STANLIB MM All Stars Equity FoF Comment- Sep 10 - Fund Manager Comment23 Dec 2010
In spite of significant volatility and a 3.6% decline in August, the FTSE/JSE All Share Index finished the third quarter up 13.3%. There were three primary drivers of the strong market. Firstly, the US Treasury moved closer to a second round of quantitative easing which helped to reduce fears of a double dip recession. Secondly, both local and global companies delivered strong earnings growth during the quarter thereby partially filling the PE gap, and finally, there was significant corporate action in the local equity market which drove up the prices of Didata, Nedbank and Old Mutual to name a few. Small caps (10.1%) lagged large caps (13.4 %) for a change, however Industrials (19.9%) continued to outperform Resources (7.1 %). The Portfolio outperformed its benchmark by over 1 % for the quarter and was 1.2% ahead over the past 12 months where it was ranked 34/83 in its sector.
The strong performance by the Portfolio during the quarter was driven large by its near 40% exposure to Coronation (Top 20 and Equity), where they continued to compound good decisions. Prudential's portfolio is positioned for a global economic recovery and the rally significantly benefited them. Rainmaker had a better quarter benefiting from good stock selection and an overweight position in large caps. In line with our current preference for large cap stocks, we down weighted the Entrepreneur Fund (also in the Polaris stable) in favour of Rainmaker during August. Allan Gray underperformed, however this was in line with our expectation given their defensive positioning. Exposure to Allan Gray has reduced in line with Portfolio inflows, however their position in the overall construction of the Portfolio remains crucial in the event of a market pull pack when they are expected to outperform. In spite of underperformance from ABSA Rand Protector during the quarter, we added to our position in line with our view that large cap resource shares offer relative value. Into October, this is playing itself out well with resources benefiting strongly from Dollar weakness and the improved outlook for growth.
STANLIB MM All Stars Equity FoF Comment- Dec 09 - Fund Manager Comment25 Feb 2010
The equity rally continued into the 4th quarter, where the All Share Index was up 11.4%. In March 2009, few investors would have predicted a 32% return for the year as a whole. But much has changed, most notably the resumption in global economic growth albeit stimulus led. Earnings remain fragile and generally of a low quality. US Job creation is still under the spotlight and unemployment will be a key factor in assessing the sustainability of the recovery in 2010. Chinese demand has picked up (particularly relating to infrastructure spending) however more recent measure to curb lending and tighten monetary policy have proved conceming for markets. Global growth and inflation tends to support resources and this was certainly the case for the year (+38.2%), relative to industrials (+30.7%) and financials (+27.5%) are worrisome for global growth. This was despite the Rand strengthening 28.7% relative to the dollar during the year. Emerging markets have been attracting significant inflows and this drove their outperformance relative to developed market counterparts. Despite many of the positives, some cracks are evident as witnessed in Dubai and Greece and the possibility of other exogenous shocks remain in 2010.
The Portfolio had a good year, growing in size from R 110m to R 180m at year end, thanks partly to the market but primarily to strong inflows, which was pleasing. The Portfolio is packed with star managers. Coronation had another great year, with both their Equity and Top 20 Funds ranking in the top 10 equity funds. Rainmaker was in the top third and the inclusion of the Entrepreneur portfolio has given the Portfolio valuable small and mid cap exposure. Following an exceptionally strong 2008, Prudential lagged marginally in 2009. Allan Gray had a disappointing year by their standards but importantly for the Portfolio performed well post inclusion. The ABSA Rand Protector portfolio was introduced during the quarter. Run by Stephen Arthur, it has a top 40 benchmark, has a natural bias toward resources and will perform relatively well should the Rand weaken in 2010. Following a strong finish to the year, we removed the Foord Equity Fund on a high.
We are very happy with the current structure of the Portfolio. The manager names are all of top quality and the new structure allows us to effective rapid changes to sector weights in line with our best investment view. As such we are excited about the prospects of this Portfolio for 2010, although we should caution investors to be realistic about the extent of equity returns post the strong showing in 2009.