Kagiso Top 40 Tracker comment - Sep 08 - Fund Manager Comment29 Oct 2008
The third quarter of the year was characterised by a marked sell-off across both developed and emerging markets as the US housing led credit crisis deteriorated into a full blown liquidity crisis. The stalling of the credit markets and a further markdown in sub-prime related assets were among the reasons which led to the failure of several high profile financial institutions and an unravelling of confidence across all equity markets.
Against this backdrop, both developed and emerging equity markets posted sharply negative dollar returns. For the quarter ending September 2008, the FTSE 100 ended down 21.2%, the Nikkei lost 16.6% while the S&P 500 closed the quarter down 8.4%. Emerging markets, in general performed worse, with the MSCI emerging market index closing down 27.6% in dollar terms.
The local bourse also ended the quarter in negative territory with the FTSE/JSE Top 40 index closing down 23.3%. Across the major sectors local resources were the worst performing sector as commodity prices in general suffered significant declines amid renewed concerns around global growth. The FTSE/JSE Resources index closed the quarter down 31.3% with commodity prices in general closing the quarter well below their previous quarter's close - platinum was down 51%, oil down 28% and base metals were down strongly (e.g. copper down 26%). The FTSE/JSE Industrial index ended the quarter down 4.4% while the FTSE/JSE Financial index ended the quarter up 11.9%. Interest rate sensitive stocks, in particular the banks and retailers, had a strong quarter as the outlook for inflation continued to improve. The Fund performed in line with its benchmark over the quarter and relative to its peers, the Fund remains the top tracker fund over a 1-year, 3-year and 5-year period.
Aslam Dalvi
Portfolio Manager
Kagiso Top 40 Tracker comment - Jun 08 - Fund Manager Comment21 Aug 2008
US markets had a positive start to the second quarter of 2008 with the S&P 500 rebounding off its first quarter lows. The recovery was, however, short-lived as worsening inflation expectations and concerns around a slowing US economy saw the S&P 500 end the quarter down 3.2%.
Food and energy related inflationary concerns were key themes across most major markets as commodities, in particular oil, continued to surge ahead. Brent oil futures ended the quarter up 39.4%, while spot Brent closed the quarter at $141 per barrel. Amid these concerns developed markets were generally weak with the CAC 40 (down 3.5%), the Hang Seng (down 2.4%), and the FTSE 100 (down only 0.2% but aided by a strong performance in heavyweight oil stocks) all closing lower. The Japanese markets, however, held their ground with the Nikkei 225 ending the quarter up 1.1%. Emerging markets posted mixed results for the quarter with the MSCI Emerging Market index closing down 1.4% in dollar terms.
Against this backdrop, the local market performed reasonably well with the FTSE/JSE All Share index closing up 3.4% for the quarter. The positive quarterly return was driven by a stellar performance from the local Resource index which posted a quarterly gain of 13.4% on the back of higher commodity prices and renewed rumours of corporate action amongst the majors. The rest of the market remained weak with the Industrial and Financial indices both closing down. The FTSE/JSE Industrial index fell by 2.7% while the FTSE/JSE Financial index fell by a massive 14.5% as negative global sentiment toward financials continued to weigh on local counters.
The Fund continues to perform well relative to its peers and is the top performing tracker fund over the 3 year period ending June 2008.
Aslam Dalvi
Portfolio Manager
Kagiso Top 40 Tracker comment - Mar 08 - Fund Manager Comment24 Apr 2008
Worsening credit markets and the increasing probability of a US recession saw World markets end the quarter in negative territory. In dollar terms the S&P 500 fell 9.4%, the FTSE 100 fell 10.6%, and the Nikkei 225 lost 8.2%. Emerging markets on average fell by a similar amount with the MSCI Emerging Markets index closing the quarter down 10.9%. Within the emerging markets basket, MSCI China (down 23.7%), MSCI India (down 27%), and MSCI Turkey (down 38.3%) were the worst performing markets.
The US Federal Reserve acted vigorously to contain the unfolding credit crisis by drastically increasing liquidity to the market (both through significant reductions in the Fed rate and direct rescue packages in the investment banking sector). This stimulus was viewed as inflationary and consequently the US dollar weakened by 8% to the Euro and ended the quarter at 1.576 to the US Dollar. With rising inflation fears and financial market instability, gold rallied by 9.9% reaching an inter quarter high of $1011.
