Market overview
September 201 0 was the fifth best month for the MSCI AC World Index since the inception of the benchmark in 1988. The 14.3% return in Dollars during Q3 means equities have now recovered the losses from the May/June sell-off and are up 1.9% YTD. Volatility however, remained a key characteristic of this range bound market environment with July stronger, August weaker and then September much stronger. The Double-Dip theme took hold in August with higher unemployment numbers and a fragile housing market. Whilst these concerns still exist, the expectation that the Fed and BoE would sanction further quantitative easing helped boost investor sentiment and drive markets higher in September.

Fund review
In Dollars, the STANLlB Multi Manager Global Equity Feeder Fund marginally lagged the benchmark during the period under review albeit that year-to-date the Portfolio is significantly ahead of benchmark and the global peer group average (Upper). In the SA context, the Portfolio produced a 1.2% return over the past 12 months where it was ranked 2nd/25 in its comparable peer group of global equity funds (3.3% ahead of the average). During the quarter we introduced passive mandates in large cap developed markets with BlackRock as well as small cap and EM with Old Mutual. Our latest research, which encompassed over 30 000 mutual funds highlights how low "manager success rates" in the core space have been. Passive efficiently addresses this problem as it lowers the cost of dead beta without negatively impacting the desired risk adjusted results. Within our active managers, the more aggressively positioned Marathon and higher beta portfolio of T Rowe Price outperformed.
Looking forward
While households are overleveraged, non-financial companies are not with over $1.5 trillion of cash on their balance sheets. This will favour further capex, inventory build, dividends, share buybacks and potential M&A. Low interest rates are forcing the deployment of capital, which in the medium term should result in additional employment and an eventual pick up in final demand. As such, our base case is therefore unchanged - economic growth is likely to remain slow but positive, eventually leading to more job gains. Equity markets are supported by valuation and accommodative financial conditions however the recent equity rally warrants caution.

The STANLIB Multi-Manager International Fund of Funds will change it's name to STANLIB Multi-Manager Global Equity Feeder Fund, effective from 30 June 2010

Global equities rose 4.6% ($) in the 4th quarter bringing the total return for 2009 to an amazing 34.6%. The Rand strengthened from R/$9.52 to R/$7.40 during the year and as such rand returns were more muted (+6.5%). As a grouping Emerging Markets (+79%) were the best performing region, whilst Europe (+29.7%) generally outperformed the US (26.5%) and Japan (+16.7%). This reversed somewhat in the further quarter where Japan and US equities delivered the stronger returns. For the most part, the factors that lay behind the summer rally remained intact: a steady flow of favourable economic data and good quarterly results from companies. However, doubts about the nature of economic growth gradually appeared. Other latent concerns emerged, and investor nervousness became evident in November, when the standstill agreement requested by Dubai World on part of its debt triggered a violent (albeit short-lived) reaction from equity markets. Despite this, leading indices continued to rise, supported by third quarter company results which proved very positive and more soundly-based than those of the second quarter. Furthermore, the still very accommodative stance of the central banks and the weakness of the US Dollar up to early December, along with the firmness of commodity prices helped keep investor sentiment positive.

The Portfolio significantly outperformed the benchmark in the 4th quarter. All five of the underlying managers outperformed their respective benchmarks, with particularly strong contributions from the aggressive managers, Gartmore and T Rowe Price. Strong stock selection was the key driver of returns for all the managers, but the portfolio particularly benefited from selection and allocation within the Information Technology sector, where several of the managers were also overweight. Having lagged in the first quarter of 2009, the Portfolio recovered strongly in the remainder of the year and finished very much in line with the benchmark. Relative to its peers, the Fund was ranked 8 out of 26 in the Foreign Equity General sector, which was a very pleasing result.

The prospects for growth in 2010 remain heavily dependent on current stimulatory economic policies. Current economic indicators give the impression of vigorous activity, especially in the US. In the short term, investor optimism regarding the economic situation is likely to lead them to favour risk assets and especially equities, buoyed by good news on company results and an environment that favours corporate mergers. After this initial phase, more structural doubts about the economic recovery will surface (sluggish growth, high unemployment, very weak public finances) and could lead to a return of risk aversion.