The Fund’s objective is to provide modest long-term growth of capital and good income, with a low probability of capital loss over the short to medium-term. It aims to outperform CPI (South African Inflation) plus 4% p.a. (i.e. to provide a real return of 4% p.a.) over rolling 4-year periods.

Equities continued to show signs of weakness in the 3rd quarter, undoing the positive momentum that we saw in the first half of the year. Global equities produced a rand return of 7.3% for the quarter, mostly driven by the local currency losing 7.4% of its value against the US dollar. The sell-off happened in July and August when market participants became more concerned about slowing global trade as a result of the US/China trade war. Central banks tried to soften the blow by engaging in expansionary monetary policies, but their efforts fell short.

SA equities followed the global trend losing 5.1% for the quarter, driven by poor performance from resource and financial companies which lost 6.4% and 6.8% respectively. Sasol lost 27.7% of its value after it announced a second delay in its financial results pending an in-depth investigation into the Lake Charles project. Year-to-date, the company is down 39.1%. Single metal companies such as Northam, Implats, Harmony and Sibanye bucked the trend, rallying between 25% and 40% during the quarter. The fall in financials was largely on the back of poor business confidence in SA, which was at a 34-year low in August. In response, most investors have shied away from domestic equities – concerns of poor economic growth, escalating contingent claims from the state-owned companies as well as a stubbornly high unemployment rate are some of the factors that have contributed to this. The same factors drove returns in the property market, which declined 4.2% for the quarter. The presence of UK property companies in the local bourse also detracted from the market. Brexit remains a major problem for these companies. This was evident in Intu’s 39% plunge for the quarter, despite gaining 12% in September.

The STANLIB Multi-Manager Global Bond lagged the benchmark over the quarter. The portfolio’s overweight to emerging markets dragged on performance as developed markets outperformed. The short duration positioning detracted as yields contracted, particularly in August, while the relative performance recovered slightly in September

Local listed property continued to feel the strain of the difficult economic environment, retreating 4.2% during the quarter as poor economic conditions for the country continue. The presence of UK property companies in the local bourse also detracted from market performance with the continued Brexit uncertainty.

SA bonds returned 0.7% for the quarter while SA cash gained 1.8%. The bond performance was largely driven by the short end of the curve. The SA 10-year government bond sold off from 8.08% in June to 8.32% in September as investors demanded a higher return as compensation for the SA’s deteriorating fundamentals. Cash held up strong, producing the highest return relative to other domestic asset classes.