Global risk assets posted losses for September virtually across the board. Progress in the global economic recovery has been mixed. The Eurozone continues to face near zero growth and worsening disinflation. The United States on the other hand has been showing signs of improving economic conditions, particularly in the labour market. Emerging market assets have been weak as markets have begun to re-adjust their expectations of economic growth downwards.

South African Reserve Bank Governor Gill Marcus announced the end of her tenure at the September MPC press conference. She left rates unchanged at that meeting, passing the baton to her successor to normalise rates upwards. Subsequent to month-end President Zuma announced the appointment of Lesetja Kganyago as the new governor. He previously fulfilled the role of Deputy Governor of the Reserve Bank and we believe he has sufficient experience and credibility to provide confidence to the market. His rhetoric has been slightly more hawkish as compared to Governor Marcus and we believe he will step in to defend the rand through prudent monetary policy.

Local listed property returned 1.9% for the month, the only positive performing domestic risk asset class. Local Preference Shares (-1.9%), Equities (All Share Index: -2.0%) and Bonds (-1.5%) all posted steep declines. Money Market (+0.5%) was the second best performing asset class followed by Cash (+0.5%) and Inflation Linked Bonds (-0.1%).

US Stocks ended weaker as the S&P500 returned -1.2% despite hitting an all-time high during the month. The MSCI World Index fell -2.1% while the MSCI Emerging Market Index returning posted steep losses down -5.7%.

Volatilities ticked up markedly. The US VIX increased four percentage points to 17.3% while the Eurostoxx volatility increased 1.6 percentage points to 18.8%. SA volatility increased 1.8 percentage points to 17.3%.

During September, the Nedgroup Investments Opportunity Fund posted a modest decline amid a sharp sell-off in local equities. Domestic and foreign income generating assets as well as offshore equities aided performance during the month.

We continued selling bonds early in the month taking profits and bringing down the duration to 0.16 from 0.27 in the prior month. We have no exposure to inflation-linked bonds as yields in this asset class remain well below fair value. Subsequent to the redemption of the fixed income portion of the AFP preference share, we continue to hold its equity component which has now converted into the listed stock. Having increased our listed property exposure above 5% in recent months, we have held off from further buying as many stocks are looking fully valued after the recent run up in prices. Our exposure to convertible bonds was reduced to 4.9% as we sold some of these bonds, benefitting from the uplift resulting from credit spread compression in this space.

The net equity exposure of the Nedgroup Investments Opportunity Fund is 38%, which includes 7% exposure to foreign equities. Deteriorating valuations have reduced our expected return from equities, which explains our conservative levels of exposure. We have left protection strategies in place on several stocks which have run up sharply. Going forward we will continue to maintain a cautious approach and target risk exposures in the fund accordingly.

The net effective exposure at 30 September 2014 is a function of:

- Physical equity exposure (local 26%, offshore 7%);
- Plus option/future strategies (could increase or decrease net exposure - currently increasing effective equity exposure by 1%);
- Plus convertibles exposure (this is not the same as actual convertible holdings - currently adding about 4% to effective equity exposure).

The calm in global markets continued in June as the low volatility environment was supportive of asset prices. The European Central Bank has been promising further monetary policy easing and delivered it in June. The ECB cut the deposit rate to negative (-0,1%) for the first time in its history while the US Fed continued to adopt a dovish tone at its FOMC meeting even as it continued to scale back its quantitative easing program.

In South Africa, Property (+3.4%) and Equities (+2.8%) were the best performing asset classes. Bonds performed well (+0.95%) as yields ticked down at the long end of the curve. Inflation-Linked Bonds performed well due (+1.4%) to the higher inflation environment. Preference Shares lagged this month with a return of 0.19%, below the Cash return of 0.44%.

The rand was slightly weaker for the month, falling 0.6% against US dollar and 1% against the Euro. The pound rose to a new 5-year high against the USD during June as the British economy continues to recover. US Stocks continued their upward move as the S&P500 rose 2% to new all times highs. The MSCI World Index Delivered a return of 1.8% while the MSCI Emerging Market Index returned 2.7% on the back of a 5.4% rise in the Indian Stock Market.

Volatilities remained at low levels due to the calm market environment. SA volatility declined 1.3 percentage points to 12.7%. The US VIX index 0.2 percentage points up at 11.6% while Eurostoxx volatility decreased 0.5 percentage points to 15.3%.

