Market review
The FTSE/JSE All Share Index closed the third quarter down 5.8%, with significant rand weakness partially offsetting the sharp fall in commodity prices. The index lost 21.3% in US dollars. Significant dispersion marked the quarterly performances, with sectors most exposed to the SA economy generally outperforming the broader market. The food and general retail sectors fared particularly well, closing 6.4% and 1.7% higher, respectively. Banks lost 3.3%, while short-term insurers gained 6.9% over the three months. The health care sector, up 2.5%, continued its recent strong performance. Commodity-exposed rand hedge stocks fared poorly over the quarter, but even here there was significant dispersion. Diversified miners lost 17.3% and platinum miners shed 9.7%. The gold sector posted one of its strongest relative performances, gaining 19.5% over the review period.

Portfolio review
During the third quarter, the Investec Active Quants Fund declined in value, but outperformed its benchmark, the FTSE/JSE Shareholder Weighted Index (SWIX) by a significant margin. The biggest contributor towards the positive performance for the quarter was the overweight holding in Woolworths, which showed excellent growth in a tough market when reporting its results for the year ending June 2011. The position in Liberty Holdings paid off as the company reported consensus-beating results for the first half of 2011. The holdings in Vodacom and AVI also did well, while underweight holdings in BHP Billiton and Richemont contributed towards positive performance. On the other hand, the underweight holdings in Gold Fields and AngloGold Ashanti detracted from performance as the gold sector outperformed all others by a wide margin during the quarter.

Portfolio activity
Our expected returns and therefore our optimal portfolio, change continuously as new information arrives and the market digests that information. The returns we expect to gain from trading to our optimal portfolio have to be offset by the transaction costs incurred. A pragmatic approach is to maintain a near optimal portfolio by trading periodically, using a transaction cost model to ensure that trading costs are kept to a minimum. We typically rebalance the portfolio once a month, depending on the volatility of the market. Turnover at these rebalances is usually between 10% and 15%.

During the quarter, we added Nedbank to our holdings at the expense of FirstRand and traded our MMI Holdings position for a holding in Old Mutual. We also purchased Gold Fields to increase our exposure to the gold sector and we have taken profits on our position in Woolworths.

Portfolio positioning
The projected tracking error of the portfolio to the SWIX benchmark is currently just over 3% while the total portfolio risk and beta of the portfolio is below that of the market. On a sector level, bets are conservative. The portfolio remains overweight resources, with this position now mostly driven by an overweight holding in the gold, and oil and gas sectors. This position is offset by an underweight position in industrials and a marginal underweight exposure to financials. Within financials, we remain underweight banks, with this position being offset by an overweight position in the life assurance sector. The underweight industrials position, which remains predominantly in the beverages, and media and entertainment sectors, is partially offset by an overweight position in the more defensive food producers sector.

As always, we aim to outperform the SWIX through an active bottom-up stock selection process, using proprietary quantitative techniques. We favour companies with an improving earnings outlook at a reasonable valuation level. Given the uncertainty in the market, it is no surprise that the more defensive quality factors have been the top performers, while valuation factors based on forecasted earnings have not done well. Factors based on positive revisions in earnings have also performed well.

Looking forward, we are confident that our sophisticated quantitative stock selection methodology will continue to differentiate prospective winners from losers. Our disciplined portfolio construction, risk management and implementation skills should ensure that the alpha opportunities identified are translated into meaningful returns for your portfolio.

Market review
The FTSE/JSE All Share Index closed 0.6% lower over the review period, with the market falling 2% in June. Resources were the biggest detractors, with gold miners and platinum stocks down 13% and 7.7% respectively. Diversified miners lost 3.3%. Health care (6.9%), food producers (4.5%) and telecommunication (5.4%) performed well. Banks gave up 0.9%, with flat returns year to date. Sasol, the only oil & gas sector constituent, fell 8.5% in the second quarter after a strong first three months of the year.

Portfolio review
It has been another volatile three months for the equity market with European debt and US and Chinese growth concerns weighing on markets. While the FTSE/JSE All Share Index closed the second quarter of 2011 in the red, the FTSE/JSE Shareholder Weighted Index (SWIX) just managed to post a positive return. After a strong first quarter, resource counters lagged the market during the second quarter of the year. Despite this, on a sector level, the mining sector made the biggest contribution to portfolio returns during the review period. Within this sector, the overweight holding in Exxaro, which was the best performing large cap resource counter for the quarter, was the biggest performance contributor. This stock remains our preferred pick in the SA general mining space. At the same time, platinum counters had a difficult quarter, and the portfolio benefited from its underweight exposure to this sector and its underweight holding in Anglo Platinum, in particular.

