodity demand but also as a result of the natural disasters and MENA unrests, are starting to force central banks to normalise monetary policy. We expect the normalisation of monetary policy to be gradual and to remain accomodative. Although domestic growth prospects appear to have improved it is still too weak to make an impact on unemployment. As a result, the Reserve Bank, given the government's strong focus on job creation and growth should be in no rush to hike rates on the first round effects arising from supply side shocks. The risk to the consensus view for the hiking cycle to start in November 2011 and moving towards September is that the Reserve Bank may delay hikes until clear evidence of demand-led inflation has occurred which may even only be early 2012.

At present little relative value is to be found anywhere across the money market curve and the timing of the hiking cycle remains uncertain. We continue to utilise value opportunities as and when they arise from data announcements and surprises. From a philosophy perspective we remain a fundamentally conservative fund manager and will continue to actively avoid extremely risky investments, and invest only in vanilla instruments with A1/F1 or better credit-rated counterparties. We are confident that the good long-term performance history of the Gryphon Money Market Fund is intact and our short-term relative performance on a daily basis is see-sawing between number one and two. Performance volatility of the fund remains low; best in the industry.