After a correction in global equity markets during August, equity markets surged during September with the domestic equity market advancing 8.7% for the month. Global equities also had stellar returns with developed market equities yielding 9.1% in USD and emerging market equity yielding 10.9% in USD. Markets benefited from an increase in risk appetite from investors and markets providing higher yielding assets were the largest beneficiaries. This was clearly reflected in the ZAR strengthening by 5.9% against the USD, while other emerging market currencies experienced similar gains. Global bonds continued to perform well during September and were supported by investors' perceptions of the probability of the next round of quantitative easing by the US Federal Reserve. Global bonds yielded 2.2% in USD in September, while domestic bonds only yielded 0.76% in ZAR. Global bond returns were however severely diluted for Rand investors due to the strengthening of the Rand against the USD.

The Fund did well in (absolute terms) to capture a significant amount of the upside in equity markets, producing 5.0% for September and out performing the benchmark 0.60%. This can predominantly be attributable to the marginal overweight to local equities and manager selection, with Coronation Equity being the best performing manager in the combination. International exposure detracted from performance, as the Rand continued to strengthen.

SMMI believes bonds, both locally and offshore, are expensive and believe the fund is appropriately positioned for the ensuing market conditions.

ASISA did not approve the Domestic--Asset Allocation--Flexible sector and the fund moved into the Domestic--Asset Allocation--Prudential Variable Equity on 18 Nov 2010