During June, the performance of the Nedgroup Investments Opportunity Fund was driven by the domestic equity and convertible bond component as markets continued to rise. The offshore component of the Fund delivered value due to the currency and the performance of the underlying assets. During the month we trimmed our offshore bond exposure to take advantage of lower credit spreads.

After reducing duration last month, we maintained it at around 0.75 years in June as bonds show some value despite the weakening fundamentals. We have no exposure to inflation linked bonds as yields in this asset class remain well below fair value. Subsequent to the redemption of the fixed income portion of the Alexander Forbes preference share, we continue to hold its equity component as the company plans to relist in the coming months. We continue to see some value in listed property and have increased exposure from 2.6% to 6.6% in recent months. Our exposure to convertible bonds was cut from 13% to 8.5% as we found opportunities to take profit at attractive levels.

The net equity exposure of the Fund is 36%, which includes exposure to foreign equities. Deteriorating valuations have reduced our expected return from equities, which explains our conservative levels of exposure. We have left protection strategies in place on several stocks which have run up sharply.

The net effective exposure at 30 June 2014 is a function of:

- Physical equity exposure (local 22%, offshore 8%);
- Plus option/future strategies (could increase or decrease net exposure - currently reducing effective equity exposure by 4%);
- Plus convertibles exposure (this is not the same as actual convertible holdings - currently adding about 10% to effective equity exposure).

Going forward we will continue to maintain a cautious approach and target risk exposures in the Fund accordingly.

Global markets enjoyed strong risk appetite during March with both equity and fixed income assets delivering good returns. Emerging markets rallied hard as the month drew to a close. Global investors shrugged off escalating tensions in Ukraine, and negligible contagion effects were registered - despite the Crimean referendum's legality being disputed by several world powers. Listed Property was the best performing asset class returning 4.6%. Preference Shares, the second best performing asset class in March returned 3.0%, reversing the prior month's decline. Inflation Linked Bonds enjoyed continued strength returning 2.6% for the month. Nominal Bonds returned 1.8% with yields ticking down between 7 and 23 basis points across the curve. The short end of the yield curve was particularly strong. Both bonds and ILBs outperformed the money market return of 0.46%.

The rand gained 2.1% against the dollar and 1.2% on a trade weighted basis. Emerging Market Equities gained (+3.7%), outpacing Developed Market Equities (+0.8%). Global Bond yields were stable over the month which aided the recovery in EM Currencies and Bonds.

Volatilities moves were mixed in March. SA volatility declined 2.2 percentage points to 16.7%. The US VIX index decreased 0.1 percentage points to 13.9% while Eurostoxx volatility increased 0.9 percentage points to 17.7%.

During March, the performance of the Nedgroup Investments Opportunity Fund was driven by the domestic equity and bond component as markets rose strongly. The offshore component of the Fund was broadly flat, although offshore equities detracted modestly.

Regarding the Fund's fixed income and hybrid asset allocation, we trimmed duration to 0.99 from 1.18 as bonds strengthened. We have no exposure to Inflation Linked Bonds as yields in this asset class need to rise significantly before they show good value. We have a substantial allocation to convertible bonds which performed strongly due to a rally in the underlying equities. In addition, convertible bonds provide an attractive fixed income return. We continue to see some value in listed property and have increased exposure from 2.6% to 6.7% in recent months.

The net equity exposure of the Fund is 43%, which includes 10% exposure to foreign equities. Deteriorating valuations have reduced our expected return from equities, which explains our conservative levels of exposure.

The net effective exposure at 31 March 2014 is a function of:

-Physical equity exposure (local 22%, offshore 10%);
-Plus option/future strategies (could increase or decrease net exposure - currently adding about 1% to effective equity exposure);
-Plus convertibles exposure (this is not the same as actual convertible holdings - currently adding about 9% to effective equity exposure).

Going forward we will continue to maintain a cautious approach and target risk exposures in the Fund accordingly.

Global markets were once again dominated by the US Federal Reserve action. Following December's FOMC meeting, Fed Chairman Ben Bernanke announced the much anticipated reduction in Quantitative Easing Asset Purchases starting in January. The announcement came earlier than most market participants were expecting and resulted in a continued up-tick in global bond yields.

In SA, owing to both domestic and global factors, the rand continued to depreciate markedly against the dollar (-3,4% for the month). Fear of rand inflation pass-through has caused the market to price in interest rate hikes as early as Q1 2014. Despite downgrades in SA economic growth expectations, Gill Marcus stated in the most recent Monetary Policy Committee announcement that there is now no room for further monetary easing.

