Fund Review

After a superb December quarter when the fund did +19.3% in rands and +6.6% in dollars (beating the benchmark’s 3.3%) in the first quarter of 2016 the fund did -6.8% in rands or -1.6% in dollars (benchmark +2.2%), as the rand gained 5.2% against the dollar. Over the twelve months to end December the fund did +17.1% in rands and -3% in dollars (benchmark -0.8%).

The fund has been managed by Threadneedle Investments of London since early 2014. The equity portion of the fund (lower at 61.7% at end March) is identical to the STANLIB Global Equity Fund portfolio, which had a difficult quarter, but a good 12 months to end March. The equity portion of the fund did -2% in dollars in the quarter, the worst return of the four asset classes. Sector allocation hurt during the quarter, with underweights in energy and materials (including mining) plus an overweight in healthcare and technology (together 39% of the portfolio) hurting relative returns.

During the quarter to end March, fixed interest did best with a return of +4.9% in dollars (9.9% of fund versus 20% for the benchmark and down from 13.5% of fund at end December). So the big underweight in bonds detracted most from relative performance in the quarter. Next best was property’s +4.7% dollar return (11.2% of portfolio versus 10% for the benchmark), then the cash return of +1.8% in dollars. The allocation to cash was raised from 12.4% at end December to 17.2% at end March, much higher than the benchmark’s 10%.

Looking Ahead

Stock and property markets corrected sharply in the first six weeks of 2016, finally bottoming on 11th February. Since then markets have rallied quite strongly, recouping most of the losses. Columbia Threadneedle thinks developed stock markets will continue to climb the proverbial wall of worry.

The fund manager continues to believe that economic growth will remain challenged in 2016 and prefers to focus on shares that deliver consistent growth and attractive dividends. However, volatility is expected to remain a key feature.

Fund Review

The fund did +19.3% in rands and +6.6% in dollars (beating the benchmark's 3.3%) during the last quarter of 2015, as the rand fell -10.8% against the dollar, -8.3% against the pound and -8.3% against the euro. Over the twelve months to end December the fund did +32.7% in rands and -1.7% in strong dollars. During the same period the euro return was +10.6% and the pound return was +5.6% as the dollar once again gained against most currencies.

The fund has been managed by Threadneedle Investments of London since early 2014. The equity portion of the fund (higher at 63.4% at end December simply due to market movements, despite some selling of equities) is identical to the STANLIB Global Equity Feeder Fund portfolio, which had an excellent quarter and year, beating its benchmark cleanly. The equity portion of the fund did +7.7% in dollars in the quarter, contributing 4.7% of the 4.97% return of the fund. The overweight in technology (24.7% of portfolio versus 14.9% for the benchmark) boosted returns, returning +13.3% in the quarter.

During the quarter to end December, property did next best with a return of +5.3% (10.8% of fund versus 10% for the benchmark, which did 5.17%) followed by cash's -1.2% (12.4% of portfolio versus 10% for the benchmark, which did -1.7%), then the fixed interest return of -1.5% (13.5% of fund versus 20% for the benchmark, which did -0.9%).

Looking Ahead

Stock and property markets have corrected sharply in the first two weeks of January, undoing much of the good work of the 4th quarter, reflecting tensions in the Middle East, further weakness in crude oil prices and additional currency and stock market weakness in China. Market volatility is picking up and earnings growth globally is likely to be quite modest. In this environment the value generated by skilled active managers is likely to be an important component of total portfolio returns.