Against the backdrop local markets performed reasonably well with the FTSE/JSE Top 40 Index closing the quarter up 5.1%. In dollar terms however the market was down 11.45% with the Rand depreciating by 18.7% against the dollar and 28.3% against the Euro. The weakening currency coupled with stubbornly high commodity prices saw the local Resources index close the quarter up 16.5%. The local financial index however ended the quarter down 13.4% as negative sentiment towards banks continued to weigh on the index. The local industrial index (down 5.5%) also ended the quarter in negative territory as concerns around the health of the SA consumer, rising inflationary pressures and the impact of electricity shortages on the economy took centre stage.
The Fund return of 4.3% (net of fees) over the quarter was below that achieved by its benchmark, the FTSE/JSE Top 40 index (which returned 5.1% over the quarter). The performance mismatch was largely due to the futures position in the fund which underperformed the spot index over the quarter as well as trading costs incurred from index rebalancing. Relative to its peers within the General Equity Large Cap universe, the Fund continues to perform well and is ranked as the Top tracker fund over the 3 year period ending March 2008.
Aslam Dalvi
Portfolio Manager
Kagiso Top 40 Tracker comment - Dec 07 - Fund Manager Comment14 Mar 2008
World markets ended the quarter in negative territory with the MSCI World Index losing 2.3% in US dollar terms. The subprime fallout in early August and the resultant credit squeeze continued to be a key driver of performance over the quarter.
A downturn in the US housing market, the expectation of further sub-prime losses, tighter credit markets and the potential spill-over impact on the US consumer once again re-ignited fears of a US recession and saw developed markets end the quarter in negative territory. In response to the deteriorating credit markets and amid renewed concerns around sub-prime losses, central banks moved to ease the current crisis by adopting a more accommodative monetary policy and by pumping additional liquidity into the monetary system.
Despite these efforts, markets moved lower over the quarter as investors remain concerned with the impact of a slowing US economy on global growth. Across developed markets headline indices closed weaker with the S&P 500, the Nikkei 225 and the FTSE 100 closing down 3.8%, 8.8% and 0.2% respectively. The near term outlook remains uncertain and investor confidence will likely remain fragile as the credit squeeze unfolds.
With developed markets reeling from the turmoil in credit markets, emerging markets posted a respectable return, with the MSCI Emerging Market index closing up 3.4%. In dollar terms, markets such as India (up 23%) and Russia (up 17%) were the top performers over the quarter while the Chinese market (down 3.6%) moved lower on renewed concerns that key export sectors would be negatively impacted by a slowing US economy.
The local market followed developed markets into negative territory with the FTSE/JSE All-share index closing the quarter down 3.0%. Resources was the worst performing sector, driven by falls in the local mining counters. Weaker prices for industrial metals and concerns around escalating costs for both the gold and platinum producers saw the FTSE/JSE Resources index close the quarter down 7.5%.
The FTSE/JSE Financials index closed the quarter down 0.7% driven by continued negative sentiment from the credit crisis and higher interest rate expectations - as the local inflation outlook continued to deteriorate. Within financials, Real estate and banking stocks were the worst performers over the quarter, with the FTSE/JSE Real Estate and FTSE/JSE Banking index closing down 3.2% and 1.8% respectively. The insurers generally had a strong quarter with the FTSE/JSE Life Insurance index and FTSE/JSE Non-Life Insurance index returning 3.3% and 8.9% respectively.
The FTSE/JSE Industrial index continued to build on last quarter's positive momentum (+3.3%) and ended the quarter up 1.7%. Within industrials, the FTSE/JSE Mobile Telecommunications index was the star performer returning 22.3% over the period. The Leisure and Fixed Line sectors were the worst performers over the quarter losing 20.7% and 20.5% respectively.
For the quarter, the Kagiso Top 40 Tracker Fund outperformed its benchmark, the FTSE/JSE Top 40 index, by 0.4%. The Fund ended the quarter down 3.0% relative to its benchmark, which closed the quarter down 3.4%. The Fund remains the top index tracker within the unit trust General Equity Large Cap sector over the 3-month, 2-year and 3-year periods. All index changes that occurred during the quarter were timeously acted upon so as to minimise the relative risk in the fund.
Aslam Dalvi
Portfolio Manager