Fund review

The fund returned 7.51% in rand terms for Q3 2019 compared with the benchmark return of 7.57%. The fund’s market value increased to R352 million during the quarter, up from R299 million at the end of June 2019. The rand weakened during the quarter to end at R15.17/$ (R14.08/$ at the end of June 2019). This was a key contributor to the positive return of the fund. The rand remains volatile due to economic uncertainty and a low growth environment in SA. The fund aims to maintain capital value and liquidity while producing a return for investors in line with money market rates.

Market overview

US macroeconomic indicators were mixed. US GDP was 2% in the second quarter, unchanged from preliminary estimates and lower than the 3.1% expansion reported in the first quarter. Investor sentiment also took a hit after the US manufacturing gauge contracted for the first time in three years. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index fell to 49.1 in August. The group’s gauge of new orders dropped to a more than seven-year low, while the production index hit the lowest level since late 2015. Consequently, the US Federal Reserve (Fed) cut interest rates twice during the quarter by 0.25 percentage points each time. Government bond yields slumped to record lows amid renewed fears over a trade war and as the Fed adopted an accommodative monetary policy stance. Meanwhile, the University of Michigan’s consumer sentiment index gained slightly towards the end of the quarter to 93.2, driven by favourable income trends. This was after it fell from 98.4 to 89.8 between July and August, marking the largest monthly decline since 2012, as US trade tariff policies, which are subject to repeated reversals and an ongoing overhang of higher future tariffs, dented consumer sentiment.

Looking ahead

The fund continues to focus on high-quality issuers, with about 45% invested in entities rated Aa3 or higher. The fund’s weighted average maturity was decreased to 40 days from 49 days previously. The fund continues to invest mainly in commercial paper and certificates of deposit with investment companies and banks.