Meaningful and synchronized improvement in global growth has continued this quarter. Business sentiment indicators remain very strong with improvements across emerging markets. Over the quarter, developed equity markets were yet again strong across the board in dollar terms. Hong Kong (up 8.5%), Germany (up 7.7%) and France (up 7.8%) were again the outperformers. Emerging markets were also strong (up 8.0% in dollar terms).

The local economic outlook remains weak as confidence remains damaged by the actions of government and continuous news of rampant corruption in the public sector. Investment has contracted and household consumption growth has slowed to a crawl. State owned enterprises continue to be generally mismanaged, the mining sector faces a huge threat from a poorly constructed new Mining Charter, and there have been signs of the hollowing out of experience and credibility within the National Treasury. Against a very favourable global growth backdrop, South Africa's growth outlook is expected to remain one of weakest amongst emerging markets. The outcome of the ANC elective conference in December will be very important in determining the direction of future policy and the government's capacity to effectively implement it, and hence long-term growth prospects.

Despite the economic issues, the local equity market was also strong over the quarter (the All Share Index up 8.9%). Resources (up 17.7%) outperformed this quarter, with Anglo American and BHP Billiton contributing materially (up 42.2% and 22.2% respectively). Other strong performers were Kumba Iron Ore (up 39.8%) and African Rainbow Minerals (up 28.9%).

Industrials were also strong (up 8.3%), with heavyweights Naspers (up 15.0%) and Richemont (up 16.0%) contributing significantly, while British American Tobacco (down 4.2%) lagged. With the exception of Pick 'n Pay (down 2.4%) and Woolworths (flat), retailers were stronger after the weak previous quarter (Clicks up 12.9%, Truworths up 10.5%, Shoprite up 5.3%). Food producers were again weak this quarter (index down 1.0%). Financials were stronger this quarter (up 6.1%) as Insurers rebounded and Banks performed well.

The fund performed marginally below its Benchmark, the FTSE/JSE Top 40 Index, which closed the quarter up 9.98%.

Global growth remains low, but the outlook has improved as evidenced by a strong pickup in a broad array of sentiment indicators globally. Against a backdrop of improving global risk appetite, developed equity markets were strong across the board in dollar terms. The MSCI Word Index closed the quarter up 6.5% with Hong Kong (up 9.9%), Germany (up 8.8%) and the French market (up 7.1%) outperforming. Emerging markets were also very strong with the MSCI Emerging Market Index closing up 11.5% in dollar terms.

Locally, the South African economy remains weak although expectations are for an improvement in growth this year due to a recovery in agriculture and mining. Recovery expectations are further aided by a much improved inflation and interest rate outlook due to a recovery in the currency. However, it is clear that a more meaningful improvement will need increased private sector confidence and investment. This is unlikely, due to high policy uncertainty and lack of meaningful growth enabling reforms.

The dramatic events of late March, in particular the very negative leadership changes within the National Treasury, have added significantly to policy uncertainty and have materially eroded the previously high levels of investor confidence in this key institution. The subsequent foreign currency rating downgrades were therefore to be expected and further downgrades are likely if the economy continues to be weak.

The local equity market gained 3.8% over the quarter resulting in a one year return of just 2.5%. Industrials (up 7.1%) outperformed this quarter, with material contributions from index heavyweights (Richemont up 16.8%, British American Tobacco up 15.8%, and Naspers up 14.9%). The basic materials sector was positive this quarter (up 2.7%) while Financials (down 1.9%) underperformed.

The fund performed broadly in line with its Benchmark, the FTSE/JSE Top 40 Index, which closed the quarter up 3.9%.

There has been a fairly meaningful and synchronised improvement in global growth in 2017. Sentiment indicators remain positive, and there are now early signs that business investment is improving. Over the quarter, developed equity markets were again strong across the board in dollar terms. Hong Kong (up 8%), Germany (up 6.8%) and France (up 9.2%) were again the outperformers. Emerging markets were also strong (up 6.4% in dollar terms).

The local economic outlook has worsened over the quarter as confidence has been dented by the actions of government and continuous news of rampant corruption in the public sector. The cyclical rebounds in agriculture and mining have not been enough to offset weakness in consumption and manufacturing sectors. This challenging environment ensures that business confidence, and the private sector's appetite for investment that is necessary to create growth, is severely supressed. A positive is that strong, broad-based emerging market inflows are supporting the Rand and, together with a weak oil price, are dampening inflation and creating room for moderate interest rate cuts.

Against this backdrop, the local equity market lost 0.4% over the quarter resulting in a low one-year return of 1.7%. Industrials (up 3.4 %) outperformed again this quarter, with Naspers contributing materially (up 9.9%). With the exception of Shoprite (up 3.0%), retailers were significantly weaker (Massmart down 22.5%, Truworths down 17.4%, Woolworths down 11.8%, Pick 'n Pay down 9.1%). Food producers were also weak (index down 8.3%).

The basic materials sector closed the quarter down 7% as weaker commodity prices and a stronger currency weighted on gold and platinum shares in particular. Financials were flat (up 0.3%) with Insurers generally weaker and Banks offering a mixed performance over the quarter.

The fund performed marginally below its Benchmark, the FTSE/JSE Top 40 Index, which closed the quarter up 0.94%.

Over the quarter, emerging markets underperformed developed markets with the MSCI Emerging Market Index down 4.1% versus the MSCI World up 2%. Despite a generally negative final quarter, emerging markets (with the exception of Turkey and India) had a positive year with the MSCI Emerging Market Index closing the year up 11.6%. For the final quarter, developed equity markets were mixed in dollar terms, with Hong Kong and UK stocks down, while German, French and US markets were positive. For the year, US markets were the best performing developed markets (S&P 500 index up 12%).

In South Africa, economic growth remains very weak and is expected to improve only moderately in the medium term, as the agriculture and mining sectors recover from low levels. The exchange rate, which remains very sensitive to political developments, has recovered significantly in 2016 from oversold levels. This has improved inflation expectations and the interest rate outlook, offering some relief to a subdued consumer. Unfortunately, much of this respite will be offset by expected increases in consumer taxes.

SA sovereign ratings remained unchanged however the S&P retained their negative outlook with the next review in June 2017. A meaningful improvement in the political backdrop in the form of policy certainty and growth enabling reforms is needed in order to mitigate the risk of downgrade. ANC succession dynamics will be a key focus ahead of the ANC elective conference in December 2017.

The local equity market lost 2.1% over the quarter and finished the year relatively flat (up 2.6%). After three successive quarters of strong performance the resource sector was down marginally this quarter, but with significant internal divergence. General mining was up 9.3%, while gold and platinum mining were down a significant 35.5% and 33.0% respectively, following sharp falls in precious metal prices. Resources remained the top performing sector (up 29.0%) for the year, with the platinum sector posting a recovery from a low base (up 50.5%).

Industrials (down 5.4%) underperformed this quarter with a number of highly rated shares under pressure including Naspers (down 15.2%), Brait (down 20.7%) and British American Tobacco (down 11.3%). Industrials closed the year down 8.3% with the poor performance across most sectors mitigated to some extent by a good performance out of General Industries (up 23.8%), Food producers (up 23.3%) and Fixed line Telecoms (up 22.1%).

Financials outperformed, closing the quarter up 3.2% and the year up 3.6% driven by a strong performance from the banking and non-life insurance sectors (up 33.6% and 32.9% respectively for the year).

The fund underperformed its benchmark over the quarter and year, driven by costs incurred from flows and large index changes that resulted in higher than average levels of trading.