As at the end of September 2018 the Marriott Dividend Growth Fund remained one of the top performing general equity funds over the last decade with the third lowest volatility and the lowest maximum drawdown.

Global equities made good progress over the third quarter of 2018, rising by 4% in US$ terms. US equities once again led the way. The S&P500 Index rose by 8% in US$ terms bringing the gain over 2018 to date to 9%. These excellent returns, driven by good second quarter corporate earnings and the ongoing impact of last year's tax cuts, were overshadowed by performance elsewhere in the world. In local currency terms, UK equities fell by 1.8% over the quarter whilst European equities lost 0.1%. Emerging markets were especially weak. The latest arguments over US trade tariffs, this time with Turkey, spilt over into currency markets and focussed attention on the financial arrangements of several fragile economies. This included South Africa, whose position was not helped when the economy recently fell into its first recession since 2009.

Unsurprisingly, the shares of SA Inc. businesses came under pressure as investors priced in a deteriorating backdrop for emerging markets in general, as well as significant economic challenges that are more specific to the South African economy. These challenges include high government debt to GDP, weak SOE balance sheets, low business confidence, high unemployment and massive social inequality. This difficult environment is evidenced by the recent financial results of many of SA's finest businesses which have struggled to grow dividends in 2018.

In our recent half year report to investors we highlighted how we had taken into consideration: 1) South Africa's vulnerable economic position, 2) tighter monetary policy in the first world; and, 3) the more attractive valuations of the world's best dividend payers when positioning all our portfolios. As such, notwithstanding recent "Ramaphoria" we maintained an approximate 25% exposure to offshore listed companies (eg: Johnson & Johnson, Medtronic and Diageo) as well as an additional 15% exposure to rand hedge stocks. This brings the fund's total exposure to businesses whose prospects aren't linked to SA to approximately 40%. We have also ensured all the domestically focused businesses we own are of the highest quality with strong brands and pricing power - eminently suitable to a low growth environment. This positioning served investors well this quarter, and will likely continue serving investors well in the years ahead as we do not expect current trends to change anytime soon.