Fund Review

After delivering an excellent return in the December quarter of +9.9% in dollars (benchmark +5.2%) or +22.8% in rands, the fund’s first quarter of 2016 saw a negative return of -3% in dollars (benchmark +0.4%) or -8.1% in rands as the rand strengthened by 5.2% against the dollar. Over the year to end March 2016 the fund did +15.4% in rands, or -4.1% in dollars (benchmark -3.8%). Sector allocation hurt during the quarter, with underweights in energy and materials (including mining) plus an overweight in healthcare and technology (together 39% of the portfolio) hurt relative returns. The portfolio’s US return was -1.6%, with the US at 58.8% of the portfolio (benchmark 53.2%). The worst return of the bigger countries came from Japan with -9.1%. Fortunately the portfolio is even more underweight in Japan at 4.7% of portfolio (benchmark 7.5%). By comparison, the Brazilian return was +36%, but is only 0.5% of the portfolio.

The fund manager Columbia Threadneedle is still overweight in Emerging Markets at 11.2% of portfolio versus 10.2% for benchmark (10.5% at end September). Shares in China comprise most of this, followed by shares in Mexico. Europe excluding the UK is now slightly overweight at 16.1% (benchmark 15.6%). Alphabet, Google’s holding company, is the biggest share in the portfolio at 4.4% of portfolio, followed by Amazon.com, Facebook, Gilead Sciences, AON and JP Morgan.

Looking ahead

The fund manager, Columbia Threadneedle Investments in London, expects developed stock markets to continue to climb the proverbial wall of worry. They are focusing on company-led growth as they believe economic growth will remain subdued and companies that can deliver consistent growth in this environment will be attractive investments. They also prefer secular-growth companies and high quality franchises, rather than cyclical areas of the market.

Fund Review

The fund delivered an excellent return in the December quarter of +9.9% in dollars (benchmark +5.2%) or +22.8% in rands, as the rand fell -10.8% against the dollar, -8.3% against the pound and -8.3% against the euro. Over the year to end December 2015 the fund did +34.9% in rands, or +0.4% in dollars (benchmark -1.8%). The strong dollar again played a big role, because the fund gained +12.9% in euro terms and +7.9% in pound terms. The fund outperformed the benchmark handsomely. Sector allocation was supportive, with underweights in energy and materials (including mining) plus an overweight in technology (24.7% of portfolio versus 14.9% for the benchmark) helping relative returns, returning +13.3% in the quarter. Alphabet, internet giant Google's parent company (5.3% of fund versus just 1.3% in the benchmark) rallied strongly, up 22% in the quarter on strong sales and earnings. Amazon (2% of fund) rose 32%, Facebook (2.6%) rose 17% and Tencent (1.5%) rose 18%. North America produced 67% of the portfolio's return in the quarter. The fund manager Columbia Threadneedle went overweight in Emerging Markets for the first time in a long time at 10.5% of portfolio versus 9.5% for benchmark and 8.75% at end September. Shares in China comprise most of this, followed by shares in Mexico. Europe excluding the UK is now at weight with benchmark at 15.9% (from underweight) and Japan is underweight at 6.1% versus 8.1% for benchmark.

Looking ahead

The fund manager, Columbia Threadneedle Investments in London, says despite a rate rise in the US, monetary policy is likely to remain accommodative in both Japan and Europe. They are focusing on company-led growth as they believe economic growth will remain subdued and companies that can deliver consistent growth in this environment will be attractive investments.