The STANLIB ALBI (Non-Tr) Index Tracker Fund will change it's name to 1NVEST ALBI (Non-Tr) Index Tracker Fund, effective from 19 November 2019

Fund review

In the review of the JSE All Bond Index in the last quarter there were no deletions from and no additions to the index. The fund performed in line with the Index. The R186 Government bond remained the largest bond in the fund and its yield increased from 8.88% as at end of December to 8.60% at end of March. The modified duration of the fund moved from 5.45 in December to 5.24 in March. The yield increased from 9.46% to 9.23% over the quarter. The modified duration of the fund decreased from 7.19 to 7.28 over the quarter.

Market overview

In the first quarter of 2019 equity markets shrugged off any negative sentiment arising from the second half of 2018. The majority of equity markets across the globe recorded strong positive returns, with the MSCI World Index recording 13.5%, MSCI Emerging Markets recording 11.1% and the South African equity market, as represented by FTSE/JSE All Share Index, recording 8%. Global growth continues at a slower pace with many of the major economies progressing to later stages of the business cycle. The less hawkish Fed provided some relief for financial conditions but the era of easy money has shifted towards gradual tightening of monetary policy. Locally, Eskom and corruption in other SOE’s remain in the headlines as domestic asset classes such as bonds (ALBI), property (PCAP) and cash (SteFi) recorded gains of 3.8%,1.73% and 1.9% respectively.

Looking ahead

Against the backdrop of slowing global economic growth, there is potential for trade uncertainty to continue, resulting in higher prices and a significant drag on business and consumer confidence. We expect risk aversion will rise as the ability of developed markets and vulnerable emerging economies to weather the impact of trade wars remains uncertain. Emerging economies with sizeable dollar debts and fiscal deficits may struggle. After more than two years of steadily rising interest rates, 2019 could mark the peak for US treasury yields for the current business cycle, however the road ahead is likely to remain bumpy. Locally, uncertainty will remain high until the widely anticipated national election provides some direction on the future of SA’s economic policy. We believe investors should focus on liquid market segments with risk dialled down compared with market benchmarks.

The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.