The fund returned 2.69% for the month of June relative to a benchmark return of 3.72%. The rand strengthened by 3.38% against the dollar, which explains the monthly underperformance. As mentioned in previous commentary, the fund now has an approximate 80% rand hedge bias which is in-line with its objective. We are satisfied with the year-to-date performance which has been achieved in a rand strengthening environment.

Locally, economic indicators continued to paint a substandard growth environment. Key datapoints included:
- 1Q GDP growth flat year-on-year (estimated 0.6%)
- April retail sales up 2.4% year-on-year (estimated 1.2%). This number was ahead of expectations, however, the average over the past year has been markedly below that of the five-year average
- May vehicle sales down 5.7% year-on-year (estimated 0.9%)
- April electricity consumption up 1.8% year-on-year
- May Consumer Price Inflation up 4.5% year-on-year (estimated 4.4%). This muted data point coupled with the stagnant growth outlook may justify the Reserve Bank to cut interest rates at their next meeting on 18 July. As of writing the market is pricing in a 60% chance of this occurring

The fund continued to increase our rand hedge component on the back of a strengthening local unit. Exposure was increased to Master Drilling, Mondi, Naspers and the Platinum ETF. In-line with previous commentary, we were waiting to initiate a position in several technology stocks contingent on a retracement in their share prices. This opportunity was afforded to us on the back of escalating trade tensions which saw a market de-rating, especially in the technology sector. Along with our investment in Wealth Warriors, this sector gives the fund exposure to some growth themes predicated on continuing advancements in the utility of the internet - a theme which is underrepresented in South Africa. Exposure was initiated in Alibaba, Amazon, JD.com, Facebook and Alphabet (formerly Google).

Two of the fund’s holdings, coincidentally our two largest positions, reported in June:

Naspers reported results for the year ending 31 March 2019. The rump of the business (all divisions excluding Tencent) continued to reduce trading losses as some of these divisions continued to move towards profitable inflection points. Their classifieds unit has moved into profitability and we believe management can deliver similar returns on their other ecommerce divisions - they have achieved an annualised internal rate of return of circa 17% in US Dollars since 2008 on their non-Tencent investments. Backing management is integral to the Naspers’ investment thesis as the company invested a further USD3.1bn in these initiatives over the past year, circa 3% of the current market capitalization. They also announced that the previously announced ‘NewCo’ will be named ‘Prosus’ and its listing date has been pushed out to early September.

Sirius reported yet another strong set of results highlighted by like-for-like rental growth of 7.1% with most of this coming through rent-per-square increases. This result is particularly pleasing when considering German inflation currently stands at 1.4%. When combining top-line growth with ongoing operational excellence and economies of scale, the result is an increase in like-for-like net asset value per share of 13.3%. Cash generation remains strong and with a payout ratio of 70%, the dividend yield of circa 4.5% remains secure. We feel the share still offers reasonable upside from current levels, despite having re-rated markedly since results were released, and deserves to trade on a higher premium to what the market has attached.

We believe the fund is well positioned given the lackluster local economy and should be largely insulated from any fallout should the local political climate deteriorate further.