The fund returned 3.48% and 10.24% for the quarter and year respectively. In comparison, the benchmark (CPI plus 2% p.a. over 12-month rolling period) returned 1.00% and 6.19%. Over a rolling 1-year period, the fund exceeded the benchmark return by 4.05%. For the quarter, the fund outperformed the All Bond Index (ALBI) which returned 1.73&. The fund increased duration to 3.92 tears frin 2.78 years versus the ALBI's duration which decreased by 23bps to 6.83 years. The running yield was increased to 10.66% from 10.10% over the quarter, compared to the ALBI's running yield at 9.15% as at quarter end.

Equities (ALSI Total Return) were the top performer for the quarter at +4.64% followed by Cash at +1.74% (STEFI Total Return), Bonds at +1.73% (ALBI Total Return Index) and Property at +0.58%. Inflation-linked bonds returned -0.91% for the quarter. Over a rolling 12-month basis, Equities were the top performer at +12.05%, followed by Bonds at +10.32% and Cash at +7.29%. Property posted the lowest return of +1.93%.

The US Federal Reserve announced its last policy rate decision for the year, maintaning the Fed Funds target rate range at 1.50% to 1.75%. The Fed cut rates three times over the course of 2019. The FOMC stated that the labour market continues to remain strong, household spending is rising at a strong pace, but that business investment remains weak. Inflation continuest to remain below the 2.0% target. The dot plot now expects rates to remain unchanged in 2020, with one hike each in 2021 and 2022. The US House of Representatives impeached President Donald Trump on charges of abuse of power and obstructing of Congress. The Senate will hold a trial early in 2020 to decide whether the president should be convicted on the charges and removed from offices. With the Republicans holding the majority in the chamber, the expectation is for President Trump to be acquitted. The US 10-year Trasury yield traded 25bps higher (1.6% to 1.92) at quarter end, while the Dollar Index wakened significantly from 99.38 to 96.39. 3-month USD Libor decreased to 1.91% down 18 bps and 90 bps QTD and YTD respectively.

European yields continue to move higher: the German 10-year generic yield became less negative, trading 18 bps higher at mont-end at -0.19%, while the French 10 Year yield rose 17 bps and moved into positive territory, closing the month at 0.12%. The Bank of England (BOE) kept interest rates unchanged at 0.75% at their last meeting of the year on the 19th of December. Two members voted for a 25bp cut in rates citing the lower growth outlook and a turn in labour markets as concerns. The committee voted unanimously to hold the stock of gilts and corporate bonds at GBP 435bnand GBP 10bn respectively. Inflation is expeceted to remain below the bank's 2.00% target until late into 2021. the UK held their general elections on the 12th of December, which resulted in a resounding victory for Boris Johnson's Conservative Party. The election outcome should provide Mr Johnson's Brexit plan passing Parliament, however a lot of uncertainty around the future trading agreements remains. The last European Centra Bank (ECB) meeting on 12 December went as expected, with the new Bank president, Christine Lagarde, annoucing that interest rates would be kept stable at 0.0% and that rates will remain unchanged until inflation increases to the target rate of below but close to 2.0%. The asset purchase programme will continue until shortly before the ECB deems the time as appropriate to begin rasing rates.

The Commodity Research Bureau (CRB) indices recovered in the fourth quarter. The CRB Commodities Index returned 3.6% (-1.9% YTD), with the CRB Metals Index returning 4.4% (-9.4% YTD). The CRB Food Index returned 4.8%. At quarter end, Brent traded at USD66.00, up 8.6% for the quarter The rand price per barrel was flat for the quarter as the rand appreciated by 7.88% against the dollar, trading at ZAR926.89 per barrel (+0.3%). Platinum (+9.5% QTD, +21.5% YTD), AND GOLD (+3.0% qtd, +18.3% YTD) performed strongly.

The J.P Morgan Emerging Market Bond Index traded slightly higher at 881.83 at quarter end (up 2.1). The JPM EMBI spread closed the quarter at 298.02 (down 25.42 bps). Emerging Market 5 year Credit Default Swap spreads tightened: Turkey's spread tightened the most (-75.85, followed by Mexico (-36.96 bps), Russia (-30.81 bps), South Africa (-30.09 bps) and China (-16.50 bps). The VIX Index, which measures risk sentiment, traded lower at the end of the quarter at 13.78 from 16.24.

Over the quarter, the rand appreciated agains the most of the major urrencies, including the British pound (+0.6), the Australian dollar (+4.1%), the US dollar (+7.9%), the Euro (+5.1%) and the Japanese yen (+8.2).

The South African Reserve Bank (SARB) kept the repo rate unchanged at 6.50% athe November MPC meeting. Two members preferred rates to be lowered. The QPM now projects a 25bp cut in the third quarter of 2020. in contrast to the September meeting where the model showed no changes over the period. The Governor reiterated that the committee would like to see inflation came in at 3.6% y/y for November, in line with expectations, down from 3.7% y/y in October. The 0.1% decline in the number is attributed to a decline in the transport component. Foord inflation remained stable at 3.5% y/y.

The third quarter GDP disappointed after printing at -0.6% y/y, even less than the expected 0.0% q/q. Growth moderated to 0.1% sectors contracted in the quarter, with the biggest decline coming from mining (-6.1% q/q), transport (-5.4%) and utilities (-4.9%). The trade sector and general sentiment is however sstill weak amid growing concern of the underwhelming pro-growth reform traction and an increasingly fragile global economy. The current account deficit widened to 4.0% of GDP from 2.9% previously, the highest level since 1Q19. The figures reflect a weak trend in eports while imports rebounded. The value of net gold exports dropped for the third quarter in a row.

State-owned enterprises (SOEs) are continuing to put fiscal pressure on the SA government. South African Airways was placed under business rescue and has since entered a process to allow "radical restructuring"under which the carrier will receive R4bn in funding. This process will however allow SAA to continue operating. Electricity producer Eskom has implemented load shedding towards the end of the year as sabotage contributed to record power cuts across South Africa. Eskom warned that the power system continues to remain "vulnerable and unpredictabe".

In November, Moody's kep South Africa's rating at investment grade, but changed the outlook to neative from stable. Moody's also significantly changed SA's position on the scorecard, moving it down two notches, from the Baa1-Baa3 range, to the Baa3-Baa2 range (Baa3 is investment grade, while Ba1is non-investment grade). The next rating decision will take place in March 2020. In December, Fitch kept South Africa's long term foreign and local currency debt ratings at BB+, one notch below investment grade, with a negative outlok. According to the ratings agency, SA's ratings are constrained by low growth, high and rising government debt, large contingent liabilities as well as the risk of rising social tension due to high inequality. The ratings however remain supported by a strong institutional framework, a favourable government debt structure and deep local markets.

Non-residents were net buyers of South African bonds (+R3.8bn), taking the YTD outflow to R28.8bn. The short end of the curve including the R208, r2023 and R186 returned a total return of 0.56%, 1.19% return, however the strongest positive returns came from the R2048, which returned 2.65% for the quarter. Spreads widened over the quarter, steepengin the yield curve on the back of a deteriorating long-term outlook for the South African sovereign. The R2032-R186 spread traded at 77bps from 68 b[s (+9bps), the R209-R186 spread widened by 23bps to 183 bps. The long end of the curve will remain under pressure as the outlook for SA's fiscal position deteriorates.

On a arolling one-year basis, the fund aims to eceed a benchmark of CPI +2.0% and the target total return of the South African all Bond Index.