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STANLIB Global Aggressive Fund - News
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Stanlib Global Aggressive Fund - Sep 19
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Monday, 9 December 2019
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Fund Manager Comment
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Market Background
Despite bouts of volatility, global equities ended the quarter in positive territory, with the MSCI ACWI up 1.2% in local-currency terms. The reescalation of US-China trade tensions temporarily unnerved markets, with both sides exchanging further tariff blows in August. However, the subsequent agreement for a fresh round of talks drove a recovery, as did accommodative moves by central banks.
North American and Europe ex UK stocks benefited from interest rate cuts, but optimism was kept in check by signs of damage from the trade war and some weak economic data. In the UK, the new Prime Minister Boris Johnson’s ‘do or die’ Brexit stance weighed on stocks. Meanwhile, emerging markets lagged on fears about economic growth, a firmer US dollar and reports that President Trump was planning to delist Chinese stocks from US stock exchanges. Japanese stocks fared well. The Bank of Japan hinted at further easing, as policymakers cited lost momentum in attaining the 2% inflation target. Utilities and consumer staples led returns against a backdrop of rising volatility and falling core government bond yields, which weighed on financials. Energy and materials lagged, as concerns around global growth and demand lingered.
Performance
Gross of fees, the fund underperformed its index but remains well ahead over the year to date. Sector allocation was the main cause of the quarter’s underperformance, with the underweight in utilities detracting most. Stock selection was neutral, as gains from our selections in communication services helped to offset detraction from those in health care. At the stock level, managed-care enterprise Centene detracted. The loss of a renewal contract in Louisiana weighed on the stock, as did the talks of a national health plan by Democratic presidential candidates. Centene plans to expand its exchange business next year, which could generate synergies. India's HDFC Bank also lagged after reporting some weakness in retail loan growth. More positively, margins were stable and asset quality held up well. Corporate tax cuts by the Indian government buoyed the stock later on. Google’s parent company Alphabet was our strongest performer after it reported a reacceleration in revenue growth and healthy margin expansion. We believe that the market is underestimating the sustainability of Alphabet’s growth. Equinix also added value after reporting a strong quarter for recurring revenues.
Outlook
Global equity markets have been providing evidence of the value to be found in secular winners that can sustainably outgrow their peers. With scope for these businesses to positively re-rate and expectations that volatility will remain somewhat elevated, we believe the backdrop is ideal for investors with the ability to identify undervalued, long-term opportunities. While factors such as technological regulation and trade may remain in focus in the short term, we feel that structural factors driving a world which is ‘lower for longer’ will shape markets further into the future. We therefore retain our focus on companies with durable competitive advantages, as we believe these are best placed to sustain high returns on capital and earnings growth through the market cycle.
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Stanlib Global Aggressive comment - Mar 16
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Friday, 17 June 2016
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Fund Manager Comment
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Fund Review
After an excellent last quarter of 2015, when the fund returned +4.9% in dollars, the fund had a tough first quarter of 2016 as both equity and property markets tumbled in January and early February. The fund returned -1.5% in the quarter to end March and -4.7% in the year to end March.
We kept an equity holding closer to 80% for much of the quarter and also a Global Property Fund holding of around 15%. Our underweight in bonds worked well in the December quarter, but hurt in the March quarter because bonds performed best with a return of +5.9%, although global property recovered well from a big knock to return +4.6% in the quarter. Global equities returned -0.2%.
Our overweight positions in the equity portfolio in Japan (-6% return) and Europe (-0.5% return) hurt in the quarter as these markets underperformed, but we expect better returns as 2016 unfolds. We also have a small overweight in emerging markets/China, which came through nicely in March as emerging market currencies and shares finally turned after some serious underperformance.
Looking ahead
Global equities and global property both took a beating in the first five weeks of 2016, with global equities down -11.7% and global property down -9.3%. Since the 12th of February both have bounced back sharply, with equities now positive in 2016 and property up over 4%, as of April 15th.
Our view is that both global equities and global property have further upside potential. In particular, Japanese and European equities look good value. Their recoveries have somewhat lagged the recovery in US markets. Even though Japan’s economy looks a bit bleak, should the global economy strengthen, Japan’s economy should revive as it is highly geared to the global economy and we are seeing good signs of stirring in China.
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Stanlib Global Aggressive comment - Jun 14
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Thursday, 11 September 2014
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Fund Manager Comment
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Fund Review
In the first quarter of the year the fund delivered a small positive return of 0.11% as markets digested the big gains of 2013.
The quarter to end June was much better than the first quarter, as the fund delivered a return of 4.1% in dollars. Stock markets started 2014 very slowly after a particularly strong 2013, but have picked up steam through the second quarter and into the third, so far. For the year to end June the fund did 15.95% in dollars.
The best return in the second quarter came from the MSCI Emerging Markets Index, which did 6.6% in dollars, just beating the Global Listed Property Index's 6.5% return. We went 50% overweight in the Fidelity Emerging Market Fund during the quarter, with a holding of over 18% of equities, as emerging markets showed signs of finally turning upwards after a long slumber.
We remain overweight in Fidelity's Global Property Fund, which did 8.7% in the quarter. The fund is 45% invested in the US (8% underweight relative to its benchmark) and 26% invested in Asia Pacific, excluding Japan (8% overweight). We also remain moderately overweight in equities, with overweight tilts towards Japanese equities and European equities, apart from Emerging Markets.
We went further underweight in bonds late in the June quarter. Our cash position, at 5.2% of fund, is 61% invested in sterling and 39% in dollars.
Looking ahead
It has been over two years since the US stock market had a correction of 10% or more, which is always a risk in a bull market. However, we continue to prefer offshore equities and listed property to bonds and cash.
The environment of global growth that is neither too hot nor too cold is friendly towards equities and property, because it tends to keep both inflation and interest rates low.
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Stanlib Global Aggressive comment - Mar 14
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Friday, 6 June 2014
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Fund Manager Comment
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Fund Review
After a strong 4th quarter of 2013, when the fund returned 4.8% - as well as a strong calendar year - the first quarter of 2014 was muted, as the fund delivered a small positive return of 0.11%. For the year to end March 2014, the return was 11.3%.
We did not change the holdings in the fund during the quarter. European equities are outperforming other regions so far in 2014 and the euro currency is strong too. The fund is overweight in European shares. The MSCI Europe Index returned 2.2% in dollars in the quarter, beating the 1.4% return of the MSCI World Index. Japanese shares have been the worst performers, apart from emerging markets, so far in 2014, losing 7.5% in the quarter.
The best asset class so far in 2014 has been global listed property, which returned 3.1% during the quarter. We are happy to be overweight this asset class and believe that there is still value there.
Looking Ahead
The bull market has entered its sixth year. Less than 30% of bull markets make it through six years. However, with inflation very muted in the developed markets and aggregate demand not overly firm, there is no sign of any interest rate hikes in the developed world. So the bull market can continue, along with corrections of course.
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Stanlib Global Aggressive comment - Sep 13
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Thursday, 2 January 2014
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Fund Manager Comment
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Fund Review
The fund had a good quarter, rising by 6.2% in dollars, after a very good month of September (up 4.3% in September). For the year to end September the fund did 13.3%.
We have maintained a moderately overweight position in equities through most of the quarter (76.7% versus 75% for the benchmark) and also a moderately overweight position in global listed property (9.1% versus 7.5%). Property had a difficult time after Bernanke's tapering comment in May, falling 4.6% in the quarter to end June. It had a sharp 16% correction in total as anything to do with yield got sold down. However, the return was flat in dollars for the September quarter, rather than negative and we are optimistic that property will recover and do well as the global economy picks up.
The equity portfolio has an overweight tilt to both Europe and Japan. Europe has underperformed the US by some 31% in the past six years until recently and looks better value (cheaper), with the economy now in recovery mode. We remain very underweight in emerging markets (half-weight) and also in bonds (8.3% versus 15% for the benchmark).
