In dollar terms, world markets had a disappointing quarter with the MSCI World Index closing down 16.5%. Increased concerns around the Eurozone debt crisis saw emerging markets and key Eurozone markets close down sharply. The S&P 500 closed the quarter down 13.9%, the FTSE 100 closed the quarter down 15.5% while the German and French bourse ended the quarter down 31% and 30% respectively. Within emerging markets, Russia (down 31%), Brazil (down 29.4%) and China (down 25.2%) were among the worst performers.

With increasing risk aversion most commodity prices also came under pressure and, apart from gold which ended the quarter up 8.2%, precious metals, oil and base metals were all weaker. The weaker Rand provided some support to our local market as the currency ended the quarter at R8.09 to the dollar, 19.7% weaker than its previous quarters closing level.

The FTSE/JSE All Share Index ended the quarter down 5.8% benefiting to some extent from the weaker currency. Across the major sectors, the FTSE/JSE Resources Index closed the quarter down 10%, while the FTSE/JSE Industrial Index and FTSE/JSE Financial Index closed the quarter down 3.3% and 3.1% respectively.

The fund delivered a return marginally below its benchmark, the FTSE/JSE Top 40 Index, which closed the quarter down 6.6%. All index changes that occurred during the quarter were timeously acted upon so as to minimise the relative risk in the fund.

World markets had a lacklustre quarter with the MSCI World Index closing up 0.7%. Weaker economic data, concerns around the Eurozone debt crisis and increasing risk aversion saw developed markets generally outperform their emerging market counterparts. In dollar terms, the S&P 500 and FTSE 100 ended the quarter in positive territory (up 0.1% and 1.7% respectively), while key emerging markets such as China (down 1.7%), Brazil (down 5.3%) and Russia (down 5.4%) were weaker.

Commodity prices were generally weaker with the exception of gold which ended the quarter up 4.8% in dollar terms. The local currency was broadly unchanged and closed at R6.76 to the dollar.

In line with other emerging markets, the FTSE/JSE All Share Index closed the quarter down 0.6%. The FTSE/JSE Resources Index ended in negative territory (down 5.8%), with lower commodity prices and renewed uncertainty around global growth all weighing heavily on the index. In contrast to the weaker resource counters, the local financial and industrial counters had a good quarter, supported to some extent by a surprisingly robust consumer environment. The FTSE/JSE Industrial Index and FTSE/JSE Financial Index ended up 3.7% and 1.3% respectively. Index changes over the quarter saw the fund trading frequently, but despite this, it continued to closely track its benchmark, the FTSE/JSE Top 40 Index, which ended the quarter down 1.3%.

Portfolio manager
Aslam Dalvi

Following on from a strong performance in 2010, world markets delivered a reasonable performance during the first quarter of 2011. The MSCI World index and MSCI Emerging Market index delivered a US dollar return of 4.9% and 2.1% respectively. However, the performance masks significant volatility experienced over the quarter. Political unrest in the Middle East and North Africa region and the Japanese natural disaster led to increased risk aversion and saw investors adopting a more cautious outlook on markets.

Commodity prices had a mixed quarter with oil up 23.9%, while platinum and copper closed the quarter marginally down. The local currency weakened slightly over the quarter and closed at R6.75 to the dollar - 2.0% weaker than its 2010 closing level.

In line with global markets, the FTSE/JSE All Share index closed the quarter up 1.1%. Rising commodity prices (in particular oil), combined with a slightly weaker currency, saw the FTSE/JSE Resources index close the quarter up 2.8%. The FTSE/JSE Financials index delivered a credible performance over the quarter (up 0.7%), while a poor performance from South African industrial counters saw the FTSE/JSE Industrial index lag the overall market (down 0.3%).

Index changes over the quarter saw the fund trading frequently and this marginally detracted from performance. Despite this, the fund continued to closely track its benchmark, the FTSE/JSE Top 40 index, which delivered a return of 2.2% over the quarter.

Portfolio manager
Aslam Dalvi

For the year 2010, world markets delivered a strong performance with the MSCI World index and MSCI Emerging Market index delivering a US dollar return of 12.3% and 19.2% respectively. The FTSE/JSE All Share index had a particularly strong year with the local index returning 19% in rand terms (34.2% in US dollar terms aided by the currency which strengthened 10.6% over the year).

For the quarter, world markets again posted solid returns with the MSCI World index closing up 9.1% in US dollar terms. Commitment by the US Federal Reserve to provide additional monetary stimulus, better than expected earnings in the third quarter and improving investor sentiment, were key themes that supported asset markets. Emerging markets underperformed developed markets over the quarter with the MSCI Emerging Market index closing up 7.4%.

Commodity prices in general had a strong quarter with palladium (up 39.1%), silver (up 42.1%) and coal (up 50.8%) among the top performers. The local currency also continued to strengthen and ended the quarter at R6.62 to the dollar, 4.9% stronger than the previous quarter's closing level. In line with global markets, the FTSE/JSE All Share index closed the quarter up 9.5%. Resources stocks had a stellar quarter with the FTSE/JSE Resources index delivering a return of 16.5% as rising commodity prices more than offset the negative impact from currency strength. The FTSE/JSE Industrial index also delivered a credible performance over the quarter (up 7.8%) while a poor performance from South African banking and insurance counters saw the FTSE/JSE Financial index lag the overall market (down 0.1%) in the fourth quarter.

The Kagiso Top 40 Tracker Fund continued to closely track its benchmark, the FTSE/JSE Top 40 index which delivered a return of 9.9% over the quarter. Index changes over the quarter saw the fund trading frequently and marginally detracted from overall performance.

Portfolio manager Aslam Dalvi