The third quarter of 2011 was dominated by a slowing US recovery and debt ceiling squabbles in Washington, all of which culminated in the S&P downgrade of US debt. At the same time, Europe's debt woes deepened and troubling signs emerged in China, raising doubts about the strength of global economic growth. In a move to avert the worst, the US Federal Reserve (Fed) and the European Central Bank (ECB) intervened to provide dollar liquidity to European markets. Another positive move was the Germans' voting in favour of an expansion of the European bail-out fund. Despite efforts by the authorities, risk aversion continued to dominate markets. This resulted in a strong sell-off of emerging market equities which, for the third consecutive quarter, underperformed the developed world: year to date MSCI World Developed markets outperformed MSCI World Developing markets by 10.6%. Within the developed markets, the worst performance came from Europe, with the Euro Stoxx 50 down 22.7%, driven mainly by the German Dax and French Cac dropping 21.2% and 22.4%, respectively.

During the quarter, our markets followed the global markets down, with the FTSE/ JSE All Share Index falling 5.8% in Namibian dollars (NAD) terms. The NAD weakened significantly against major currencies, losing 18.6% during the quarter. The Namibian Stock Exchange was hard hit, losing 9.8% over the same period. The resources sector was the worst performing sector, amid falling commodity prices, while the Financial and Industrial Index (FINDI) only lost 3.2% over the quarter.

We believe that our investment philosophy and process will continue to guide our investment decisions to delivering long-term performance for our clients.

Despite the volatility witnessed in the second quarter of 2011, the MSCI World Index managed to deliver a positive return, rising 0.4% in US dollars (USD) versus a gain of 4.9% in the first quarter. Developed markets continued to outperform emerging markets, rising 0.7% in the quarter, while emerging markets declined 1%. Most of the gains in the developed world came from Europe, with the German DAX 30 and the French CAC 40 rising 7.0% and 5.1% in USD terms, respectively. This is despite the current sovereign debt crisis in the Eurozone that has led to Greece being downgraded to the lowest credit rating in the world. On the emerging markets front, it was the BRICS countries that fell the most, with markets such as Russia and Brazil declining 5.4% and 5.3%, respectively.

Our markets did not fare any better than other emerging markets as the FTSE/JSE All Share Index (ALSI) fell 0.7% in USD terms. In rand terms (ZAR), it fell 0.6% as the rand weakened slightly against the USD. Resources was the worst performing of all the major sectors, falling 5.7%. Declining commodity prices on the back of concerns about global economic growth weighed heavily on the sector. The other two major sectors, financials and industrials, performed well, rising 1.3% and 3.7% in rand terms, respectively, almost completely ignoring relatively poor global markets. Our investment philosophy and process continues to deliver strong absolute and relative returns for our clients.

2011 started off well for global equity investors, with most markets continuing the strong performance witnessed in 2010. During the first quarter, the MSCI World Index (MSCI) rose 4.9% in US dollars (USD). This was despite a number of negative events such as the political unrest in the Middle East and North Africa (MENA) region, as well as the devastating earthquake and tsunami in Japan. Both events had a negative effect on global equity markets, with the former leading to a significant increase in the oil price, while the latter caused major logistical delays in Japan. In the end, it was the developed markets (excluding Japan) that produced the quarter one best returns, continuing their recent outperformance of emerging markets. Developed Europe performed particularly well, with the Dow Jones Euro Stoxx 50 rising 10.5% in US dollar terms.

During the period, our markets underperformed with the FTSE/JSE All Share Index (ALSI) falling 0.9% in US dollars. In rands (ZAR), the ALSI rose 1.1%, reflecting the 2% depreciation of the rand. Industrials had the worst returns of all major sectors, falling 0.3% in rand terms.

The returns within industrials were mixed, with sectors such as construction & materials falling as much as 24.8% while others, such as automobile & parts (+13.7%), rose significantly.

Profit warnings from large construction companies weighed heavily on the former. Financials were the second worst-performing major sector, rising 0.7%, while resources rose a respectable 2.8%.

We continue to believe that our investment philosophy and process will deliver competitive returns for our clients.

The last quarter of 2010 was again good for equity investors globally as the MSCI World Index (MSCI) delivered a positive return of 9.1% in US dollars, after a robust 14.5% in the third quarter. For the year it returned 12.3%. Although this was more muted than the 35.4% witnessed in 2009, it was a positive outcome given the problems experienced throughout the year, ranging from sovereign debt problems and subsequent bail-outs in Europe, to a jobless recovery and quantitative easing in the United States. All in all, 2010 was a decent year for global investors, especially for those invested in emerging markets.

Our markets had an even better year than most markets as the FTSE/JSE All Share Index (ALSI) returned 33% in US dollars and 19% in rands. The rand continued its recent gains against major currencies, reaching multiyear highs, contributing positively to performance in US dollars. Strong commodity prices, as well as relatively high real interest rates in South Africa, were major drivers of a strong rand. Despite strong commodity prices, it was not resources that led our markets higher, but domestic stocks, mainly in the industrial and financial sectors. The strong rand benefited these stocks, while negating the positive impact of strong commodity prices on the resources sector. All in all, 2010 was a good year for domestic investors, too.

The Old Mutual Namibian Growth Fund performed strongly in 2010, repeating its outperformance of its peers that was witnessed in 2009.