The South African equity market disappointed during the third quarter of 2019 after it had a good first halve. The Shareholder Weighted Index (SWIX) decreased by 5.28% during the third quarter of 2019, with property shares returning a similar number of -5.34% for the quarter. The South African economy is still under pressure even though there was some relief in the GDP number for the second quarter of 2019, reading 3.1% annualised quarter on quarter. The rand has been weakening against the US dollar and other major currencies during the third quarter – falling roughly 9.6% against the US dollar halfway through the quarter, then strengthening by nearly 6% in the beginning of September just to weaken again and close the quarter off at R15.16 to the USD. The weakening in the rand can mainly be attributed to trade war tensions and outflows of foreign investments.

Globally, we have seen a slight uptick in the market towards the end of the quarter, after a small pullback midway through. The S&P 500 Index increased by 1.2% over the quarter slightly less than the all-time high reached in July. The trade war is far from over, but already having a negative impact on growth. With some economies slowing down central banks responded with rate cuts during the quarter to stimulate growth.

The fund underperformed its benchmark for the quarter, returning -5.2% gross of fees. It underperformed the benchmark by 100 basis points gross of fees. Our overweight position in Oryx Properties contributed most towards performance of the fund relative to our benchmark, while the overweight position in Fortress Reit was the biggest detractor from the fund relative to benchmark over the quarter. The fund continues to be aligned quite closely to the benchmark due to the current volatile market conditions.