Global markets continued their rally despite renewed concerns surrounding Europe on the back of bailout demands punishing Cyprian deposit holders. The MSCI World Index returned 7.2% (USD) over the quarter, led higher by Japan (11.7% USD) where Prime Minister Abe has embarked on doubling the Japanese monetary base in a bold attempt to catapult the Japanese economy out of its recession. The USA (10.7% USD) was not far behind, with both the Dow Jones and S&P500 hitting new highs. The local market (ALSI) returned 2.5% (ZAR), with Industrials (6.6% ZAR) and Financials (5.4%) up whilst Resources (-6.0% ZAR) fell as gold and platinum counters took a beating. The Rand came under pressure, mainly due to US Dollar strength and Euro weakness resulting in a 9% drop in the currency value during the quarter. The absolute portfolios largely managed to outperform their respective targets over the quarter. Performance was largely driven by exposure to foreign equity centric managers, with the MSCI World Index producing good returns during the quarter, with the added benefit of Rand weakness. The domestic equity centric manager also produced excellent returns over the quarter, outperforming the ALSI by a significant margin. The Fixed interest absolute return manager produced decent returns as well, outperforming cash by 36 basis points. With mixed data and consumer confidence low, markets are questioning whether the sustainability of a US led recovery and a bold Japanese monetary base expansion will be sufficient to offset Eurozone weakness. While we have seen rotation into defensive asset classes, our view is that market risk premia sufficiently compensates investors seeking inflation beating returns. Indications from the latest FED minutes reiterates the view that an orderly unwinding of QE3 will only occur once evidence confirms that a recovery has traction. Fundamentals are still supportive of risk assets even if some normalisation in interest rates occurs during the coming year. With US QE linked to a reduction in unemployment to some 6.5%, we do not see this as a material risk. Therefore, the rotation into more defensive assets towards quarter end is likely to be short-lived. While the recent run-up in equity markets has been rather accelerated, we still see attractive margins-of-safety and price-to-book discounts thus maintaining global equities as our favoured asset class and hence why Nedgroup Inv Global Equity will have a significant weight. Relative to other domestic asset classes we expect equities to outperform. Within fixed interest, our base case view is that rates will remain unchanged given the weaker Rand limiting the SARB's ability to raise rates at the cost of growth as well as their acknowledgement that inflation risks remaining to the upside. We maintain our preference to inflation linked bonds given the insurance on offer. The Rand remains volatile and the diversification benefit further lends to our offshore bias.