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STANLIB Global Balanced Fund - News
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Stanlib Global Balanced comment - Sep 19
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Monday, 9 December 2019
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Fund Manager Comment
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Market Background
The MSCI ACWI returned 0.1% in dollar terms, with a stronger dollar eroding returns from overseas assets. The Bloomberg Barclays Global Aggregate bond index returned 0.7%, driven by falling core bond yields; credit spreads were little changed. Bonds and equities were both aided by the expectation that key central banks would ease their monetary policy, as indeed transpired. The Federal Reserve cut US rates in July and September; the ECB made one rate cut and also announced that it would resume its bond purchase programme, among other stimulus measures. Core bonds benefited from the economic uncertainty, and the Treasury yield curve inverted at the 2- and 10-year points – often seen as a recession signal. In dollar terms, Japan was the best performer among the major equity regions, thanks to a rally in September as US-China relations improved and the yen weakened. The US and UK also outperformed. Europe ex UK fell, though this was due to currency moves. Asian and emerging markets were the worst performers as investors preferred safer havens: the strong dollar was another headwind here.
Performance
The portfolio delivered a positive return for the quarter, though it trailed the composite benchmark. Asset-allocation had a small negative impact overall. This was mainly due to the overweight exposure to cash. Selection effects detracted. A positive contribution from the fixed-income portfolio was offset by negative contributions from the other portfolios.
Outlook
The cycle is clearly mature but we do not believe the end is imminent – rather it is being extended and redefined by a combination of structural factors leading to low interest rates, low inflation and ongoing moderate growth. Our central case is that US growth should continue to slow over 2019 as the impact of fiscal stimulus rolls off. Inflation should remain under control and valuations continue to be fair, leaving a generally benign environment for investors. In recent months we have become somewhat less constructive on the outlook for equities, given ongoing trade tensions, increasingly patchy economic data, falling earnings expectations, and our forecast of fewer rate cuts in the US and Europe than are currently priced in. Within fixed income, we have become more positive on corporate bonds: slow but positive global economic growth, gentle inflation and dovish central-bank policy tends to be a sweet spot for credit investing. Leverage among US companies, compared to European peers, is a concern but we believe there are opportunities within specific industries and regions. The energy, telecoms, and food & beverage industries have previously raised leverage, but a number of companies in these areas are now reducing debt.
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STANLIB Global Balanced comment - Mar 19
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Wednesday, 12 June 2019
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Fund Manager Comment
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Market Background
- Global equities (as measured by the MSCI AC World Index) bounced back strongly, returning 12.3% for the quarter in dollar terms. Bonds (Barclays Global Aggregate) returned 2.2%, benefiting from both falling core yields and tightening credit spreads.
- Amid more signs of slowing global growth, investors welcomed increasingly dovish signals from key central banks. Apparent progress in US-China trade talks provided further support, as did Chinese stimulus measures – both actual and anticipated.
- At its March policy meeting, the Federal Reserve indicated that US rates were unlikely to rise in 2019, and that it would stop reducing its balance sheet in September. Treasury yields fell sharply in response and the US yield curve briefly inverted - a move seen by many as a harbinger of recession.
- The ECB pushed out its next projected rate hike to 2020, cut its Eurozone growth forecast for 2019, and pledged another round of stimulus via cheap loans for banks.
- Brexit dominated the headlines in Europe. The UK parliament rejected the EU withdrawal agreement three times. While MPs also ruled out a no-deal exit they then voted down every other Brexit plan put in front of them. With time running out, the EU granted a short extension to
Article 50. Despite the mounting turmoil, sterling strengthened over the quarter as no-deal fears receded somewhat.
- The major equity regions all delivered strong gains. In dollar terms, the US outperformed the MSCI AC World, while the UK was broadly in line with the global index. Asia ex Japan lagged modestly, with Europe ex UK and emerging markets further behind. Japan was the main laggard, with sentiment towards its export heavy market dampened by disappointing
global economic indicators.
Activity
- We raised exposure to equities over the quarter, increasing the overweight from +170 basis points (bps) to +373 bps. We also moved slightly further overweight in property, from +41 bps to +54 bps.
