Performance
Although the fund slightly under performed the median return of its peers during the last quarter it continued to outperform on a year to date basis.

It was again thin pickings for South African equity investors during the third quarter. On a relative basis Resources experienced a fair return. Within this asset class gold shares were the star performers. With hindsight our neutral stance towards this sector was too conservative, but fortunately we were overweight the better performers namely Goldfields and Harmony. Amongst the large cap Resource counters our overweight Sasol and Billiton added value while our exposure to Anglo’s and Kumba negatively affected the portfolio’s return.

Financials, although perceived by many to be cheap, yet again under performed. Fortunately Banks, where we had an overweight exposure, outperformed Life Assurance on a relative basis. We also favoured ABSA and Stanbic, which outperformed the banking sector. Our stock selection amongst Assurers, however, which favoured Sanlam over Liberty Group, destroyed value.

Where we lost some basis points were through our Industrial equity holdings. Although underweight Richemont (down 31,7%), the optimal position should have been no exposure. Our positions in Imperial and Bidvest also detracted from the fund’s performance. Positive contributions came from TigerBrands and Nampak.

Our underweight TMT again added value especially taking into consideration that we had no exposure to Didata and M-Cell, which under performed considerably.

Outlook
Going forward we still prefer companies that will benefit from high inflation, but we are also becoming more concerned about the risk of further interest rate hikes and the negative affect that might have on spending in the real economy. With the huge volatility in equity markets it is our belief that quality companies with superior management and visible income streams would be the better performers.

The trust ended the quarter containing 33 counters.

The top ten counters constitute 51.1% of the fund, which form the core around which the fund will be managed.

The fund managers continue to align the fund as a general fund from a growth fund. The resources holdings were increased to 15% and TMT exposure was reduced to 20%.

The fund managers will continue to look for trading opportunities in the market. They expect the market to remain volatile during February and will decrease the risk profile of the fund more aggressively.

During the third quarter the fund slightly outperformed the average return of the Namibian Equity Funds' category.

The fund’s aggressive tilt towards large-cap shares was a detractor from the performance, especially during the month of September when small and mid-cap shares held up very well in the midst of the reaction on the US attack. Other detractors from performance were our large exposure towards financial companies, which were one of the worst-performing sectors over the last three months against the relative under-exposure to Resources, which was the better-performing sector over this period.

During the quarter the fund manager decreased the financial exposure through the selling of some large-cap shares. The cash generated from this was used to increase the fund’s exposure to some mid-cap industrial shares.

The fund manager also increased the cash from 11,5% to 14,3%, thus a more conservative approach, especially after the tragic events in the US.

In the short term global stock markets are going to be volatile with sentiment more on the negative side. Having said this however, valuations, especially in South Africa, are very attractive.

As the market is very unpredictable at present, the fund manager will maintain the cash position around 13%, and with any new purchases we will favour companies of a defensive nature.