Note: Given this fund’s objective, the manager recommends a minimum time horizon of six years for it to achieve its strategic objective.

The H4 Growth Fund (‘the fund’) delivered 1.7% in Q4-2019; and has delivered 14.5% versus 10.4% for its SA CPI +6% p.a. benchmark over the past year. In terms of the major asset classes to which the fund was exposed during the quarter, the local equity market (measured by the FTSE/JSE All Share Index) gained 4.6%, slightly behind the FTSE/JSE Capped Top 40 Index (to which the fund is exposed) which was up 5.2%. Local bond prices (All Bond Index) ended the quarter up 1.7% despite the Moody’s rating agency’s announcement in the quarter of a downgrade in the country’s rating outlook from Stable to Negative; while the local listed property market (FTSE/JSE SA Listed Property Index) gained 0.6%. Global equities (MSCI All Country World Index in US dollars) delivered 9% during Q4-2019’s renewed risk-on phase; while global listed property (MSCI World REITs Index in US dollars) was flat. During the quarter the rand strengthened 8.4% versus the US dollar; detracting significantly from the performance of global assets when measured in rand terms.

One of the stated primary objectives of the fund is to achieve capital appreciation over the medium to long term at a risk level that is somewhat lower than that of a pure equity investment. When measured over the past one and three year periods, the fund’s standard deviation (which is a generally accepted measure of risk/volatility) was 6.7% and 8.7% respectively; compared with the local equity market’s standard deviation of 10.5% over one year and 11.5% over three years, and global equity measured in rand’s standard deviation of 25.8% over one year and 22.3% over three years.

There were no marked asset allocation changes in the fund during the quarter. In terms of foreign currency exposure, the manager initiated a new zero cost currency hedge during August on a portion of the fund’s offshore exposure in order to protect it from possible marked rand strength. This protection was in place until mid-December 2019. At quarter-end, the fund held a relatively diversified mix of assets which the manager deems appropriate for the current investment climate. Sizeable asset class exposures included global and domestic equity (of which a portion was allocated to protected equity), along with local and global listed property and SA government bonds. The fund continues to adhere to its policy.