- We reduced exposure to fixed income, where the underweight widened from -330 bps to -435 bps, and cash, where the overweight fell from +118 bps to just +7 bps.
Outlook
- Global markets continue to provide evidence of the value to be found in sustainably growing, secular opportunities. With scope for further rerating and expectations that volatility should remain elevated, we believe this backdrop is ideal for investors capable of identifying the market’s long-term winners.
- While factors such as technological regulation and trade remain in focus, we believe that structural factors promoting a world which is ‘lower for longer’ remain in place. This should ensure that companies which can sustain above-average growth remain attractive. We therefore retain our focus on companies with durable competitive advantages, as we
believe these names are best-placed to sustain high returns on capital and earnings growth through the market cycle.
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Stanlib Global Balanced 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 returning an excellent +4.3% in dollar terms in the quarter to end December 2015, the fund encountered very tough markets in the first quarter of 2016 to register a return of -0.4%. For the year to end March the fund returned -1.5% in dollars, after all costs (benchmark -0.8%). The equity portion of the fund (61.7% at end March) had a difficult quarter, but a good 12 months to end March.
The equity portion of the fund returned -2% in dollars in the quarter, the worst return of the four asset classes. Sector allocation hurt during the quarter, with underweights in energy and materials (including mining) plus an overweight in healthcare and technology hurting relative returns.
During the quarter to end March, fixed interest performed better with a return of +4.9% in dollars (9.9% of fund versus 20% for the benchmark and down from 13.5% of fund at end December). So the big underweight in bonds detracted most from relative performance in the quarter. Next best was property’s +4.7% dollar return (11.2% of portfolio versus 10% for the benchmark), then the cash return of +1.8% in dollars. The allocation to cash was raised from 12.4% at end December to 17.2% at end March, much higher than the benchmark’s 10%.
Looking Ahead
Stock and property markets corrected sharply in the first six weeks of 2016, finally bottoming on 11th February. Since then markets have rallied strongly, recouping most of the losses. Columbia Threadneedle thinks developed stock markets will continue to climb the proverbial wall of worry.
The fund manager continues to believe that economic growth will remain challenged in 2016 and prefers to focus on shares that deliver consistent growth and attractive dividends. However, volatility is expected to remain a key feature.
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Stanlib Global Balanced comment - Jun 14
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Monday, 15 September 2014
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Fund Manager Comment
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Fund Review
In the first quarter of 2014 the fund registered a small positive return of 0.02%, as markets digested the big returns of 2013.
The quarter to end June was much better than the first quarter, as the fund delivered a return of 3.3% 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 11.8% in dollars.
The fund has been managed by Thread needle Investments of London for most of 2014. The equity portion of the fund (52.8% of fund) is identical to the STANLIB Global Equity Fund portfolio. During the quarter to June, the property allocation (10.4% of portfolio), which is the STANLIB Global Property Fund, did best with a return of 7.2% in dollars, followed by the 4.3% from the equity portfolio, then the 2.91% from the fixed interest portfolio (23.9% of fund, versus 30% for the benchmark), then cash with a return of 0.6% (13% of portfolio versus 10% for the benchmark).
The bond portfolio has 85 different bonds, mostly government and corporate bonds, including government bonds of the US, Germany, Japan, France and New Zealand, as well as a few emerging markets.
Looking Ahead
The fund manager at Thread needle, Alex Lyle, continues to see better value in equities than in bonds. He is happy with the property allocation at just above benchmark.
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.
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Stanlib Global Balanced 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 an excellent final quarter of 2013 (+3.4% in dollars) and 2013 calendar year (+10.3% in dollars), the fund registered a tiny positive dollar return in the first quarter of 2014 of 0.02%. The return for the twelve months to end March was 6.5%.
Threadneedle Investments from London are now managing the portfolio, using exactly the same equity portfolio (52.7% of fund versus 50% for the benchmark) as the STANLIB Global Equity Feeder Fund. The portfolio is also identical to the rand-based portfolio they manage for us. The equity portfolio underperformed in the first quarter because of its overweight position in the US and Japan and underweight in Europe, although the big underweight in Emerging Markets helped. Share selection also hurt in the quarter, with strength in industrial shares offset by poor performances in financials, healthcare and consumer discretionary shares.