The portfolio also did well out of the holdings in Lewis Group, Coronation, Woolworths and Imperial. The biggest detractor from relative performance during this period was the overweight position in the oil & gas sector via the weighting in Sasol. The counter gave back some of the strong returns it earned during the first quarter of the year. The underweight holding in Richemont, which exceeded expectations with consensus-beating sales growth and a strong increase in operating profit, also detracted from performance. Valuation levels are still looking rich according to our models, so we are maintaining the underweight position for the time being.

Portfolio activity
Our expected returns and therefore our optimal portfolio, change continuously as new information arrives and the market digests that information. The returns we expect to gain from trading to our optimal portfolio have to be offset by the transaction costs incurred. A pragmatic approach is to maintain a near optimal portfolio by trading periodically, using a transaction cost model to ensure that trading costs are kept to a minimum. We typically rebalance the portfolio once a month, depending on the volatility of the market. Turnover at these rebalances is usually between 10% and 15%. During the quarter, we increased our weighting in Steinhoff, Exxaro and Tiger Brands and switched our JD Group holding into Lewis Group. We also trimmed our positions in Impala Platinum and BHP Billiton and sold out of Nampak.

Portfolio positioning
The projected tracking error of the portfolio to the SWIX benchmark is currently just over 3%, slightly lower than the previous quarter. The total portfolio risk and beta of the portfolio is in line with that of the market. The portfolio remains overweight resources, mostly driven by an overweight position in Sasol. This position is offset by an underweight exposure to financials and industrials. Within financials, we remain underweight banks (but less so than previously), offset by an overweight position in the life insurance and speciality finance sectors. The underweight industrials position remains predominantly in the beverages and media & entertainment sector and is partially offset by an overweight position in the more defensive food producers sector. As always, we aim to outperform the SWIX through an active, bottom-up stock selection process, using proprietary quantitative techniques. We favour companies with an improving earnings outlook at a reasonable valuation level. Style performance over the quarter has been consistent with that generally seen during an economic upturn, with factors based on momentum and analyst sentiment performing strongly. Performance from the more defensive quality factors has been mixed. We are confident that our sophisticated quantitative stock selection methodology will continue to differentiate winners from losers. Our disciplined portfolio construction, risk management and implementation skills should ensure that the alpha opportunities identified are translated into meaningful returns for your portfolio.

Market review
Local equities mimicked global market volatility, recovering January's losses and ending the quarter marginally higher (1.1%). Resource counters performed best, with Sasol, the only oil & gas producer constituent in the index, rising 13.1%. Diversified miners closed 3.2% higher while paper stocks added 15.5% over the period. Platinum stocks lost 10.5%. Both the industrial and financial sectors underperformed the broader market, closing down 0.3% and up 0.7%, respectively. Again, there was substantial dispersion amongst the various sub-sectors, with construction (-25%), food producers (-4.3%) and pharmaceuticals (-11.5%) underperforming, while mobile telecommunication (3.9%), life insurance (6.4%) and industrial metals (14.5%) enjoyed strong returns.

Portfolio review
Despite a number of significant global events, the market showed resilience and local equities managed to close the quarter in positive territory. The performance of the Investec Active Quants portfolio was in line with the FTSE/JSE Shareholder Weighted Index (SWIX) for the quarter ending 31 March 2011. Resource counters were the strongest performers over the review period and the portfolio benefited from its overweight exposure to this sector via its holdings in Exxaro Resources and BHP Billiton. The underweight holding in Sasol detracted from returns and an underweight exposure to forestry and paper also dragged down relative performance. In the financial sector, the life assurers were the top performers and the portfolio's positions in Old Mutual and MMI Holdings paid off. The market did not respond well to the news of the Brait restructuring, and our holding hurt relative performance. There was a high degree of dispersion in the returns of the industrial sub-sectors. The portfolio benefited from the strong performance of the industrial metals sector via its overweight holding in Kumba Iron Ore, while underweight holdings in the media and pharmaceutical sectors paid off due to their poor performance.

Portfolio activity
Our expected returns and therefore our optimal portfolio, change continuously as new information arrives and the market digests that information. The returns we expect to gain from trading to our optimal portfolio have to be offset by the transaction costs incurred. A pragmatic approach is to maintain a near optimal portfolio by trading periodically, using a transaction cost model to ensure that trading costs are kept to a minimum. We typically rebalance the portfolio once a month, depending on the volatility of the market. Turnover at these rebalances is usually between 10% and 15%. During the quarter, we increased our exposure to Sasol, JD Group and AVI, and upped our weighting in Anglo American at the expensive of BHP Billiton. We also trimmed our holdings in Old Mutual and MTN. We disposed of our position in AngloGold Ashanti and used the proceeds to switch into Gold Fields.