Looking Ahead
Hopefully the US government deadlock gets suitably sorted. Usually the months of October to April are buoyant months for equity markets and this time should be no exception, because the big economies are recovering in synchronised fashion for the first time in years and both interest rates and inflation remain very low.
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Stanlib Global Aggressive comment - Jun 13
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Friday, 20 September 2013
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Fund Manager Comment
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Fund Review
The fund delivered a small negative dollar return of -0.1% in what has been a very volatile quarter. The return for the first six months of 2013 was 3.5% in dollars and for the year to end June the return was 13.1%.
During the quarter the MSCI developed markets delivered a small positive dollar return of 0.8%, where your fund is overweight, while the MSCI Emerging Markets Index did -8%, where your fund is underweight (6.5% of equities versus 12% in the benchmark). We cut our equity holdings before the correction began in late May and are currently neutral relative to benchmark, while we are 6% underweight in bonds relative to benchmark. Global bonds returned -2.9% in dollars during the quarter, making it -4.8% so far in 2013 and -2.2% for the year to end June.
During the quarter we went overweight in Japanese equities. There was a sharp correction between May and end June. Since then the Nikkei Index is up 6% by 10th July. We are positive on Japan's economy and equity market.
The most volatile asset class was global listed property which returned -4.9% in the quarter in dollars, but still returned 10.2% for the year to June. We are overweight at 9.5% of fund versus 7.5% for the benchmark. Global property is showing signs of bouncing from its knock in early July.
Looking Ahead
One usually expects plenty of volatility and a fair amount of negativity during the May to August period, which coincides with the languid Northern Hemisphere summer months. So far there has been more volatility in bonds and listed property than in equities because of the US Federal Reserve's mention of cutting back its $85bn bond-buying program called quantitative easing.
One gets the impression that the volatility has been overdone and that markets should be calmer going forward, including both bonds and property. Thus far the bull market in equities remains intact and we continue to prefer developed market equities.
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Stanlib Global Aggressive comment - Mar 13
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Thursday, 30 May 2013
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Fund Manager Comment
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Fund Review
The fund recorded its third consecutive positive quarterly return in dollars during the March quarter of 3.7%, after returns of 6.1% in the September quarter and 3.0% in the December quarter. The dollar was strong against other currencies. For example, in euros the fund did 6.5% and in pounds it did 13% in the quarter.
For the year to end March, the fund did 6.6% in dollars.
It was mostly "risk-on" during the quarter, with global equities gaining 6.6%, global property gaining 3% and global bonds losing 3.1% (biggest loss in a while). The big disappointment was emerging market equities losing 1.6%.
The fund had outperformed in the last 6 months of 2012, but underperformed during this quarter partly because of our big overweight through much of the quarter in the Fidelity Emerging Markets Fund. Despite trading at just 10.5 times expected 2013 earnings (much cheaper than the 13 times earnings of the developed markets), emerging market equities disappointed in the quarter, losing 1.6% versus the 7.9% positive dollar return for developed markets. Upon reassessing valuations in emerging markets - which look full on a sector basis - we switched most of our emerging market holding into developed markets in March.
Otherwise we remain overweight equities and global property and underweight bonds.
Looking Ahead
US equities, which comprise around 46% of the MSCI World index, reached a record high in early April and still offer decent value, assuming the US economy continues to grow around 2%. Japanese equities are picking up nicely in line with their economy, so it is Europe and the UK that are struggling a bit.
Overall we still prefer equities and listed property offshore to bonds. Could this be one of the few years when the May to August period is positive rather than negative for risk assets like equities?
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Stanlib Global Aggressive comment - Dec 12
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Friday, 12 April 2013
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Fund Manager Comment
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Fund Review
After an excellent third quarter for the fund in dollar terms (6.05%), the fourth quarter still produced decent returns of 3.0 % in dollars (better than the MSCI World Index's 2.6% return), which is creditable considering that your fund is only 77% in equities, not 100%. During the year to end December the fund gained 13.4% in dollars. By comparison, the pure equity STANLIB Global Equity Fund did 10.2% for the year.
The fund continues to be overweight in equities (77% versus 75% for the benchmark), overweight in listed property (9.1% versus 7.5% for the benchmark), underweight in bonds (8.6% versus 15% for the benchmark) and overweight in offshore cash (5.2% versus 2.5%). This allocation has benefited the fund nicely over the past 6 months and generally in 2012, with global bonds losing money in the last quarter of the year (-0.5%).
It was "risk on" during the quarter, with developed market global equities gaining 2.6% in dollars and emerging markets gaining 5.6%. The fund benefited from an overweight position in equities, including via the Fidelity Emerging Market Fund (22% of equities plus 3% in China versus 13% for the benchmark)and also an overweight in the listed property market.
Looking Ahead
STANLIB's house view is that the US and global economies will continue to grow, albeit slowly. Interest rates are expected to remain at rock-bottom levels in most countries after a large number of rate cuts across the world in 2011/2012. After the strong move in markets since July, it is quite possible that returns will be muted in the next month or two, or that a correction may ensue. However, the bull market remains intact. Usually after 4 years of a bull market (due on 8th March 2013), one may be cautious, because interest rates start rising as demand gathers pace. This is not prevalent in 2013.
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Stanlib Global Aggressive comment - Sep 12
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Monday, 19 November 2012
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Fund Manager Comment
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Fund Review
The fund had a good return in the quarter to end September, doing 6.05% in the quarter and 14.97% in the year to end September, both in dollar terms. It was "risk on" during the quarter, with developed market global equities gaining 6.1% and emerging markets gaining an even better 7%. The fund benefited from an overweight position in emerging market equities via the Fidelity Emerging Market Fund, as well as an overweight position in European shares, which bounced back nicely, along with the euro currency (up 7% against the dollar). The overweight in global property also proved effective (up 4.7%).
The fund continues to be overweight in equities (77% versus 75% for the benchmark), overweight in listed property (10.5% versus 7.5% for the benchmark), underweight in bonds (9% versus 15% for the benchmark) and overweight in offshore cash (3.5% versus 2.5%). The fund was largely unchanged during the quarter, although we sold our position in the Fidelity Euro High Yield Bond Fund near the end of September after a strong rally and also trimmed our position in European and South-east Asian equities.
Looking Ahead
STANLIB's house view is that the US and global economies will continue to grow, albeit slowly. One big positive in 2012, as opposed to 2011, has been the consistent cutting of interest rates around the world. STANLIB remains overweight in equities offshore. After the strong move in markets since July, it is quite possible that returns will be muted in the next month or two. However, with the bull market still intact, there is no certainty on that.
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Stanlib Global Aggressive comment - Jun 12
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Wednesday, 22 August 2012
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Fund Manager Comment
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Fund Review
After an excellent first quarter in 2012, the second quarter turned distinctly nasty for risk-oriented investments as the European crisis took centre stage yet again. The fund's return was -5.9% during the three month period, on the back of currency movements (the euro lost almost 6% against the dollar and most emerging market currencies lost too) and weaker stock markets (MSCI World Index down 5.4% and MSCI Emerging Markets Index down 8.8%). Listed property held its own during the quarter, while government bonds gained a tad and corporate bonds lost a tad.
During the year to end June the fund lost 9.6%% in dollar terms on the back of much weaker stock markets and currencies, particularly in Europe and in emerging markets.
The fund continues to be overweight in equities (78% versus 75% for the benchmark), overweight in listed property (10% versus 7.5% for the benchmark), underweight in bonds (9% versus 15% for the benchmark) and overweight in offshore cash (3% versus 2.5%). The fund was largely unchanged during the quarter.
Looking Ahead
As frequently occurs, the period from April has been a difficult one for global risk markets, coinciding as it does with the languid northern hemisphere summer months. Global economies have weakened and risk aversion has increased, to the detriment of equities, most currencies and some corporate bonds.
