3 month and 12 month Jibar remained relatively flat over the quarter ending 31 December 2016. The FRA curve remained flat at the short end and shifted up around 10bps on the longer end.

The market is currently pricing in flat rates out to 12 months which is a bit optimistic given that the US has started raising rates. At these levels, floating rate assets continue to offer more value relative to fixed rate assets; hence the Fund is largely invested in floating rate instruments. We also increased exposure to step up notes, as these notes offer high liquidity and attractive yield pickup.

At the end of the quarter, the Fund held a mix of yield enhancing assets comprised of bank floating-rate notes, bank step-up notes, NCD's, corporate paper and short-dated fixed, floating and inflation linked bonds. The duration of the Fund remains short, less than 3 months, and is currently yielding 8.4% gross versus 3m Jibar at 7.35%.

The Fund outperformed the benchmark over the quarter. The main contributor to performance was the high credit and funding spreads, with nothing detracting from performance.