The portfolio is very underweight in Fixed Interest (23.7% of fund versus 30% for the benchmark) and slightly overweight in Global Property (managed by STANLIB's team) at 10.1% of fund. Property had an excellent return in the quarter, doing 7.6% in dollars, beating the benchmark's 7.1%. The Fixed Interest return was good too at 2.5%, ahead of the benchmark's 2.4% return. Even the cash return at 1.1% in dollars was good (benchmark 0.2%). The fund is overweight in cash at 13.5% versus 10% for benchmark.
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.
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Stanlib Global Balanced comment - Sep 13
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Thursday, 2 January 2014
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Fund Manager Comment
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Fund Review
Your fund had a good quarter to end September with a return of 4.7% in dollars, thanks to a 3.4% move in the month of September. For the year to end September the fund did 9.3%.
We have maintained an overweight position in equities through most of the quarter (53.5% versus 50% for the benchmark) as well as an overweight in global listed property (13.8% versus 10% for the benchmark). 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 fund has maintained an underweight position in bonds (20% versus 30% 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 Balanced 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 -1.6% in what has been a very volatile quarter. The return for the first six months of 2013 was 1.95% and 10.4% for the year to end March 2013.
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 returned -8%, where your fund is underweight (3.3% of equities versus 12% in the benchmark). We cut our equity holdings before the correction began in late May, but remain 3% overweight, while we are 9% 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.
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 slightly overweight and are seeing a recovery in this asset class in the new quarter, after a sharp correction.
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 Balanced 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 produced its third consecutive positive dollar return during the quarter of 3.6%, after dollar returns of 5.7% in the September quarter and 2.4% in the December quarter. The dollar was strong against other currencies. For example, in euros the fund did 6.4% and in pounds it did 12.9% in the quarter.
During the year to end March the fund did 7.5%.
It was mostly "risk-on" during the quarter, with global equities gaining 6.6%, global property gaining 3% and global bonds losing 3.1%. The big disappointment was emerging market equities losing 1.6%.
The fund continues to be overweight in equities and in property and underweight in 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 Balanced comment - Dec 12
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Friday, 12 April 2013
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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 After a good return in the quarter to September (5.7%), the fund did 2.4% in the last quarter of 2012, which was good for a balanced fund with 52.6% in equities, because the MSCI World Index of pure equities did 2.6%. For the year to end December, the fund did 12.5% in dollars.
The fund continues to be overweight in equities (53.6% versus 50% for the benchmark), very overweight in listed property (13.9% versus 10% for the benchmark), underweight in bonds (26.5% versus 30% for the benchmark) and underweight in offshore cash (5.9% versus 10%).
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 the Fidelity Emerging Market Fund, an overweight in the listed property market and underweight in bonds and cash.
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 Balanced 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 5.7% in the quarter and 14.5% 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 European shares (up 9.3% in the quarter in dollars), which bounced back nicely, along with the euro currency (up 7% against the dollar from its low), as well as a small overweight in emerging markets. The overweight in global property also proved effective (up 4.7%).
Our bond holdings have also benefited from the "risk on" situation because of a good holding in the Fidelity Euro High Yield Fund (15.7% of bonds) - sold during September - and also a good position in the Fidelity US High Yield Fund (11.5% of bonds), both of which appreciated nicely.
The fund continues to be overweight in equities (53.6% versus 50% for the benchmark), overweight in listed property (13.5% versus 10% for the benchmark), underweight in bonds (28.6% versus 30% for the benchmark) and especially underweight in offshore cash (4.3% versus 10%).
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 Balanced 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 -4.1% 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 6.8%% 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 (52.7% versus 50% for the benchmark), overweight in listed property (12.8% versus 10% for the benchmark), underweight in bonds (28% versus 30% for the benchmark) and underweight in offshore cash (6.5% versus 10%). 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 Balanced 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 an excellent quarter, gaining 8.4% 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 did -0.5%.
