The Oasis Balanced Stable Fund of Funds is a specialist, asset allocation prudential portfolio. The primary objective is to provide long term capital appreciation and the secondary objective is to provide income based on a selection of underlying investments. To achieve this objective, the portfolio
will be well diversied by asset class in accordance with the existing prudential investment regulation. The portfolio will have a low equity exposure commensurate with that typically displayed by a multi asset low equity portfolio in accordance with the ASISA Fund Classication Standard for South African Regulated Collective Investment Portfolios.

The global economy entered 2018 with a synchronised upswing firmly underway, driven by improving manufacturing output, trade volumes and commodity prices. In January 2018, the IMF upgraded its forecasts further and now expects global economic growth to firm to 3.9% in both 2018 and 2019, after 3.6% in 2017, a pace comfortably above the 3.2% recorded in 2016, when there were widespread concerns over secular economic stagnation. The synchronised global economic upswing has led to narrower output gaps and, together with higher oil prices, has provided the basis for reflation. However, inflation increases have remained measured suggesting some economic 'slack' is still prevalent in key economies. From 0.8% in 2016, the IMF projects inflation in Developed Markets will average 1.7% in 2018 and 2.1% in 2019, in line with most central bank's target levels.

Against the backdrop of US economic upswing, the Federal Reserve has raised the Funds Rate six times since December 2015, each by +25 basis points, to reach 1.75% in March 2018. The improving job market has supported growth in disposable income and helped underpin consumer spending. A series of tax cuts have been implemented with a view of boosting investment and employment. As things stand, the plans are unfunded and will over the long-term add significantly to the fiscal
deficit. The global economy faces a number of key risks. Most importantly, the normalisation of monetary policy in developed markets, in particular the US, may cause a faster than expected tightening of global financial conditions, which could impact market valuations and increase market volatility. Steps by President Trump to add tariffs on steel and aluminium imports has led to corresponding steps by the Chinese authorities, leading to fears of an escalating 'tit-for-tat' trade war. Finally, China's high level of corporate indebtedness and lack of transparency on local government balance sheets also poses a key risk to the domestic economy and, by extension,
the global economy too.

The South African economy has continued to perform well below its long-term potential given domestic headwinds from corruption, poor governance within the
State Owned Enterprise (SOE) sector and uncertainties around the political landscape. The election of Cyril Ramaphosa as National President in February 2018 will be looked back on as a pivotal moment if he is successful in tackling deep-seated corruption and introducing growth-supportive economic policies. The 15% appreciation of the Rand since the ANC's National Conference in mid-December shows a vote of confidence by financial markets. If Ramaphosa is able to fulfil these
expectations, the stronger Rand will improve inflation outcomes by protecting the economy from rising oil prices and provide scope for the South African Reserve Bank to maintain an accommodative monetary stance.

Fiscal tightening measures announced in the February 2018 Budget, which included an increase in the VAT rate from 14% to 15%, will provide a headwind of around
0.5 percentage points to GDP growth. While the fiscal tightening and the more market-friendly Ramaphosa administration led Moody's to retain its investment grade rating and placing South Africa on a stable outlook, risks to the rating outlook remain should economic growth disappoint over the coming year. The current account deficit may have reached its narrowest point in 3Q 2017 with higher import volume growth stemming from a recovery in economic activity. In this respect, a decline in terms-of-trade is a key risk for South Africa's external position at the current juncture.

Improvements in the global economy and the rally in global equity markets as well as a shift in the local political sphere provided what seemed like a solid footing for the first quarter of 2018 for SA equities. However, the first quarter of 2018 has ended with the FTSE/JSE Index 5.9% lower mainly driven by the industrial stocks which have been dragged down by the sell-off in Naspers. Given the recent global developments in terms of trade war fears and high valuation concerns, especially
to tech stocks, we believe that investors need to seriously consider portfolio diversification as a measure of shielding their investments in an environment where uncertainty has increased.

Benchmark yields have fallen notably in the aftermath of Cyril Ramaphosa's election as ANC President in December 2017. Tough steps taken to restrain the fiscal deficit in the February 2018 Budget followed by Moody's decision to retain its investment grade rating for South Africa and switching to a stable outlook have all been supportive of bonds. The benchmark R186 yield has fallen by around 130bp to around 8.15% since November 2017. After a lengthy pause following its 25 basis point rate cut in July 2017, the South African Reserve Bank followed up with another 25 basis point rate cut in March 2018, taking the repo rate to 6.50%. Given the split 4-3 MPC vote and rising global yields, it would seem likely that South Africa is not about to enter a major rate cutting cycle, notwithstanding recent Rand strength. Amidst the volatility, our income exposure has been very well positioned to provide downside protection relative to peers. In this environment, short term increases in benchmark yields do provide us with important buying opportunities in order to maximize the risk-adjusted return of the funds over the long term.

Our balanced portfolios are well diversified across geographies, currencies, asset classes, sectors and instruments. This appropriate level of diversification allows for a relatively lower level of risk and the fund is positioned to generate real returns for our clients over the long term.