Investors are breathing a sigh of relief as a difficult investment period punctuated by robust volatility seems behind us.

Downside pressures were felt until late February before risk assets finished the quarter off in fine form. At one point in January South African Top40 Equities were trading down by 10% on the year and listed property was down in excess of 8%. This volatility was driven largely by global fears which added to familiar local political and economic woes. We remain gripped in a world of low economic growth, currency dislocations, questions around commodity prices and especially fears of oil oversupply. Oversupply should lead to lower oil prices which have fed into corporate credit markets. Additionally, equity markets are digesting a continued "earnings recession" as companies and analysts revise their estimates lower.

The above non-exhaustive list of concerns explains some of the volatility which seemingly was pushed to the back of investors’ minds post the Shanghai meeting between the G20 nations. While there was no formal announcement from Shangai, it became clear that Europe and Japan approved the "agreement" to allow their currencies to strengthen against the dollar, but by virtue, also strengthen against the Chinese Yuan which in turn removed some of the concerns around China needing to devalue its currency. Chinese devaluation concerns had previously resulted in market fragility in August 2015 and January 2016 and rightly investors have been grappling with the negative impact a one-off devaluation would bring on asset prices globally. Post this "Shanghai Accord "we seem to have now progressed to a world where it appears the Fed who hiked rates in December realize some of the unintended consequences of their actions, and appear now to be more dovish than was previously the case over the last few months. Additionally, the ECB has brought about more accommodative policy in Europe amidst continued economic weakness, lack of inflation and negative nominal yields.

It appears that we are back into a coordinated policy environment between the world’s most powerful Central Bankers. This has provided some relief or support for asset prices amidst the continued earnings recessions (weaker earnings).

While currencies have reacted to the new environment quickly it remains to be seen if this is sustainable since Yen and Euro strength will increase deflationary effects in these countries. How long until coordinated response is too painful and the status-quo is unsettled and we head into another round of volatility or will equities trend lower given the expected earnings trajectory despite the appearance of a status quo.

The "will they, wont they" debate is over. Nine years since the last time the U.S Federal Reserve raised rates Chairwoman Janet Yellen announced that rates would be increased, finally nailing the QE coffin shut, a door which has stood ajar since 2009. How markets behave with the re-pricing higher of the cost of capital by the worlds reserve currency remains to be seen. Initial effects appear muted although Emerging Market Bonds and especially currencies continue to show significant slides in value as Dollars are "sucked" back home.

More noteworthy is how South African's (and the rest of the investment world) stood aghast as Jacob Zuma decided to replace our Minister of Finance with an unproven backbencher David van Rooyan. This action sent our currency spiralling ominously along with our heavily foreign held bond market; before thankfully Mr Zuma did an abrupt about turn and appointed Pravin Gordhan as the new Minster of Finance 48 hours later. The reaction by asset markets was predictably horrific until some semblance of reason returned (with the appointment of Gordhan) although leaving lasting cracks on a number of fronts. Performance for the final quarter of 2015 as follows: The Johannesburg All Share gained 1.68% (shows the offshore hedge equities are now providing), The All Bond Index lost 6.43%, Listed Property lost 4.66% and Cash (measured by STEFI) provided a return of 1.62% for the quarter (all on a Total Return basis). Over the same period the fund produced a return of 0.70%.

For the 2015 calendar year the Fund Returned 7.78%. While shy of our medium term aim, the fund provided an excess return versus almost all assets classes in SA, beating Cash (STEFI) by 1.33%, Bonds (ALBI) by 11.47%, Equities (JALSH) by 2.65% and underperformed Listed Property by 0.22%. The fund also delivered an excess return relative to its Strategic Asset Allocation of 4.57%, a reasonable achievement relative to the opportunity set, providing our investors with equity type returns without equity type risk - one of our stated aims.

Going forward it is difficult to outline with real conviction what happens now that the Fed has moved and the repricing of global capital begins. Will the U.S Economy continue to show sufficient strength to merit further hikes, however slowly, how will currencies react and can emerging markets provide better growth prospects in the absence of commodity prices recovering? How will the SARB react to slower growth while inflation climbs toward 7% exacerbated by a very weak ZAR, and can our politicians ease the very real fears investors have? Of course we continue to see stimulus in Japan and Europe. China is pulling levers to cushion its own economic slowdown through rate cuts, a weaker currency and monetary stimulus. The great experiment continues but now that we have entered the stage of exiting the QE process by the FED, at the same time as growth is slowing globally, risk assets will continue to show volatility as we readjust to the new regime. 2016 will not be a normal investment environment although it must be said that there appear to be pockets of value in SA which was difficult to say twelve months ago.