In local markets, preference shares were once again the best performing sector returning 5.1% for the month. The All Share Index rebounded strongly, returning 3.0% in December. Bonds were resilient, returning 1.1% for the month despite a broad uptick in global bond yields (US 10-year Treasury yield +28bp). Inflation linked bonds returned 1.1%. Listed property returned 1.0% offsetting prior losses and cash returned 0.5%.

Local market volatility ticked up 0.3 percentage points to 16.92. The US VIX index was broadly unchanged 13.7% while Eurostoxx volatility increased 2.6 percentage points to 17.3%. '

During December strong performance came from our equity allocations - both domestic and foreign - with our positions in Chinese consumer stocks outperforming. Our allocation to local bonds also contributed to performance.

Valuations of both domestic and global equity markets continue to look stretched. We have maintained protection strategies on several stocks which have run up sharply.

We decreased the Fund duration to 0,63 years from 0,93 years by taking profits on bonds into a rally towards the end of the month. By month end bond yields had sold off again and are now moving closer to fair value. We are conservatively positioned from an interest rate perspective as the significant upward move in yields we were anticipating has begun to materialise. Inflation linked bond yields are well below fair value and we continue to have no exposure to this asset class. Convertible bonds provide an attractive fixed income return with upside participation and we have a significant exposure to this asset class.

The net equity exposure of the Fund increased to 41% from 39% as the market ran up. We are looking to reduce our equity exposure following the rally.

The net effective exposure at 31 December 2013 is a function of:

- Physical equity exposure (local 24%, offshore 10%);
- Plus option/future strategies (could increase or decrease net exposure - currently adding about 1% to effective equity exposure);
- Plus convertibles exposure (this is not the same as actual convertible holdings - currently adding about 6% to effective equity exposure).

Going forward we will continue to maintain a cautious approach and target risk exposures in the Fund accordingly.

The key event in September was the surprise announcement that the US Federal Reserve would delay its wind down of Quantitative Easing, which lead to an increased appetite for risky assets. In contrast, the South African Reserve Bank has now started to shift its policy stance, preparing the market for a potential rate hike on the horizon. US bond yields pushed lower by 17 basis points, almost completely offsetting the previous month's sell off. Local bond yields moved in concert with the US, strengthening 62 basis points.

In September, South African nominal bonds and inflation linked bonds returned 3.9% and 2.8% respectively. The property sector rebounded with the SAPY Property Index climbing 6.7% on the back of falling bond yields. The local equity market performed well with a return of 5.1%, driven by the FINI15 Index which delivered 6.5%. Preference shares were flat for the month. Global equities rebounded, with the MSCI World Index and MSCI Emerging Market Index delivering 5.0% and 6.5% respectively. The rand enjoyed a modest reprieve from its weakening trend, appreciating 2.5% against the USD on the back of broad dollar weakness and 0.6% on a trade weighted basis.

Volatilities moderated due to positive sentiment in the market. The US VIX index declined 0.4 percentage points to 16.1% while Eurostoxx volatility declined 4.0 percentage points to 19.5%. Volatilities in South Africa declined 3.2 percentage points to 16.1%.

During September the Nedgroup Investments Opportunity Fund's performance was driven by the performance of local and foreign equities. The fixed interest positions also delivered performance, with exposure to local and offshore convertible bonds adding to returns.

Valuations of both domestic and global equity markets continue to look stretched, and we will look to trim equity exposure into market strength. We have implemented protection strategies on several stocks which have run up sharply.

Having rallied dramatically during the month, we saw reduced value in nominal bonds and sought to lock in returns. Reflecting this view, the Fund duration was reduced to 0.55 years from one year by selling a combination of bonds and swaps. Inflation linked bonds continue to look expensive and we will continue to wait for better levels before investing. Convertible bonds continue to provide an attractive fixed income return with upside participation and we have a significant exposure to this asset class.

The net equity exposure of the Fund was reduced to 40% from 44% and the Fund remains conservatively positioned as equity valuations have deteriorated.

The net effective exposure at 30 September 2013 is a function of:

¥Physical equity exposure (local 25%, offshore 10%);

¥Plus option/future strategies (could increase or decrease net exposure - currently adding about 1% to effective equity exposure);

¥Plus convertibles exposure (this is not the same as actual convertible holdings - currently adding about 4% to effective equity exposure). Going forward, we will continue to maintain a cautious approach and vary the risk in the Fund as we see fit.