The Saffron BCI Flexible Fund underperformed the benchmark over the quarter, returning - 3.07% vs the ALSI of -2.25% and the category average rising 0.39%. The fund’s relative low equity position was offset slightly by weakness in SA government bonds, as well as a 30bp loss from the write down of the RedInc instruments that referenced the Bridge Taxi issuer.
Sentiment was mixed in global markets as the AI boom continued to support the rally in the US despite a reversion in rate expectations, while key EM markets struggled particularly in China and South Africa as global growth sentiment outside of Tech was weak.

The US was the notable winner for the quarter, up 10.16% as NVIDIA continued to pull the index higher on AI buzz, while the key Asian markets were mixed. Of note, Japan put an end to negative interest rates for the first time in more than a decade, which didn’t seem to hurt sentiment in the country as the Nikkei continued to record highs, while in China, the Hang Seng continued to reel from the weaker growth and stumbling property market.

Gold was a notable outperformer, reaching record highs on a combination of uncertainty, central bank demand and some dovish sentiment on rates. Brent Crude continues to hold above $85 amidst tensions in the Middle East and supply worries.

Asset classes on the JSE were all negative over the period, with the FINI15 being the worst performer of the major indexes (returning -7.67% for the period) while the INDI25 returned 0.21%. The FINI performance can be attributed to a few large movers and to large-cap names toppling from highs. Notably, holding companies Remgro and Reinet were hit during the period, while Standard Bank and ABSA both fell post results, with SBK having nowhere else to climb despite a decent set of results, and ABSA struggling to keep up. The RESI was pulled up by gold miners, specifically those domiciled in SA, as the gold price coupled with ZAR costs were leveraged into outperformance. The opposite moves were observed in base metals as Iron Ore struggled, dragging Kumba and ARM with it.

Small Cap names and Mining counters dominated the quarterly winners, with Blue Label Telecoms and RCL foods being among the Gold Miners for the notable winners of the quarter. Multichoice was the best performer, with significant gains of 40.21% on the back of continued acquisition interest from CANAL+.

During the quarter, we saw the Rand depreciate against the dollar a further 2.96%, reaching 7.78% depreciation over the year, with even more drastic depreciations against the pound (13.13%) and euro (10.63%). This left the fund exposed to slight underperformance of the benchmark due to the peer group carrying offshore holdings, while the fund is local-only.
The fund outperformed the benchmark on the quarter to end the year (7.01% vs 5.92%), with a beneficial overweight holding of government bonds and South African fixed income instruments benefitting the fund while the peer group retains a higher offshore exposure.