Fund Review

Along with the global equity indices, the fund delivered a negative dollar return of 1.2% in the 3rd quarter, although it outperformed its benchmark, which did -2.2%. In rand terms the fund's return was +4.7%, as the rand lost 5.8% to the dollar, 0.6% to the pound, but gained 2.2% versus the euro. Over the year to end September 2014, the fund did 21.7% in rands, or 8.6% in dollars. The fund's marked underweight in Europe (-3.8%) and in the Far East, excluding Japan (-3.9%) added value as both regions did worst (-7.4% and -6.2% respectively, in USD). The fund remains overweight in the US (53.5% versus 50.3% for the benchmark), but this is down from 61% at end March. The fund also remains very underweight in Emerging Markets (6.3% versus 10.5% for the benchmark) and very overweight in Japan (14.3% versus 7.4% for the benchmark).

In share selections, strong showings in consumer discretionary, healthcare and materials (including mining) was offset by weakness in financials, industrials and IT. Share highlights included Gilead Sciences (biotechnology), which delivered impressive sales thanks largely to its hepatitis treatment Sovaldi. Bank of Ireland rose on the back of Ireland's resurgent economy and Mazda gained nicely too.

Looking Ahead

The fund manager, Threadneedle Investments in London, remains constructive on equities relative to other asset classes, but is cautious about rising nationalist sentiment and geopolitics in the world, as well as trade sanctions and weaker emerging markets.

Global stock markets have fallen a further 5-6% in dollars since end September, extending the correction that everyone has talked about for so long. This has taken the fund's dollar price back to where it was a year ago in October 2013, presenting an opportunity to up-weight.

The STANLIB Global Equity Feeder Fund is a feeder fund seeking to achieve an investment medium for investors, which shall have as its main objective to maximise long term total return. Apart from assets in liquid form, it will consist solely of participatory interests in a single portfolio of a collective investment scheme operated in territories with a regulatory environment which is to the satisfaction of the manager and trustee of a sufficient standard to provide investor protection at least equivalent to that in South Africa, namely the STANLIB High Alpha Global Equity Fund.

Fund Review

After a great 2013 (56.7%, ahead of benchmark), the fund has so far in 2014 underperformed its benchmark in the first two quarters of 2014. In the latest quarter, the fund did 4.7% in rands, or 3.8% in dollars versus the 5.2% of the benchmark. Over the year to end June 2014, the fund did 26.2% in rands, or 17.2% in dollars, relative to the 23.6% of the benchmark.

The fund's underweight in Europe (-2.8%) and overweight in Japan (+4.9%) added value, but this was more than offset by emerging markets outperforming (fund underweight by 3%) and the UK too (underweight by 0.8%). The fund remains overweight in the US (54% versus 49% for the benchmark), but this is down from 61% at end March.

In share selections, strong showings in consumer discretionary, consumer staples and energy shares were outweighed by weakness in financials and IT.

Looking ahead

The fund manager, Threadneedle Investments in London, believes that the strong relative performance of cyclical shares is warranted by improving economic data, but given the risk/reward balance, they still favour quality shares with secular growth, ie they prefer the lower risk route, even at the expense of lower returns in the short-term.

Although it has been over two years since the US stock market fell by 10% or more and although a correction like this could occur at any time, the bull market remains firmly intact, even after 5.25 years. With economies neither too hot nor too cold, both inflation and short-term and long-term interest rates remain very low, which is supportive of financial assets like shares and property.

Fund Review

After a great 2013, when the fund returned 56.7% in rands and beat its benchmark, the fund's return of -1.6% in the first quarter of 2014 was below the benchmark's 3.2% return. For the year to end March the fund did 31.4%. The overweight in Japan and underweight in Europe detracted from performance in the quarter, although the severe underweight in emerging markets helped. Share selection hurt in the quarter, with strength in industrial shares offset by poor performances in financials, healthcare and consumer discretionary shares.

The Japanese shares did -11.66% in dollars during the quarter, while the return from shares in North America was 1.26% and in Europe 3.35%. The portfolio remains very overweight in Consumer Discretionary shares (19% versus 11.7% for the benchmark) and in Information Technology shares (18.4% versus 12.7% for the benchmark) and slightly overweight in Financials - the single biggest sector - at 24.3% of portfolio versus 21.5% for the benchmark. Energy (3.7% versus 9.7%) and Materials (3.7% versus 6.1%) are big underweights, as are Telecommunications and Utilities (together 1.6% versus 7.1% for the benchmark). At the end of March the portfolio remained heavily overweight in North America (63.3% versus 52.7% for the benchmark) and very underweight in Europe, excluding the UK (10.8% versus 17.4%).

Looking Ahead

Threadneedle Investments, the fund managers based in London, expect economic data to improve globally and also expect reasonable growth in earnings. They believe that shares broadly encapsulated by the "innovation driving growth" and "media content/cable" themes are attractive in the long term. They expect the earnings season to be a catalyst for a rebound in developed markets, as fundamental strengths come to the fore.

Fund Review

The fund had an excellent month of December and quarter to end December, as well as a superb year. The fund gained over 3% in dollars in December and 9.3% in the quarter to end December. With the rand depreciating by 6.4% against the pound in the last quarter, 6% against the euro and 3.1% against the dollar, the fund returned 12.7% in rands in the quarter, beating the benchmark MSCI All Country World Index rather well.

For the year to end December the fund returned an impressive 27.7% in dollars… or 56.7% in rands!

Threadneedle Investments, based in London, have now managed the portfolio since November 2012. They continue to be very overweight in the developed markets and somewhat underweight in the emerging markets (4.6% versus 10.5% for the benchmark), which has been very useful because emerging markets lost 2.3% in dollars in 2013, while developed markets did extremely well, with Germany, Japan and the US all returning over 30% in dollars.

The fund continues to prefer the USA, with 59% of funds allocated there, well above the 49% in the benchmark. Japan is also a favourite, with a 12.4% allocation, versus 7.8% for the benchmark. The third biggest country allocation is the UK with 8.5% versus 8.1% for the benchmark.

The fund is very overweight in Consumer Discretionary shares and in Information Technology shares, although Financials comprise the single biggest sector in the fund at 20.7%, slightly underweight versus benchmark. The top ten shares include eBay, Google, JP Morgan, Walt Disney, Apple, American Express and Mazda Corporation, all powerful brand names doing business around the world.

Looking Ahead

Broadening recoveries in the US and in Europe are likely to serve as an underpin for equities, as they are likely to boost company earnings. However, one needs to be aware that the bull market in equities has lasted almost 5 years, which is unusually long and there are few cheap shares left to buy.

With inflation at very low levels in the developed world, however, there is no sign of any hike in interest rates in the developed world, so the bull market can continue.