Portfolio positioning
The result of the above trades is that the portfolio is currently running at a projected tracking error of approximately 3.5% to the SWIX, with the total risk slightly lower than that of the market. On a sector level, the portfolio is overweight resources, mostly through overweight positions in the oil and gas and other mineral and mines sector. The underweight position in industrials remains predominantly in the beverages and media and entertainment sector. The portfolio is also marginally underweight financials, mostly due to its underweight holding in banks. As always, we aim to outperform the SWIX through an active, bottom-up stock selection process using proprietary quantitative techniques. We favour companies with an improving earnings outlook at a reasonable valuation level. Style performance over the quarter was consistent with that generally seen during an economic upturn. Factors based on momentum and analyst sentiment performed strongly, while performance from the more defensive quality factors was mixed. We are confident that our sophisticated quantitative stock selection methodology will continue to differentiate winners from losers. Our disciplined portfolio construction, risk management and implementation skills should ensure that the alpha opportunities identified are translated into meaningful returns for your portfolio.

Market review
After a volatile first three quarters of 2010, risky assets responded to prospects of an improved economic outlook and ended the year firmly in positive territory. During the fourth quarter, investors switched out of bonds into equities. Global equities added 8.8% over the period, while global bonds lost 1.8% in US dollars. Local bonds could not shrug off the global bond sell-off, ending up only 0.7% over the quarter. Cash, as measured by the STeFI, returned 1.6% for the three months to the end of December. The best performing asset class over the past year was the listed property sector. The sector continued to show strong returns, despite weak property fundamentals. Listed property gained 3.1% in the fourth quarter to rise by 29.6% for the year. Local equities participated in the global equity rally. The FTSE/JSE All Share Index rose 9.5% in the fourth quarter on top of the 13.3% gain over the prior three months, ending the year 19% higher. Resources (16.5%) proved to be the top performing sector, with financials flat and industrials up 7.8% for the period. Amongst the resource counters, diversified and platinum miners (both up 19.2%) did best, while short-term insurers (15.4%) and some smaller industrial sectors (media and support services) beat the overall market. Stocks predominantly focused on the South African economy fared worse. Construction ended the quarter 3% higher, banks closed flat, while food and general retailers added 2.9% and 6.2% respectively.

Portfolio review
After a volatile first few quarters of 2010, dominated by expectations of a relapse into recession, risk assets ended the year firmly in positive territory. The catalyst for better asset returns and the upward revision to growth expectations was a renewed commitment by monetary and fiscal authorities across the globe to continue to promote reflationary policies. Such policies were perceived as supportive of a re-acceleration in economic activity, rising asset prices and increased employment. Local equities participated in the global equity rally and the Investec Active Quants portfolio also had a strong quarter, outperforming its FTSE/JSE Shareholder Weighted Index (SWIX). Resource counters did well over the quarter and the portfolio benefited from its overweight exposure to this sector with the star performers being Kumba Iron Ore, BHP Billiton and Exxaro Resources. An underweight position in Anglo American detracted from performance. On a sector level, the other big contributor to the positive performance over this quarter was the underweight exposure to the banking sector. With the exception of FirstRand, we remain underweight the counters in this sector. Our positions in Imperial Holdings, Nampak and Coronation Fund Managers also continued to do well. The life insurance sector lagged the market during the quarter and our exposure to this sector through our holdings in Old Mutual and Liberty Group, therefore detracted from relative performance.

Portfolio activity
Our optimal portfolio changes continuously as new information arrives and the market digests that information. The returns we expect to gain from trading to our optimal portfolio have to be offset by the transaction costs incurred. A pragmatic approach is to maintain a near optimal portfolio by trading periodically using a transaction cost model to ensure that trading costs are kept to a minimum. We typically rebalance the portfolio once a month, depending on the volatility of the market. Turnover at these rebalances is usually between 10% and 15%. During the quarter, we increased our holdings in Impala Platinum, AngloGold and MTN. We added Mr Price to the portfolio at the expense of the Foschini Group and took profits on our Sasol and African Rainbow holdings.

Portfolio positioning
The result of the above trades is that the portfolio is currently running at a tracking error of approximately 3% to the SWIX, with the total risk slightly lower than that of the market. On a sector level, the portfolio is overweight resources and financials, and underweight industrials. As always, we aim to outperform the SWIX through an active stock selection process using proprietary quantitative techniques. We use a bottom-up stock selection process, favouring companies with an improving earnings outlook at a reasonable valuation level. Our quantitative model did well over the quarter, with our valuation and sentiment factors being the most reliable performers. Earnings certainty, which was a strong performer earlier in the year, had a negative quarter, while the performance from our technical factors was mixed. Looking forward, we are confident that our sophisticated quantitative stock selection methodology will continue to differentiate prospective winners from losers. Our disciplined portfolio construction, risk management and implementation skills should ensure that the alpha opportunities identified are translated into meaningful returns for your portfolio.