During the quarter we kept the fund's asset allocation the same, largely because we believe that the global business cycle is improving and coupled to a rising interest rate environment. We still prefer global equities relative to global bonds. European equities are currently offering deep intrinsic value, coupled to an improving outlook for European GDP.

Within a South African context, equity valuations are expensive and GDP growth is weak. SA bonds are beginning to offer value as investors discount the fact that the interest rate cycle in South Africa will perhaps be more benign than initially forecasted. We also increased our weight to commodities in the portfolio through the purchase of the New Gold ETF which provides us underlying exposure to the platinum commodity. The business cycle is progressively favouring Resource shares and Billiton and Sasol remain our preferred overweight exposure.

The investment environment for mobile telecommunication remains attractive and both MTN and Vodacom are benefiting from rapid data volume growth and smart phone penetration. Operating margins remain stable and are still showing a positive trend.

FirstRand and Barclays Africa remain our preferred banking shares, given their diversified business mixes. Both these shares have surplus capital which can be paid back to shareholders through special dividends.

Looking ahead

The global economic recovery will continue and will allow central banks to reduce quantitative easing. We retain our preference for global equities as the asset class continues to offer superior risk adjusted returns.