STANLIB's house view is that the US and global economies will continue to grow, albeit slowly. We are hopeful that investors will return to riskier investments like equities as the northern hemisphere summer draws to a close in September. One big positive in 2012, as opposed to 2011, has been the consistent cutting of interest rates around the world, as well as the sharp fall in the prices of many commodities, especially oil. Both of these positives should help to underpin economies and stock markets later in 2012.
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Stanlib Global Aggressive comment - Mar 12
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Friday, 1 June 2012
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Fund Manager Comment
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Fund Review
The fund had a good quarter, up a stellar 10.3% in dollar terms. During the quarter, the MSCI World Index gained 11.7%, while the MSCI Emerging Market Index gained 14.1%, global listed property gained 11.9% and global government bonds returned -0.5%.
The fund benefited from a slight overweight allocation to global equities (76% versus 75% for the benchmark), as well as an overweight to global property (9.3% versus 7.5%). Within global equities, the fund also benefited from an overweight in emerging market equities (27% versus 14%) and also an overweight in Europe, both of which bounced back strongly after a poor 2011. We kept an underweight in bonds (7.9% versus 15%), preferring to hold cash instead of bonds and also held some euro high yield bonds in place of governments (1.7% of total fund).
The equity portfolio is 40% invested in Fidelity global equity funds (the Global Growth and International Funds) and 60% invested in a spread of different regional Fidelity funds.
Looking Ahead
Although there may be some weakness in equities and property early in the second quarter, on balance we are positive for the 2012 year. The global share bull market entered its fourth year on 9th March. Typically the fourth year is a better one than the third year. The global economy is improving and global equities look 10-15% undervalued.
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Stanlib Global Aggressive comment - Dec 11
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Tuesday, 20 March 2012
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Fund Manager Comment
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Fund Review
The fund had a decent final quarter of 2011, gaining 4.5% in dollars as global stock markets rallied after the sharp declines in the third quarter. The fund is marginally overweight equities compared with the benchmark's 75% allocation and also overweight listed global property at 8.6% of portfolio versus 7% for the benchmark. The underweight is in bonds (9.6% versus 15% for the benchmark).
For the 2011 calendar year the fund had a negative return of 12.2%. This reflected partly the sharp 18% fall in the dollar return of emerging markets (mostly because of currency declines), the 9% fall in listed property offshore and the 5% fall in the developed markets. Within developed markets, Germany fell 17.5%, while both France and Hong Kong fell 16% and Australia lost 10.8%. Partly because of the strong dollar, the US stock market outperformed strongly and we were a bit underweight in the US during the second half of the year and overweight in emerging markets. We expect this to reverse in the first quarter of 2012, as emerging markets bounce back, including their currencies.
Looking Ahead
The 2012-year has started positively, with the US stock market up in 6 out of the first 7 trading sessions. The third year of a bull market is typically a very difficult year and 2011 was no exception. The fourth year of a bull market is usually better and there is a fair probability that 2012 will produce decent returns. The portfolio is well positioned from an asset allocation point of view and from a fund selection point of view to outperform in 2012.
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Stanlib Global Aggressive comment - Sep 11
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Thursday, 22 December 2011
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Fund Manager Comment
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Fund Review
After a difficult second quarter of 2011, the third quarter was even worse, as the European debt crisis escalated and as American politicians argued their way to a rating cut for their country. Returns were nasty (-16.6% for the quarter and -9.7% for the year) as stock markets and currencies retreated sharply, even though the dollar return was somewhat better than the MSCI World Index's -17.1% return (back at 1998 levels in dollar terms) and the MSCI Emerging Market's -23% return, both for the quarter.
Despite their faster growth and stronger banking systems, the emerging market currencies got dumped, particularly in September, including Brazil, South Africa, South Korea and Russia as European banks withdrew funds and as investors headed for supposed safety in US Treasury Bills. So emerging market returns in dollars were very weak in September and in the quarter, as were European returns, with the top 50 shares in Europe (DowJonesEuroStoxx50 Index) almost back to the March 2009 lows, especially the banking shares. The mounting debt crisis in Europe, poorly managed by the Europeans, as well as the debt and over-spending crisis in the US, almost as poorly handled there, have severely dented consumer and business confidence. Southeast Asia was down a lot too (24.1%). So our overweight in Emerging Markets (24% of equities versus 14% for the benchmark) hurt the fund, whereas our strong overweight in Japan (21% of equities versus 7% for the benchmark) helped the fund, because Japan's currency remained strong against the dollar, helping the Japanese stock market decline in dollars by 11.6%, well below the 17.1% of the MSCI World Index.
Looking Ahead
Markets (and economies) are in the hands of European politicians at this critical juncture. Will European leaders apply the right medicine to recapitalize their troubled banks and satisfactorily ring-fence the troubled countries in time to avoid another recession? Markets were very worried that they have been taking far too long, but lately Germany and France have promised a plan by the end of October. In the end, it all comes down to confidence, the confidence for consumers to keep spending, instead of worrying about their jobs and the confidence of businesses to expand.
As of early October, we are hopeful that a long-overdue rally is enfolding, because pessimism is at extreme levels and there is now some hope for action. Whether it is merely a rally in a downward moving market, no one knows at this stage.
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Stanlib Global Aggressive comment - Jun 11
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Monday, 19 September 2011
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Fund Manager Comment
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Fund Review
The second quarter was a difficult one for global stock markets as a variety of negative issues affected sentiment and economic growth, including the Japanese tsunami, the high oil and food prices, the Greek and other European debt issues. As a result the fund had a negative return of 1.4% in rands or 1.5% in dollars. We held 30% of equities in Emerging Markets by quarter end, just over double the 14% benchmark and we held an overweight in Japan too (about double the 8% benchmark). The Japanese Nikkei Index was at 10,500 when the tsunami struck. It then fell to 8,500 and is trading back at 10,000 by early July, about 5% below its pre-earthquake level. For the year to end June, the fund returned 5.7% in rand terms or 19.9% in dollars.
We maintain our overweight in equities (74.7% in equities versus 71.3% for the benchmark), our slight overweight in listed property and our underweight in bonds.
Looking Ahead
Global stock markets usually experience diffi cult times during the May to September period. This year has been no exception, although a nice bounce is unfolding in early July. We think on balance that we've seen the lows for the year and that the bull market remains intact, even though we may see further declines before September. However, slow economies in the developed world, coupled with weaker oil and food prices, imply lower interest rates for longer, which is good for equities. Fortunately companies are listed on stock markets, not governments, many of which remain mired in debt.
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Stanlib Global Aggressive comment - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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Fund Review
After a strong 4th quarter in 2010 (fund up over 6% in dollars), the fund underperformed a bit in the fi rst quarter of 2011, returning 1.5% in dollars. We remained heavily overweight in emerging markets (30% of equities), which did 2.1% during the quarter versus the 4.9% return of the developed markets. The good news was that the emerging markets recovered quite sharply in late March and recommenced their outperformance of the developed markets, ending the quarter at a new post-crash high. For the year to end March the fund did 9.7% in dollars. As of early April, the fund had 78% in equities (3% above benchmark) and 7.6% in offshore listed property, which did 2.5% during the quarter in dollar terms. We did invest in Japan after the massive earthquake had knocked the Japanese Nikkei Index down by some 15%, so that currently the fund has 18% of equities in Japan, about double the benchmark's weighting. So we are overweight offshore equities (relative to benchmark), slightly overweight offshore property, overweight offshore cash (mostly in the pound) and underweight bonds.
Looking Ahead
Global stock markets bounced back nicely in late March as investors placed the Egyptian, Libyan and Japanese crises in perspective relative to the good news of the global economic recovery continuing to make progress in most regions. Offshore equities remain undervalued and to-date interest rates in the developed markets are still at record lows, although the European rates may rise later in April by 0.25% because of higher infl ation in Europe. Risks are higher because of the 26% dollar rise in the oil price so far in 2011 and because of issues in Japan and the Middle East. Also we are always cautious during the May to August period, which coincides with the northern hemisphere summer months. However, all-in-all, the global equity bull market remains intact.