We maintained an overweight in equities (53% versus 50% for the benchmark) and an overweight in listed property (12.4% versus 10% for the benchmark), both of which helped the fund do well. On the bond side, we maintained our underweight at 27.2% of fund, relative to the 30% for the benchmark. Holding to the belief that developed market government bonds (down 0.5% in the quarter) are overpriced, we held 27% of our bond holding in a combination of European and US High Yield Bond Funds and 5.7% in emerging market bonds.
The fund's equity holdings are spread amongst a wide range of Fidelity funds, with approximately 18.5% of equities invested in emerging markets (versus 14% for the benchmark).
Looking Ahead
Although there may be some weakness in equities and property (and concomitant strength in government bonds) 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 Balanced 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 good final quarter of 2011, gaining 4.2% 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 50% allocation and also overweight listed global property at 11.6% of portfolio versus 10% for the benchmark. The underweight is in bonds (27.8% versus 30% for the benchmark).
For the 2011 calendar year the fund had a negative return of 8%. 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 Balanced 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 (approximately -13.9% for the quarter and -6.9% 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, because of small positive returns from most offshore bonds (28.5% of fund).
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. Our overweight in Emerging Markets (20% of equities versus 14% for the benchmark) hurt the fund in the past quarter and year, but may help it in the next period. On the cash front (10.3% of fund), although the US dollar was our single biggest holding (34% of cash), nevertheless the dollar gained quite sharply against the other currencies representing 66% of cash. This dollar outperformance is being partially unwound early in the new quarter.
As the December quarter begins, we are slightly underweight equities and bonds and slightly overweight in listed property.
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 Balanced comment - Jun 11
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Monday, 19 September 2011
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Fund Manager Comment
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Fund Review
After two good quarters (December and March), the fund underperformed a tad during the June quarter. 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 0.5% in rands or 0.6% in dollars.
Our overweight position in equities hurt marginally as global equities returned 0.4% in dollars during the quarter. Within global equities, our double overweight holding in emerging markets (26.7% versus 14% for the benchmark) hurt as emerging markets returned -1% in dollars. Also we were underweight in bonds and bonds had a good quarter (3.2% in dollars), although bonds are losing value in early July as yields rise.
For the year to end June the fund returned 4.6% in rand terms or 18.6% in dollar terms. We remain overweight equities as the new quarter gets underway, underweight bonds, marginally overweight offshore listed property and underweight cash.
Looking Ahead
Global stock markets usually experience difficult 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 Balanced comment - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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Fund Review
The fund had another good quarter, coming on top of the previous quarter's 4% gain in dollars. This three month period produced a return of 3% in dollars. By comparison the MSCI World Index did 4.9% in dollars, the MSCI Emerging Markets Index did 2.1% and the JP Morgan Government Bond Index did 0.7%. The fund typically has around 50% in equities. During the year to end March, the fund did 10% in dollars. The MSCI World index did 14% and the JP Morgan Government Bond Index did 7.5%. Offshore listed properties (9.6% of fund), did around 15% in dollars. We started the 2011 year overweight in equities (54% of fund, where benchmark is 50%), but at one stage reduced this to under benchmark during the troubles in Egypt and Libya, not to mention Japan. In March we reverted back to a neutral position as further good news about the global economy emerged. We stayed partially underweight in bonds (26% versus 30% for the benchmark) because of concerns about capital losses as economies strengthen and infl ation picks up, not to mention huge government defi cits causing more issuance of bonds. On listed property the fund is 9.6% invested, slightly lower than benchmark (10%). On the currency front, the 14% in cash has been 65% invested in the euro, Canadian dollar and the pound, leaving 35% in the dollar. The dollar lost 6% against the euro, 3.8% against the pound and 2.8% against the Canadian dollar during the quarter.
