Global Market Overview
Global equity markets displayed a significant degree of volatility during June, with few developed markets posting positive returns. This resulted in the MSCI AC World $ index losing 0.3% over the month. In contrast, some emerging markets posted very solid returns, such a Russia, which rose 6.6% assisted by the stronger oil price. The MSCI Emerging market $ index ended 4.4% higher for the month.

In the currency markets, the dollar ended lower against most major currencies. It lost 1.4% against the pound, closing above the 2 dollar-to-the-pound level. In the commodity markets, oil prices rose sharply whilst most precious metals closed slightly lower. Brent Crude ended 6.6% higher during the month, which brings the rise to 23.2% for the year-to-date.

Concerns about the health of the US economy eased over the past three months as incoming data pointed to a notably improved growth rate, this despite a still weak housing market. The rest of the world continues to grow strongly, with emerging Asia and the Euro-area leading the charge and growth forecasts still being revised upwards. Consequently, across the globe there is ongoing concern about inflation and central banks are still hiking interest rates. These include Australia, New Zealand, the UK and EU. Global interest rate risks remain skewed to the upside as growth is strong and underlying inflation risks have risen. However, we do not believe policymakers will tighten so aggressively as to risk a serious growth downturn in 2008.

Last month we noted that with real yields rising, one of the large positive drivers for equities is slowly diminishing, namely excess liquidity. This is not to say equity markets can't rally further. With earnings still solid, public participation in equity markets still relatively low and fair valuations, equity markets could likely continue its rally for longer. It is however important to note that early warning signs are starting to appear and even greater vigilance is necessary.

The All Share index posted solid 6.4% return in March. The Resource 20 index returned a very significant 11.1%. Although small versus the performance within the resource index, the 2.9% return from the Industrial 25 index and the 3.1% return form the Financial 15 index was still a very solid performance.

Global equity fundamentals remain positive despite the current turmoil. Economic growth is strong, inflation looks to be under control, no further significant interest rate hikes are expected and as a bonus equity valuations are attractive relative to other asset classes. The picture for local equities is not dissimilar as the positive local economic fundamentals provide great comfort for investors.

Short term corrections within a longer term up trend are to be expected but this does not change our view that equities remain the asset class of choice going forward.

The Select Manager Flexible Growth FoF returned 3.63% for March. The BlueBay Visio Actinio fund posted a very strong return of 6.0% during March as stock selection proved superb.

The All Share index posted another solid return of 4.2% during December. This brought the return for the year to 41.2%. The advance of Resource stocks were again halted by the strength in the currency during the month. The Resource 20 index ended the year 44% higher, the Industrial 25 index 40.8% higher and the Financial 15 index 25.9% higher. The Small cap index was the best performer of the major indices, returning 44.1% for the year. As noted last month, we expected further advances in equity prices during December. For this reason we increased our holding in the pure equity funds from 31% to 36% by reducing the position in the Stanlib Income fund.
Equities are not cheap versus global equities, but versus other local asset classes it remains the asset class of choice. Risks are however not negligible and we remain vigilant on this front. A continuation of the current rally is plausible.

The Select Manager Flexible Growth FoF returned 3.52% for the December and 23.5% for 2006. This represents a strong outperformance of the fund's benchmark of Stefi +4%.