The objective of the Sage SCI Long Term Solution Fund of Funds is to secure steady growth of capital over a longer term of more than 3 years, and to offer a return of at least CPI+7% over a rolling five year period. The portfolio will aim never to have a negative return over any two year period.

The FoF is a combination of underlying managers with diverse skill-sets from various ASISA categories to build an optimal high equity portfolio. The combination of managers strikes a balance between the CPI+7% benchmark of the FoF, and its objective not to lose money over 24 months.

There were no manager changes over the quarter. More than two thirds of the FoF is invested in equities (mainly SA equities, but foreign equities too) with the remainder largely invested in SA cash and SA bonds. The FoF makes use of both active and passive strategies to improve on its ability to deliver on its return and capital protection objectives.

Over the past year the FoF outperformed its CPI+7% p.a. objective, helped by a partial reorientation from SA equities (which returned 6.8% p.a.) to foreign equities (up 19.9%). Over the three-year investment horizon of the FoF, however, the underwhelming performance of SA equities (up just 3.5% p.a.) has contributed to the underperformance of the FoF relative to its CPI+7% benchmark.

South African economic growth surprised on the downside in 2019, and is vulnerable to further weakness. Recent changes to the FoF have reduced its dependence somewhat on SA equity market performance, although the performance of the SA equity market remains an important factor in achieving the FoF's objective.