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Stanlib Global Aggressive comment - Dec 10
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Friday, 25 February 2011
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Fund Manager Comment
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Fund Review
The fund performed well during the last quarter of 2010, gaining 6.6% in dollar terms, or 8.6% in Euros. During the 2010 year, the fund gained 11% in dollars and a far more impressive 17.9% in Euros. Global listed property shares (8.2% of fund) gained 5% in dollars during the 4th quarter, a bit behind global equities, but for the 2010 year property gained 15,6%, outperforming the MSCI World Index's 9.6% dollar return. During the quarter we up-weighted the holdings of the Fidelity Emerging Markets and related fund s to 25% to take advantage of the stronger currencies and stock markets of emerging markets relative to developed markets. The Fidelity fund is very overweight in China (27% of fund) and also reasonably overweight in Russia (10% of fund) and in South Africa (9.5% of fund). The biggest sector overweight in the fund is in Information Technology (19.3% versus the benchmark's 12.7%). The biggest country underweight is Brazil (8.4% of fund versus 15% in the benchmark, which had a weak 2010 performance. Emerging markets underperformed a little during the quarter relative to developed markets (7% versus 8.6%), but outperformed during the year (16.4% versus 9.6%). The other change to the fund during the quarter was to reduce the bond holding to 7.7% of fund, about half the benchmark weighting. Global government bonds lost 1.8% in dollars during the quarter as bond yields shot up in the developed markets, causing loss of capital. Yields normalized (from very low levels) as the economic news improved, especially in the US after the Federal Reserve's quantitative easing program was instituted. Your fund is more invested in corporate bonds, which held up better.
Looking Ahead
We have maintained an overweight position in the fund in equities (relative to benchmark), with a holding of 81% versus the benchmark's 75% of fund holding. This is because we remain positive on the global economic recovery and the recovery of global stock markets, even though corrections will occur from time to time. At time of writing (early January), most stock markets are at post-recession recovery highs, although the developed market MSCI World Index remains at 1999 levels in dollar terms. Our property holding is at benchmark weight (7.5% of fund) and the cash holding is slightly higher (2.8% versus 2.5% for benchmark).
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Stanlib Global Aggressive comment - Sep 10
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Wednesday, 5 January 2011
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Fund Manager Comment
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The third quarter was a very good one for the fund, with a dollar return of 12.6%. Despite all the intense negativity during the May to August period on Europe and on a possible double-dip global recession, the fund's dollar return for the 2010 year-to-date to end September is now a positive 4.2%. In euro terms, the 2010 year-to-date return is even better at 8.6% and in pound sterling terms it is 6.5%. The MSCI World Index of developed market equities did 13.9% during the quarter in dollars, with Europe excelling - interesting considering all the crises in Europe - with a return of 19.4% (well ahead of the US's 11.5% return) and Australia (23.7%) and Hong Kong (21.9%) also doing well. Fortunately we held a very overweight position in emerging markets (30%-plus versus the benchmark's 13.8%) as the MSCI Emerging Markets Index returned 18.2%, well ahead of the developed markets, with Turkey (31.9%), South Africa (25.4%) and Thailand (32.5%) excelling. Although the global index return was higher than your fund's dollar return, bear in mind that your fund is an asset allocation fund and typically holds around 75% in offshore shares, with the balance held in bond-related investments, listed property and cash. Including listed property as equities would mean the fund was approximately 85% invested in equities and 85% of 13.9% equals 11.8%, which the fund beat with a 12.6% return, still ahead. Listed property offshore had a gangbuster quarter, with the global index (EPRA NAREIT) gaining 17.5% in dollar terms. The hunger for yield in developed markets is making property look more attractive relative to bonds and cash. Global bonds returned 8.3% in dollars, which was also looks good, although the dollar lost over 10% against the euro during the quarter. Looking ahead: After the recent big gain in markets (into early October), the elastic may be a tad stretched, meaning we may have a correction or consolidation. However, there is a good probability that after this consolidation markets will continue to recover from the 2008 crash.
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Stanlib Global Aggressive comment - Jun 10
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Thursday, 9 September 2010
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Fund Manager Comment
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Fund Review
Global stock markets started the second quarter of 2010 well, peaking in mid-April. Then the "sell in May and go away" saying proved very accurate this year as the MSCI World Index declined by almost 17% until early July. We underestimated the marked effect that the European debt situation had on global markets as panic spread about the possibility of Greek and Spanish debt defaults. While the MSCI World Index declined by 12.5% in Dollars during the quarter and the MSCI Emerging Markets Index declined by 9%, the fund declined by just under 10% in Dollars. The listed property holding in the fund (8% of fund) declined by around 8% in Dollar terms. For the year to end June the fund gained 9.7% in Dollar terms. We did not make any changes to the fund during the quarter and do not anticipate any changes in the early stages of the new quarter.
Looking Ahead
We are cautiously hopeful that global equities may have bottomed in early July, but are also highly aware that the typically difficult May to October period in offshore markets is not over yet. Global economies are going through a slow-down that is adding to the nervousness of investors, making forecasting the near future that much more difficult. However, the STANLIB view is that there is only a 20-30% risk of a renewed or "double-dip", recession in the near-term.
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Fund Name Changed
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Thursday, 22 July 2010
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Official Announcement
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The STANLIB Offshore Managed Aggressive Fund will change it's name to STANLIB Global Aggressive Fund, effective from 22 July 2010
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Stanlib Managed Aggressive comment - Mar 10
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Tuesday, 29 June 2010
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Fund Manager Comment
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Fund Review
This fund has been ably managed by Kent Grobbelaar for the past five years. Kent is now based in London and is devoting his time exclusively to Multi-Manager, so Paul Hansen has taken over the management of the fund. Our thanks go to Kent for an excellent job in managing the fund.
During the quarter the fund achieved a positive dollar return of around 2.7%, similar to the MSCI World Index, which is admirable because the fund had less than 80% in equities until near the end of the quarter and neither bonds nor cash delivered such a high return. The fund has approximately 7% directly invested in emerging markets and another approximate 7% indirectly held via other Fidelity Funds. Listed offshore property comprises an additional 7.7% of fund.
The fund is well spread in nineteen different Fidelity equity funds, ranging from the India Focus Fund, the Australia Fund, the Latin America Fund, the South-east Asia Fund and the China Focus Fund to the Japan Fund, Euro Blue Chip Fund, American Diversified Fund and the Global Focus Fund. Bonds are held via the International Bond Fund and cash is divided between the dollar cash fund and sterling cash fund.
Looking Ahead
We remain positive on offshore equities and listed property. Chartists are indicating that the big bear market has recently been cleanly broken and by definition the charts show that a new bull market is now in process in most offshore markets. Naturally, we should expect corrections from time to time.
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Stanlib Managed Aggressive comment - Dec 09
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Friday, 19 March 2010
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Fund Manager Comment
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Market overview
Global equities rallied 17.3% (US$ terms) in the 3rd quarter & are now up 26% YTD. This follows a similarly strong Q2 resulting in the largest two-quarter increase since 1975. One of the main factors behind this rally was further evidence highlighting the world would avoid sliding into a global depression thanks to successful stimulus packages & demand in Asia. Despite increased risk appetite, bond markets also posted positive returns (+6.2%). This can be attributed to inflation & interest rates forecast to remain lower for longer coupled with QE & elevated real yields. Earnings results & better news in the housing market were among positive indicators in Q3. The tone of data did however, start to change somewhat, with fewer upside surprises & more downside surprises versus consensus.
Fund review
The portfolio rose by 14.5% in dollar terms during the period under review - in line with the composite benchmark. Within equities our GEM position contributed to returns but this was offset by our large cap bias. In the growth/value derby, no clear leader has emerged so our growth tilt was neutral. The overweight exposure to spread products added alpha as higher yielding sectors of the bond market posted strong returns. Currency allocation added value with the portfolio having tilts to euro & sterling, which strengthened against the dollar. We currently have a neutral weighting to equities, having taken profits prematurely in July following the decision to go overweight in February.
