Since August their market has been range bound, trading around the 9500 level. In October, the fund managers saw more of the same - from a level of 9465 at the end of September, the fund managers saw levels ranging between 9120 and 9780 during the month, but with a close out at 9376, down 1% for the month. This puts them 10.1% down year to date. Although this is nothing to cheer about, the fund managers are a lot better off than the majority of global markets. Their currency has strengthened solidly through the month, breaking the key psychological R10/$ level to close out the month at R9.97/$. Year to date the fund managers have strengthened from R12/$. This 17% strengthening of the rand swings a -10.1% return year to date into a +7.7% return for a Dollar investor. With international investors facing minimal cash rates and equity bear market, Emerging markets like ours must start to look more attractive. On the SA Economic front, the fund managers had the Medium Term Budget Policy Statement. One senses a shift in government's priorities, with an easing in the inflation target and higher spending. The upper limit of the 2004 inflation target was raised to 6% from 5%. This, together with the recent rand strength, reduces the risk of further rate hikes. The funds tracking error is 1.3% annualised, on a rolling 12-month basis. The correlation coefficient over the same period is 1.00. The fund makes use of equities, index futures and money market instruments in tracking the All Share Index.

After a precipitous decline in July (-13.3%), the ALSI regained some ground in August, and managed to hold these levels through September, despite falling global markets. We closed out the quarter at 9465, down 11.2%.

The downturn is largely attributable to the leaked minerals charter in July. Already nervous foreign investors needed little encouragement to sell our mining stocks. Even with the leaked minerals charter, our market has held up better than many of the global markets. The Dow lost 18%, and is now at 7590 - a 4 year low. Similarly, the Tech heavy NASDAQ lost 20% to 1172, a level last seen in '96. European and Japanese markets were similarly weak.

The domestic economy is looking fairly healthy. Solvency levels are high, which is good news for bank bad debts with the 100bp hike in the prime rate to 17%. The consumer appears to be in good shape, with debt to disposable income falling again to 53.2%. Government consumption expenditure grew by 2.8% versus 2.6% in Q1. The Labour Force Survey showed that formal jobs grew by 163,000. Inflation remains a problem, being driven up by rising food and fuel prices. It now seems possible that we could see another rate hike before inflation peaks out. The Rand trended up from R10.00/$ in July to R10.60/$ by the end of August, and has been range bound between 10.50 and 10.70 since.

The funds tracking error is 1.3% annualised, on a rolling 12-month basis. The correlation co-efficient over the same period is 1.00. The Fund makes use of equities, index futures and money market instruments in tracking the All Share Index.

After continuing to lose ground early in the month, the ALSI bounced of an intra month low of 8,871 to end the month at 9,677, up 4.7%. Resources were the big contributors, recovering from a low base caused by market overreaction to the leaked minerals charter last month.

Globally, markets have been volatile, but finished the month at similar levels to where they started. Global macro economic data continues to paint a negative picture. US consumer confidence declined from 97.4 to 93.5. NAPM new orders fell to 50.4 from 60.8. French unemployment rose by 18,000 following an increase of 10,000 last month. Japanese industrial production growth was -0.4% MoM. Consensus growth forecasts were cut in the US and Germany.

Locally, the Rand weakened through the month from R10.16/$ to R10.50/$. This, together with recent increases in food, commodity and petrol prices placed upward pressure on inflation, and increases the likelihood of an interest rate hike in September.

The funds tracking error is 1.3% annualised, on a rolling 12-month basis. The correlation coefficient over the same period is 1.00. The Fund makes use of equities, index futures and money market instruments in tracking the All Share Index.

After posting successive new highs in April and May, the ALSI slumped in line with international markets in June. From it's peak level of 11 653 on 22 May, the ALSI closed out the second quarter at 10 658, slightly down from it's beginning of quarter level of 10 949. The decline over the second half is largely attributable to the contagion effect from declining international markets. The accounting irregularities uncovered at WorldCom, Xerox as well as the collapse of Enron, all large stocks, have dragged the indices down and have dented the confidence of investors, who are now wondering if they can trust the financials of US companies. Equity returns were similarly poor elsewhere. The FTSE 100 lost 8.4% of it's value in June and the Nikkei 225, 9.7%. After significant strengthening through April and May, the rand retraced towards the end of the quarter. After reaching R9.67/$ at the end of May, it retraced to R10.26$ by quarter end. This must be seen in the light of a weak dollar, implying that on a trade-weighted basis, the rand depreciation in June was higher. On the 24 th of June, the JSE implemented its' move to free float indices. The All Share Index is now calculated on a free float weighted basis, and the fund has been realigned to track this Index. The free float methodology differs from the previous methodology in that where previously companies were weighted in the index according to their full market capitalisation, they are now weighted according to their market capitalisation less tightly held shares such as strategic holdings, management holdings, share incentive schemes, directors holdings, family holdings, government and parastatal holdings. The reasoning behind the adjustment is that these shares are not generally available to investors and so a free float weighted index better reflects the composition of the investment opportunity set available.

The fund's tracking error is 1.1% annualised, on a rolling 12-month basis. The correlation coefficient over the same period is 1.00. The fund makes use of equities, index futures and money market instruments in tracking the All Share index.

The Investec Index Fund tracks the top 100 shares in the All Share index, cutting resources share exposure to 50% compared with the 56% of the Alsi 40 index. But performances of the indices, both dominated by the top 10 super-heavyweight market cap shares, remain closely in tandem. The fund's big advantages are a zero initial fee and a low 0.4% annual management fee.

The JSE had a fair month in April. The ALSI reached a new all time high of 11 298 on the 23 rd before slipping back over the last week to close out the month just above 11 000, up 0.7% for the month. With Rand strength accelerating in April we have seen a reversal of the recent trends with Financials now outperforming and Resources lagging. The Rand has appreciated from R11.38/US$ to R10.66/US$ through the month. This amounts to an appreciation of 22% since the peak of R13.71/US$ in December.

South Africa’s weight in the Morgan Stanley Capital International (MSCI) Emerging market index is due to increase in May. Since the initial inclusion in this Index, Emerging Market Fund Managers have been significantly underweight SA. The combination of currency strength, strong market performance and an up weighting in the Index, means this position (underweight SA) has started to hurt the performance of Emerging Market Funds. The fund manager should expect, and have in fact already seen, increased foreign buying of South African Equities. Foreigners have historically focused on our large Resource shares, but he has recently seen foreign buying in Financials as well. The fund’s tracking error is 1.1% annualised, on a rolling 12-month basis.

The correlation coefficient over the same period is 1.00. The Fund makes use of equities, index futures and money market instruments in tracking the All Share Index.

The Investec Index Fund is a cheap method of building a core element of an equity fund portfolio as this fund has a low annual management fee.