Fund Review

In the last quarter of 2016 the fund did -4.5% in rands or -4.3% in dollars (benchmark -1.4%), as the rand lost just -0.2% against the dollar, but gained +5.2% against the pound and +6.8% against the euro. Over the twelve months to end December the fund did -12.9% in rands and -1.9% in dollars (benchmark +5.8%). It was a disappointing year for the fund.

The equity portion of the fund (63.1% of fund, similar to September) is identical to the STANLIB Global Equity Fund portfolio and returned -2.5% in the quarter, behind the benchmark’s +1.3%. Financials (18.6% of the equity fund, similar to the benchmark) performed best during the quarter, returning +12.3% for the benchmark, but only +5.2% for the portfolio, meaning share selection hurt the fund. Consumer staples (7.8% of the portfolio at end September) had the worst return of -14.9% in the portfolio, while the benchmark return was just -5.9%. The biggest sector by far in the fund, Information Technology (23.8% of fund versus 15.5% for benchmark) returned a disappointing -5.7% in the quarter (benchmark -0.8%) as expensive technology shares got sold off post Trump’s election victory in favour of cheaper industrial shares.

The other three asset classes all produced negative dollar returns as well during the quarter, with Fixed Interest doing -5.3%, ahead of the benchmark’s -7.1%, Property doing -6% (benchmark -4.9%) and even Cash doing -4.4% (benchmark -2.7%). The allocation to Cash was increased from 10.7% at end September to 13.4% at end December, with most of the increase coming from Fixed Interest.

Looking Ahead

The US equity market appreciated sharply by +7.4% after Trump’s victory in early November, reaching new record highs in this long bull market. Other markets such as Europe (+7.9% in dollars) and Japan (+4.4% in dollars) are also doing better since November. Emerging market shares initially fell -7%, but have since regained their pre-election levels.

Columbia Threadneedle, the fund managers, still regard equities as a more attractive proposition than bonds. This could change should the “bond bubble” burst in 2017.