Looking forward
As we enter the last quarter of the decade its worth reflecting on the past 10 years. It's been an incredible period of volatility with bubbles & busts everywhere. In years to come we will probably marvel at all that went on. Looking ahead we continue to believe stocks began a cyclical bull market in March. We say a cyclical, rather than secular, bull market because its unlikely equities will reach record highs before the next bear market sets in. Following the 66% rally since the March lows we believe the market is vulnerable to a correction. We noted in Q1 investors were so pessimistic that all that needed to happen for stocks to rally was for the world not to end.
The outlook from here is much more heavily dependent upon the strength of the economic recovery & corporate profits. Rising unemployment remains a clear headwind, while lower than expected ISM data recently reminded investors the recovery path may not be a smooth one. On the fixed income side government bond yields have been pushed around by a series of contrasting forces increased issuance & signs of economic recovery on the one hand, & accommodative central banks plus falling inflation on the other. Raising rates while unemployment is high & inflation low will be difficult to justify so our view is monetary policy should remain highly accommodative through most of 2010. As such we will continue to take advantage of the volatility & opportunistically increase bond exposure from an underweight position.
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Stanlib Managed Aggressive comment - Sep 09
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Monday, 30 November 2009
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Fund Manager Comment
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Market overview
Global equities rallied 17.3% (US$ terms) in the 3rd quarter & are now up 26% YTD. This follows a similarly strong Q2 resulting in the largest two-quarter increase since 1975. One of the main factors behind this rally was further evidence highlighting the world would avoid sliding into a global depression thanks to successful stimulus packages & demand in Asia. Despite increased risk appetite, bond markets also posted positive returns (+6.2%). This can be attributed to inflation & interest rates forecast to remain lower for longer coupled with QE & elevated real yields. Earnings results & better news in the housing market were among positive indicators in Q3. The tone of data did however, start to change somewhat, with fewer upside surprises & more downside surprises versus consensus.
Fund review
The portfolio rose by 14.5% in dollar terms during the period under review - in line with the composite benchmark. Within equities our GEM position contributed to returns but this was offset by our large cap bias. In the growth/value derby, no clear leader has emerged so our growth tilt was neutral. The overweight exposure to spread products added alpha as higher yielding sectors of the bond market posted strong returns. Currency allocation added value with the portfolio having tilts to euro & sterling, which strengthened against the dollar. We currently have a neutral weighting to equities, having taken profits prematurely in July following the decision to go overweight in February.
Looking forward
As we enter the last quarter of the decade its worth reflecting on the past 10 years. It's been an incredible period of volatility with bubbles & busts everywhere. In years to come we will probably marvel at all that went on. Looking ahead we continue to believe stocks began a cyclical bull market in March. We say a cyclical, rather than secular, bull market because its unlikely equities will reach record highs before the next bear market sets in. Following the 66% rally since the March lows we believe the market is vulnerable to a correction. Wenoted in Q1 investors were so pessimistic that all that needed to happen for stocks to rally was for the world not to end. The outlook from here is much more heavily dependent upon the strength of the economic recovery & corporate profits. Rising unemployment remains a clear headwind, while lower than expected ISM data recently reminded investors the recovery path may not be a smooth one. On the fixed income side government bond yields have been pushed around by a series of contrasting forces - increased issuance & signs of economic recovery on the one hand, & accommodative central banks plus falling inflation on the other. Raising rates while unemployment is high & inflation low will be difficult to justify so our view is monetary policy should remain highly accommodative through most of 2010. As such we will continue to take advantage of the volatility & opportunistically increase bond exposure from an underweight position.
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Stanlib Managed Aggressive comment - Jun 09
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Friday, 18 September 2009
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Fund Manager Comment
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Over the second quarter of 2009, increased risk appetite resulted in a sharp rally in corporate bonds, high yield assets & emerging market currencies. Equity (MSCI US$ +20.7) & property (EPRA/NAREIT +35.9%) markets in particular rebounded strongly delivering their best quarterly performance in 20 years. Better than expected economic news globally provided support for risk assets whilst sovereign bonds, particularly in the UK & US tended to lag as the two economies were the first to show improvement - having been most aggressive with fiscal &monetary stimulus.
The portfolio posted a dollar return of 24% during the period under review, outperforming the composite benchmark. Attribution shows the aforementioned was largely due to an overweight emerging market position, with the Fidelity Emerging Market fund outperforming its developed market peers by 11.8%. Similarly the GEM debt position outperformed developed sovereign fixed income by over 13%, while our overweight exposure to spread products also contributed to returns. Currency allocation added value with the portfolio having tilts to euro and sterling, which rallied sharply against the dollar. Unfortunately the large cap bias within the equity composite detracted.
Earnings momentum is improving and there are now as many upgrades as downgrades. Companies reacted swiftly to the recession as shown in the first quarter results so despite limited visibility in the short term; earnings should not act as a drag on equity markets. However, over this quarter, attention will be focused on the relatively weak condition of the global economy. The question being asked is whether Central Bank action and fiscal stimuli will be sufficient to encourage growth? Or will de-leveraging continue as the private sector continues to build up savings at the expense of renewed consumption? In an environment where growth will remain below potential, bonds offer value, especially if economic indicators face temporary weakness. We believe there is likely to be some consolidation in the short term as investors wait for the economic data to catch up with the dramatic recovery in valuations. As such we have trimmed back our overweight equity and high yield bond exposure.
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Stanlib Managed Aggressive comment - Dec 08
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Wednesday, 25 March 2009
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Fund Manager Comment
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Market overview
Worries about the health of the financial system depressed equity markets throughout the quarter. Events unfolded rapidly through the period, starting with the bail-out of Fannie and Freddie and the spectacular collapse of Lehman Brothers, which was subsequently followed by the collapse (and rescue) of other financial institutions. Conversely bonds experienced strong inflows during the period under review as markets came to the realisation that the global economy would see a slowdown and inflation pressures waned.
Fund review
The Fund was behind benchmark during the quarter. On the upside asset allocation contributed marginally to returns; however selection detracted. In this regard our overweight exposure to emerging markets & growth tilt (Value -13% vs. Growth -17%) did not add value. Most of the underperformance however came from cash, where the benchmark is 100% dollars. We have a more diversified spread of currencies implying the "mismatch" of holding sterling and euros vs a dollar only benchmark resulted in the portfolio lagging in a strong dollar environment.
Looking forward
The continuing slowdown will probably weigh on equities. Consensus earnings expectations remain too high and there will need to be downward revisions. A more positive impact can be expected from valuation and technical indicators - equities are certainly cheap according to many indicators, but the uncertainty of future earnings demands caution at this stage of the cycle. Bonds should perform well in the current macro environment as growth slows and inflation falls. On a valuation front, sovereign bonds are somewhat expensive, and technical indicators are also negative following the recent rally. In terms of corporate credit (where we recently went overweight) tightening credit conditions will probably remain as a result of increasing balance sheet constraints in the banking sector. However, we believe the spreads offered on investment grade debt look attractive.
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Stanlib Managed Aggressive comment - Jun 08
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Monday, 22 September 2008
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Fund Manager Comment
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In dollar terms global equities declined 8.2% in June as investors concerns over the continuing credit crunch & ongoing weakness in real estate prices were compounded by the realisation that accelerating inflation is likely to prevent any significant further monetary easing. Financial stocks remained the weakest performers, though joined this month by consumer cyclical shares such as retailers & autos. Global bonds were the beneficiaries of risk aversion with the JP Morgan GBI gaining 0.5% during the period under review. It's worth noting the inflation concerns mentioned above undermined this asset class over the quarter with the index falling 4.4%. Absolute returns were negatively impacted by the currency rebounding 4.4% against the greenback following the massive sell off at the beginning of the year (it remains the worst performing primary currency in the world YTD). Asset allocation contributed marginally to returns; however the biggest driver was selection. In this regard the equity, bond, cash & property composites all outperformed their respective indices. We expect equities to remain under pressure as analysts will probably continue downgrading earnings aggressively. The market will only bottom when revisions moderate & our view is they are likely to accelerate to1990/2001 levels. Now is not the time to sell though as irrespective of risk episodes the general pattern is the same - by the time you enter panic the worst is over & the subsequent recovery in equities is substantial. There is also a good probability of a counter trend rally in the short term as the market is looking oversold, with most tactical indicators confirming this.
