The All Bond Index delivered 0.35% for the quarter with the 1-3 year and 3-7 year indices performing the best returning 1.4% and 1.1% respectively. The reflation trade and foreign selling assisted in curve steepening during November as the R186/R203 spread widened to 124bps from 117bps but over the quarter the spread narrowed from 123bps to 119bps.

The Fund holds an option structure that will result in duration of 0.9 years below the ALBI duration if yields sell-off above 9.5% but move to benchmark duration if yields stay between 8.0% and 8.6%. The Fund maintains high quality credit mainly via bank and State Owned Corporation (SOC) exposure in both the bond and cash markets to take advantage of the additional pick-up in yield. SOC and Bank funding spreads have been on the rise and we will look to increase exposure in these credits at attractive spreads.

Contributors to performance:

The Fund outperformed the ALBI during the quarter due to the underweight duration position and attractive yield pickup. The duration position is below the ALBI with an underweight position in the 12+ year area of the yield curve in favour of the 3-12 year area where we see more value. The underweight position in the 12+ year area was reduced during November as yields sold-off.

Detractors to Performance:

Performance was hindered somewhat by the overweight position in the 7-12 year area of the curve during the quarter but this was partially offset by the underweight position in the 12+ year area.