September was largely influenced by the announcement from the Fed that they had decided to post-pone the beginning of it tapering program for its QE policy. This caught the market, and us, by surprise, as the Fed was widely expected to start its tapering program in September, with expectations that it would reduce asset purchases by around $10-15bn per month. The market's reaction was predictable - it was off to the races again. Bond yields dropped, the dollar weakened, the rand strengthened and the equity markets got another boost. Emerging market currencies and commodity prices got a boost; risky assets were in play again. Foreigners were back for SA bonds. The markets experienced yet another Fed-stoked rally.

There were two significant asset allocation moves that took place during the month. We continued our internationalisation by investing in 3 of the Db X tracker funds - predominantly in the World Index with satellites in the Euro and UK Indices. The international exposure ended the month at 24.2%. The other major change was to reduce the local equity exposure by 8.4% using derivative strategies.

Our low exposure to long bonds and local property detracted from performance in September.

Our stock picks for the month were slightly negative as compared to the SWIX All Share Index. The shares that made the most positive contribution over the month were Vodacom, Aspen, MTN and Anglos by being overweight and Goldfields by having no exposure to the counter. The shares that detracted the most by having low or zero exposure to them were Truworths, Steinhoff, Shoprite and Mr Price.

At an asset allocation level, given, the macro uncertainty created by the potential of the USA yield curve to normalize, we are comfortable right now with the exposure to risky assets.

This was the first full reporting month for this fund and it is pleasing that it got off to a solid start. The fund returned 2.26%.

It was fortunate that the fund increased its exposure to equities toward the end of November as the All Share Index gained 3.2% for the month. This capped an impressive 10.3% for the quarter.

However, it is probably too late to go overweight equities and to the contrary feel that some short term caution is warranted due to the recent extraordinary run particularly in some of the much vaunted industrial and retail shares. Note that this is an interesting balance as all else being equal there is little choice but to add some risk exposure into the fund in order to achieve the long term objective of a decent real return.

The fund took some advantage of the stronger rand during December and moved some funds off-shore. At the end of the month it was held in US$ cash. This is with a view to buying some high yield assets and possibly some broad global equity exposure. Some gold exposure was also added during the month.

Listed property is currently at zero exposure as little value is seen in this area. This position paid off marginally as the Listed Property Index returned only 0.4% for the month. High duration bonds are also at zero exposure due to no fundamental value seen in this asset class. Exposure instead was concentrated on the corporate floating rate note credit market.

Our strategy going forward is to continuously review the fund's exposure to all risky assets. This is mainly due to the financial repression taking place in the developed world (global liquidity trumping fundamentals) and to continue our international diversification program.