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Stanlib Managed Aggressive comment - Mar 08
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Friday, 11 July 2008
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Fund Manager Comment
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Q4 was characterised by increased volatility as a result of weak US housing data, poor credit markets & questions surrounding the health of consumer spending. Fortunately the 2.4% US$ decline of the MSCI was not enough to erase the gains made earlier in the year, resulting in global equities ending up 9.6%. Due to the abstract nature of the credit crisis & lack of visibility into large financial institutions balance sheets, we positioned the portfolio closer to benchmark by decreasing our underweight position in bonds at the beginning of the quarter. This was fortunate as global fixed interest markets (USD +4%) delivered significant returns thanks to the sub-prime contagion & associated credit crunch propelling flows into the safe haven of government bonds. The portfolio outperformed its benchmark during the period under review & can largely be attributed to our overweight position in growth stocks (Value -4.8% vs. Growth -0.2). As we enter 2008 investor sentiment will be driven by uncertainty as to whether the US will go into a fully blown recession or a cyclical slowdown. Furthermore will the slowdown be localised or spread to the wider global economy. We are of the opinion the US will experience a significant slowdown, albeit a short one. While we acknowledge the emergence of Sovereign Wealth Funds, potential multiple expansion, attractive valuations & rising liquidity are all bullish scenario's for equities, the emergence of a recession undermines all the above. In this regard we believe the Fed is behind the curve. Its inversion last year is a warning of a potential recession, while the unemployment rate has risen 60 basis points from the cycle low (at no time in the last 70 years has the aforementioned not been followed by the economy slipping into recession). Earnings are being revised down & it's important to note multiple expansion requires lower inflation & stronger growth - not our base case. Equities have historically also only done well following a rate cut when the economy & earnings are better & we think neither will materialise. As such we recommend caution & have adjusted the asset allocation accordingly.
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Stanlib Managed Aggressive comment - Dec 07
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Thursday, 6 March 2008
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Fund Manager Comment
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Q4 was characterised by increased volatility as a result of weak US housing data, poor credit markets & questions surrounding the health of consumer spending. Fortunately the 2.4% US$ decline of the MSCI was not enough to erase the gains made earlier in the year, resulting in global equities ending up 9.6%. Due to the abstract nature of the credit crisis & lack of visibility into large financial institutions balance sheets, we positioned the portfolio closer to benchmark by decreasing our underweight position in bonds at the beginning of the quarter. This was fortunate as global fixed interest markets (USD +4%) delivered significant returns thanks to the sub-prime contagion & associated credit crunch propelling flows into the safe haven of government bonds. The portfolio outperformed its benchmark during the period under review & can largely be attributed to our overweight position in growth stocks (Value -4.8% vs. Growth -0.2).
As we enter 2008 investor sentiment will be driven by uncertainty as to whether the USwill go into a fully blown recession or a cyclical slowdown. Furthermore will the slowdown be localised or spread to the wider global economy. We are of the opinion the US will experience a significant slowdown, albeit a short one. While we acknowledge the emergence of Sovereign Wealth Funds, potentialmultiple expansion, attractive valuations & rising liquidity are all bullish scenario's for equities, the emergence of a recession undermines all the above. In this regard we believe the Fed is behind the curve. Its inversion last year is a warning of a potential recession, while the unemployment rate has risen 60 basis points from the cycle low (at no time in the last 70 years has the aforementioned not been followed by the economy slipping into recession). Earnings are being revised down & it's important to note multiple expansion requires lower inflation & stronger growth - not our base case. Equities have historically also only done well following a rate cut when the economy & earnings are better & we think neither will materialise. As such we recommend caution & have adjusted the asset allocation accordingly.
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Stanlib Managed Aggressive comment - Sep 07
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Tuesday, 27 November 2007
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Fund Manager Comment
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Volatility in equities rose dramatically in the 3rd quarter with the VIX rising to its highest level in 4 years. By mid August the MSCI had fallen 8% but the subsequent rally has been re-assuring, although the magnitude of strength did take us by surprise. In this regard the index rebounded 11.2% from its intra month low to end the quarter in positive territory (USD +2.5%) & bringing the YTD gains to 11.7%. Global bond markets (USD +7.2%) enjoyed a buoyant quarter as sub prime concerns & risk aversion encouraged a flight to safety. The greater than expected rate cut by the Fed, coupled with a consensus view that rates globally have peaked also supported fixed interest markets. Asset allocation therefore detracted from performance as we were overweight equity at the expense of bonds. Conversely the overweight position in growth stocks contributed to returns. Dollar returns were diluted by the strength of the rand, which was up 2.6% against the greenback. As we enter the 4th quarter, we retain our positive outlook for shares. In addition to their favourable valuation, we believe the environment favours them due to rising liquidity & strong balance sheets. The shrinking equity float as a result of record share buy backs & declining new issuance reinforces this view. In light of these circumstances we continue to position the offshore component of the portfolio in asset classes with the greatest ability to take advantage of the current market environment i.e. overweight equities.
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Stanlib Managed Aggressive comment - Jun 07
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Tuesday, 25 September 2007
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Fund Manager Comment
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After being the worst performing currency last quarter the rand rebounded in Q2 to be one of the best performers gaining 3.4% against the US$. Fortunately this was offset by rising equity markets (USD +6.5%) resulting in a positive rand return. Equity outperformance can be attributed to our overweight position in growth stocks (USD +12.5%), which are rebounding against their value counterparts (USD +9.9%) as well as our emerging market bias, which outperformed developed markets. In this regard evidence of the global economy surprising on the upside has supported markets such as Brazil, India & China resulting in these regional funds being the largest contributors to returns. Within developed markets Asia continued to offer the best returns during the period under review followed by Europe, the US & then Japan. Our overweight position in Asia & Europe therefore added alpha as did our underweight position in the US. Conversely the tilt to Japan detracted from performance as did the Japan smaller companies fund. While equity markets continued to rally on the back of investors' persistent appetite for risk, bonds (USD -1.5%) & property (USD - 5.9%) lagged.
We still believe the micro & macro environment favours equities due to attractive valuations, rising liquidity & strong balance sheets. The shrinking equity float as a result of record M&A activity, share buy backs & declining new issuance reinforces this view. While relative valuations have retreated on the back of a rout in bond markets they remain supportive (earnings yields still above bonds). Clearly the risk of complacency amongst investors & corporate earnings surprising on the downside are concerns, while a correction is also possible as the current bull market (MSCI 153% over 247 weeks) exceeds the median duration (123 weeks) & magnitude (57%) of the past 8 cycles. We would use a correction as a buying opportunity as we would any further strengthening of the rand - consensus forecasts 12 months out are calling for a weaker rand (ZAR/USD=7.39).
