Performance
For the quarter, the fund returned -2.5% vs. the benchmark (2.5%) and the JSE Swix (-3.2%). Annual performance was -9.7% vs. the benchmark (10.9%) and the JSE Swix (3.9%).

For the quarter the biggest contributors to performance were local banks supported by a stronger rand and a rally in global banks. The fund also has no exposure to Gold and Platinum stocks, which had a poor quarter, returning minus 12%. Over the year the best performance was from Capitec and the JSE, whereas offshore property and rand strength was the biggest detractor.

Domestic Equity
The US Presidential election has brought a very strong Dollar, a large rally in global cyclicals, and a much higher US Treasury 10 year yield. The Rand was stable against the dollar over the quarter.

The best performing sector was local banks, on the back of the stable Rand and the strength of Global Banks. The fund is overweight this sector. Gold and platinum shares have had a poor quarter and as the fund has no exposure, this was a large contributor to outperformance. Gold and Platinum stocks have struggled to earn acceptable returns over the last 8 years and in most cases barely generate enough cash to fund current capital spend. We see the current low ratings of Price to Book as being a reflection of the poor returns and not a signal that they are cheap.

The biggest detractor from this quarter has been exposure to stable, defensive stocks such as Anheuser Busch, Shoprite and Offshore Property. At a global equity level cyclical stocks have had one of their best quarters vs. defensive companies since 2009.

Domestic retailers continue to struggle with Pick n Pay and Woolworths being the two worst performers in the portfolio. Other domestic stocks such as Bidvest, Imperial and Telkom all did well. We have continued to add to the domestic cyclical portion of the fund. With short rates peaking alongside food inflation, the worst of the economic slowdown is probably behind us.

Global Equity
Over the quarter, the USD appreciated 7.1% against a basket of major currencies. The fund has significant exposure to USD strength with 70.5% allocated to the US. Post the election in November, expectations for strong economic performance in the US have increased. Unemployment is at 9 year low at 4.6%, average hourly wage growth is at 2.9% annualised, and GDP growth came in at 3.5%. Particular performers were Boeing (18.6%) and Time Warner (21.3%) on the back of a take-over by AT&T.