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Stanlib Managed Aggressive comment - Mar 07
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Thursday, 24 May 2007
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Fund Manager Comment
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The rand started the year where it left off being the worst performing currency in the world as it declined 4.2% against the dollar in Q1. As such currency weakness enhanced the funds rand returns. In dollar terms all asset classes started the year in positive territory with property leading the charge (USD +5.7%). Within equities the MSCI Pacific (+4.7%) offered the best returns followed by Europe, the UK, Japan & then USA. Our overweight position in Asia & Europe therefore added alpha as did our underweight position in the US. The Australia & European smaller companies funds were the top contributors to returns but this was offset by underperformance of the Japan smaller companies fund. Emerging markets continue to outperform so the move to the broader MSCI All Countries Index continues to pay off. In this regard the India & China Focus funds as well as the Latin America fund have been the top performers since their introduction 9 months ago. Over 12 months the dollar return of 7% was behind benchmark due to our overweight position in growth stocks (USD +11.0%), which lagged their value counterparts (USD +18.6%) as well as our small & mid cap bias. Looking ahead STANLIB's view is the macro environment still favours equities as inflation is less problematic, the breadth of growth is good & leading indicators have stabilised. We believe attractive valuations, abundant liquidity, robust M&A activity & strong balance sheets also remain a key underpin to the market. While relative valuations have retreated they remain supportive for equities over other asset classes (record share buy back programs vindicate this). On the downside we are concerned that investors have become complacent & there is a chance of corporate earnings surprising on the downside. A correction is also possible as the current bull market (MSCI 140% over 237 weeks) exceeds the ave duration (141 weeks) & magnitude (84%) of the past 8 cycles. Prospects for property also remain positive as the divi yield of (2.94%) is higher than the 2.15% of equities. While lower than bonds (3.66%), property earnings & distributions can grow whereas bond coupons are fixed. We remain diversified across all asset classes, although being an aggressive fund have minimal allocation to cash.
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Stanlib Managed Aggressive comment - Sep 06
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Monday, 26 March 2007
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Fund Manager Comment
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The quarter was characterized by the Feds decision to leave rates unchanged at 5.25% (following 17 consecutive 25bpt hikes) as a 30% decline in the oil price from its August high eased inflationary concerns. Both contributed to a rally in all asset classes with the MSCI gaining 13.2% in rand terms, marginally better then the 12.3% increase in bonds. Property was however the main beneficiary registering a gain of 20.1%. A combination of SA's record current account deficit & emerging market jitters resulted in the local unit being the worst performing primary currency in the world over 3 & 12 months. For the quarter it lost 7.7% against the dollar extending the 12-month loss to 18.2%. The fund therefore benefited from all asset classes ending the 3rd quarter in positive territory as well as rand weakness. Our overweight position in Europe contributed to returns, as it was the best performing region during the period under review. Conversely the overweight position in Japan detracted from returns (although it was the largest contributor over the previous 12 months) as did the growth bias of the portfolio. Being underweight the US added alpha, but this has been offset by underperformance of the American Growth fund (USD -7%) underperforming the S&P 500 (USD +5.2%).
Our decision to change to the broader MSCI All Countries Index has already started paying off with the two top performing equity funds in both relative & absolute terms being the newly introduced India & China Focus funds (USD 18.8% & 7.5% respectively). Including property has also clearly proved to be beneficial. We remain bullish on equities despite their 122% dollar return since October 2002. Valuations are compelling following earnings growth of 170% over the same period resulting in equities actually being cheaper than the start of the bull market. Relative to bonds equities remain close to their most attractive levels since 1995 with European earnings yields (8.1%) more than double the 3.97% yield on the 10 year German bund! Prospects for global property also remain positive as the dividend yield of 3.32% compares favourably with global bonds (3.55%) as well as global equities (2.14%). On the downside declining interest rates & reasonable equity valuations are offset to a degree by potentially slowing corporate earnings. Global growth is also expected to moderate as a downturn in the US housing market combined with synchronized rate hikes by most major central bankers affect consumer spending. As such we are diversified across all asset classes.
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Stanlib Managed Aggressive comment - Dec 06
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Monday, 26 March 2007
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Fund Manager Comment
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Global equities ended the year on a high (MSCI +8.4% in dollars) with all major equity markets closing in positive territory. In fact all asset classes were up with property being the best performer gaining 13.5% and bonds the worst (+1.4%). In rand terms investors also benefited from the local unit being the worst performing primary currency in the world resulting in the fund gaining 24.5% over 12 months (12% in dollars) with the 3 year return now also pleasing showing an annual growth rate of 14.9%. During the period under review the Asian pacific region offered the best returns followed by Europe, the UK, US & then Japan. Our overweight position in Asia & Europe therefore contributed to returns however this was offset by being overweight in Japan. Clearly the underweight position in the US added alpha, but this too was offset by underperformance of the American Growth fund (USD 3.4%) underperforming the S&P 500 (USD 15.8%).
Our decision to change to the broader MSCI All Countries Index continues to pay off as emerging markets outperformed. In this regard the China Focus fund (US$ +34%) was the best absolute & relative performer. Looking ahead equity fundamentals remain healthy thanks to abundant liquidity, share buy backs & strong M&A activity. While relative valuations have retreated from record cheap levels they remain at supportive levels for equities over bonds. Earnings have risen considerably faster than prices resulting PE's on aggregate dropping from 24.5X to 16.8X with the FWD PE of 14.7X looking relatively attractive. Prospects for global property also remain positive as the dividend yield of (3%), while marginally lower than global bonds (3.6%) can grow whereas bond coupons are fixed. It is also higher than the 2.1% divi yield of equities.
On the downside we are concerned that investors could have become complacent with the VIX (a measure of perceived risk) near all time lows. Geopolitical risks could be underplayed & there is a risk of corporate earnings surprising on the downside. Consumer spending in particular could come under pressure thanks to synchronized rate hikes by most major central bankers. One final word of caution is the current bull market (MSCI up 125% over 225 weeks) exceeds the ave duration (141 weeks) & magnitude (84%) of the past 8 cycles since 1970 so profit taking cannot be ruled out. As such we are diversified across all asset classes, although being an aggressive fund have minimal allocation to the more conservative asset classes such as cash.
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Stanlib Managed Aggressive comment - Jun 06
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Tuesday, 28 November 2006
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Fund Manager Comment
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During Q2 equity performance was hurt by exposure to growth stocks & small caps, which underperformed the broader market in May & June. For the quarter rand returns were enhanced by the currency weakening substantially against the dollar (-14.3%) on the back of news that our current account deficit ballooned to 6.4% of GDP. Emerging market jitters also put the rand on the back foot although it's interesting to note that despite the fall it's still 4.3% stronger than it was 3 years ago! Our overweight position in Japan & Emerging markets detracted from returns this quarter however these regions have been the biggest contributors over 12 months. The portfolio continues to benefit from being underweight US securities, but this has been offset by our large exposure to the America fund (USD -5.8%) underperforming the S&P 500 (USD -1.4%). Being overweight Asia contributed to returns although the region was not immune to the sell off as it experienced its 1st decline in 8 quarters. The top performing fund in both relative & absolute terms was the Australia fund (USD +5.7%). Looking ahead we are concerned about rising geopolitical tensions as well as the ability of company's to accommodate record oil prices & tighter monetary policies. We are therefore looking at adding global bonds to the portfolio as a peak in US rates coupled with a slow down in global growth should benefit this asset class. We are also in the process of increasing our exposure to the property sector as fundamentals continue to improve.
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Stanlib Managed Aggressive comment - Mar 06
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Friday, 25 August 2006
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Fund Manager Comment
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During the 1st quarter the portfolio gained 6.8% in dollar terms, marginally ahead of the MSCI's return of 6.6%. For the 12 months ended 31/3/2006 it is up 22.8% compared to the benchmarks gain of 18%. Our overweight position in Emerging markets (USD +12.1%) contributed to returns as did our underweight exposure to the US (+4.2%) which was the worst performing market. Within this region the American Growth fund was however the top performing relative performer with a gain of 11.3%. Our largest holding as a result of a significant switch to the American Diversified fund also paid off handsomely as it outperformed the America Fund. Being overweight small caps (European Smaller Companies fund + 21.6%) added alpha however this was offset by our growth tilt during a period when value stocks did better. Unfortunately our overweight Japanese position detracted from returns as the region was affected by the Livedoor incident and experienced some profit taking following last years rally.
Looking ahead the improving growth outlook is resulting in rising bond yields and a re-kindling of the energy bull market, which historically have been headwinds for equities. Additionally higher inflation is normally associated with lower PE ratios and could result in the market derating. The aforementioned is not our base case scenario as we remain positive on offshore equities as a whole. In absolute terms they remain fair value but relative to SA are cheap due to the valuation differential between SA and global equities narrowing substantially to the point where the Euro STOXX 50 trades on a lower multiple to the JSE, while the FTSE 100 has a higher dividend yield! Relative to bonds earnings yields in all major markets remain higher than 10-yr bond equivalents despite their recent sell off. Free cash flow yields are also higher paving the way for additional M&A activity, share buy backs or capex. Finally we think the Fed is nearing the top of its tightening cycle, which could be the catalyst for a rerating in US equities. To conclude we acknowledge the risk of profit taking as the MSCI is up 90% over 3 years. This should however be limited by attractive valuations.
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Standard Bank Managed Aggressive comment - Sep 05
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Tuesday, 20 December 2005
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Fund Manager Comment
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Equities have outperformed most asset classes over the last 12 months with the MSCI up over 19% in dollar terms. The fund has remained fully invested so benefited by the strong run in this asset class but also managed to outperform the benchmark by gaining 24.1%. The out performance can largely be attributed to our east versus west geographic tilt of overweighting Japan and Asia at the expense of North America. In this regard Japan rebounded strongly in Q3 to be the top performing major market, while the USwas the worst.
Our Japan fund added to relative returns by beating the Topix as did our South East Asian fund (2nd best performing region), which continues to outperform its benchmark over all periods since 2000. Our European portfolio's also contributed to returns by outperforming the MSCI EMU index. While US equities have underperformed their global peers we have been fortunate in that our largest holding, the America fund, outperformed the S&P 500 again during the quarter - performance over 1 year is now double that of the S&P 500! A strong quarter by the American Growth fund means it joins the America fund in the top quartile over 1 & 3 years.
3 years have elapsed since the October 2002 lows. This is above the average initial upward phase of a bull market so if history is anything to go by profit taking cannot be ruled out. A correction would be healthy given the superb dollar returns over the past 3 years but we think the downside should be limited as equities continue to be underpinned by attractive valuations. Forward PE ratios in most major markets are below the mean of the last 10 years, while current earnings yields are above equivalent bond yields making equities attractive on a relative basis.
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Standard Bank Managed Aggressive comment - Jun 05
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Thursday, 17 November 2005
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Fund Manager Comment
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From a South African's perspective the portfolio had a fantastic 12 months, having benefited from the rand being the worst performing currency in the world coupled with the MSCI index gaining 8% in dollar terms. In addition investors gained from the fund outperforming the benchmark handsomely (up 12.8% in dollars). In rand terms it was up 20.8%.
Of the major markets the best performer was SEA, with Japan being the worst. Our marginal overweight position in SEA contributed to returns as did the SEA fund which outperformed its benchmark and was the best performing fund in the portfolio. The overweight position in Japan detracted from returns but this was partially offset by the Japan Smaller Companies fund, which outperformed the TOPIX. Being neutral on the UShelped the fund achieve a top quartile ranking as the dollar rebounded strongly during the period under review. Our largest holding, the America fund, also added to relative returns by outperforming the S&P 500 (up 20% for the year vs. benchmark 6%). Within Europe all 4 underlying funds beat their benchmarks and all are in the top quartile! Looking ahead fundamentals are solid in the US and SEA but are subdued in Europe and Japan. Bears would argue higher energy prices, a slowdown in economic growth and tighter monetary policy in the US could result in earnings downgrades. Conversely bulls would point out the downside should be limited by attractive valuations, strong cash flows and declining unemployment in Japan and the US. STANLIB believes the risks are balanced, however we view equities as cheap relative to cash and bonds. We will remain fully invested at all times, but the portfolio is well diversified across regions, size and styles.
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Standard Bank Managed Aggressive comment - Mar 05
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Friday, 1 July 2005
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Fund Manager Comment
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Equities succumbed to profit taking as the MSCI declined by 1,5% during the first quarter. Due to base effects (MSCI has risen 62% since troughing 2 years ago) equities are not expected to record double-digit returns this year - although we forecast they will outperform bonds and cash.
Of the major markets, the best performer was South East Asia while the US was the worst performer. The US excluding Canada accounts for 46,7% of the fund versus benchmark 52,4% so the underweight position contributed to returns, as did two of our largest holdings, the America and American Diversified fund that outperformed the S&P 500. We remain concerned about higher inflation and interest rates in the US as well as the oil price, which recently rose above $57/barrel during the period under review. While the top down macro view for Europe is bleak we remain neutral on the region due to attractive valuations. Successful tilts to small caps via the European Smaller companies fund that is not affected by the stronger euro has added to relative returns and was our best performing fund in the portfolio gaining 7.7% in dollar terms. Performance of Japanese equities was disappointing in absolute terms as company earnings slowed. In addition our core Japan fund underperformed its benchmark detracting from relative returns, however this was offset by our two satellite funds with the smaller companies fund in particular doing well as it rose 4.4% in dollar terms.
Most of the underlying funds remain overweight medium and smaller companies, though managers are increasing their exposure to large caps. Our view is equities are likely to be underpinned by the highest average level of cash on balance sheets in over 30 years. This is resulting in rising dividend payouts as well as share buy backs and may support investor's appetite for equities.
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Standard Bank Managed Aggressive comment - Dec 04
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Thursday, 17 March 2005
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Fund Manager Comment
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For much of 2004 equities came under pressure due to all the negative publicity in the press (record oil prices, turmoil in Iraq, rising interest rates etc). During the last quarter, however, equities rebounded strongly to end in the black for the second consecutive year. Global equities rose, with the MSCI world index gaining 15.2% for the year (11.9% in Q4). The fund was up just over 14% during the quarter and therefore outperformed its benchmark. Using MSCI regional dollar returns South East Asian markets were once again the best performers gaining 29%. Europe was the next best (22.4%) followed by Japan (15%) with the US lagging (10.7%) - clearly, currencies played a big role in determining returns, i.e. strong euro and pound, but weak dollar. The fund's underweight position in the USadded to relative returns, but this was somewhat offset by an overweight position in Japan.
The underweight exposure to both US and UK equities has been increased due to concerns over interest rate hikes and further oil price increases. In the US the widening trade deficit and consumer spending are a cause for concern. Risks in the UK include a deteriorating property market and falling consumption. Our Japanese overweight position has been kept constant due to continued improving fundamentals and attractive valuations.
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Standard Bank Managed Aggressive comment - Sep 04
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Monday, 29 November 2004
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Fund Manager Comment
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During the quarter, the fund returned -1.8% in US dollar terms, underperforming the composite benchmark index, which returned -1.0% over the same period. US equities, which constitute the largest portion of the fund, contributed negatively to performance while, at sector level, exposure to telecommunication services and media companies detracted from relative returns. The underweight position in the energy sector, established due to the high oil price, also hurt returns. This was offset by holdings within the consumer durables & apparel, and food beverage & tobacco sectors. Performance within European equities contributed positively to the fund's overall performance. Strong stock selection in the media, energy and automobiles & components sectors added to returns. Furthermore, the fund's positioning in a number of sectors also boosted returns, for example, low exposure to the food, beverage & tobacco, and household & personal products sectors benefited the fund on a relative basis, as they recorded some of the worst sector performances during the quarter. Exposure to Japanese equities detracted from returns. Specifically, poor stock selection in the electrical machinery sector and the fund's low exposure to power utility companies hurt performance. The portfolio manager maintained the fund's underweight exposures to US and UK equities, relative to the benchmark index, and slightly increased the position in the UK. The fund holds an overweight position in Europe. The fund remains neutral in Japanese equities; a stance which is due to market movements, and which the fund manager is currently reviewing. Although the US economy is recovering, the portfolio manager believes that uncertainties over employment figures, consumer spending and corporate earnings still prevail. The portfolio manager considers that growth prospects are weaker in the UK market than in Europe, and highlights concerns over the UK economy's sensitivity to rises in short-term interest rates through the mortgage market and indebted consumers. Meanwhile, the manager believes that Japan could outperform other major markets. Economic news has also been strong, with improved GDP, wages and exports figures. The manager believes these trends should continue, creating positive earnings surprises.
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