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 Balanced 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 had a good final quarter of 2010, with a return of 4.2% in dollars, or 6.1% in euros. During the 2010 year, the fund gained 9.1% in dollar terms (15.8% in euros). The equity portfolio (54.5% of fund) remained largely unchanged during the quarter, with emerging markets comprising around 16% of equities. Country returns in the last quarter saw the developed markets outperforming the emerging markets (9.1% versus 7.4%), with the Japanese Nikkei being the best of the big markets (12.5% in dollars), followed by the US S&P 500 Index's 10.8%, then the German Dax's 9.1% and the FTSE 100's 6.2%. On the emerging market front, the MSCI Russia Index excelled with a dollar return of 16.5%, followed by the MSCI South Africa's 13.1%, but the two biggest emerging markets did poorly, with the MSCI China Index at 0.7% and the MSCI Brazil at 1.9%. Global government bonds had a negative dollar return during the quarter after yields jumped sharply in response to better-than-expected economic news, particularly in the US. Developed market bonds have been in a broad bull market (declining yields) for 28 years and there is a fairly strong possibility that this bull market could be ending if the global economy continues its recovery. The fund's bond funds are more invested in corporate bonds, which fared better than governments during the quarter. We remain underweight bonds relative to benchmark and are watching proceedings closely.
Looking Ahead
We remain over-weight in equities in the fund (54.5% of fund versus 50% for the benchmark) because we anticipate that global equity markets should continue to rally as economies recover, despite the probability of corrections along the way. We also remain over-weight in listed property shares (11.3% versus the benchmark's 9.5%) because of recovering economies and low interest rates.
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Stanlib Global Balanced comment - Sep 10
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Wednesday, 5 January 2011
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Fund Manager Comment
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The 3rd quarter of 2010 was an excellent quarter for the fund, with a dollar return of 11.3%. This was achieved by holding a nice balance of different asset classes, all of which contributed positively. 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), although the euro's 10% gain against the dollar played a big role and Australia (23.7%) and Hong Kong (21.9%) also doing well. 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. During the quarter equity markets had a strong July, a weak August and a gang-buster September (developed markets up 9.4% and emerging markets up 11.1%)as the northern hemisphere summer ended and fund managers returned to work. Listed property rose by 14% in dollar terms during the 3rd quarter, adding nicely to your fund's returns, while global bonds (28.9% of portfolio) returned 8.3%. So the fund's recovery in dollar terms from the 2008 debacle has continued nicely. The fund has overcome the collapse in October 2008, when Lehman Bros went bang, and is now trading at the same dollar unit price as in August 2008 and has surpassed the April 2010 post-recovery high. In euro terms, the fund is trading at January 2008 levels and in pound terms the fund is close to another all-time record high, some 12% higher than the highest unit price recorded in 2008. 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 Balanced 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. The MSCI World Index fell by 12.5% in Dollar terms during the quarter and the offshore property fund declined by around 8% in Dollars. The fund declined by 7.8% in Dollar terms, shielded to some extent by the 10% in cash (overweight in the Dollar) and to a lesser extent by the 26% in global bonds. Although the government bonds in the portfolio (40% of portfolio) did well, the corporate bonds declined. For the year ended June, the fund was up 9.7% in Dollar terms. We kept the portfolio unchanged during the 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 Balanced Fund will change it's name to STANLIB Global Balanced Fund, effective from 22 July 2010
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Stanlib Managed Balanced comment - Mar 10
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Tuesday, 29 June 2010
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Fund Manager Comment
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Fund review
The fund had a positive dollar return in the fi rst quarter of around 2% and a much better pound and euro return as the dollar gained over 6% against both these currencies. During the year to end March the dollar return was an impressive 40%-plus. The fund is very well diversifi ed amongst some 26 different Fidelity equity funds, ranging from the Fidelity Australia Fund, China Focus Fund, Euro Blue Chip Fund and Emerging Markets Fund to the Technology Fund, Global Focus Fund, Industrial Fund and Japan Fund, amongst others. Importantly, as one should expect from a balanced fund, the fund is nicely diversifi ed and balanced between the different asset classes, with around 50% in equities, 29% in bonds (with a preference for corporate bonds), 9.6% in property and a similar amount in cash.
Looking Ahead
We remain positive on offshore stock and listed property markets, although corrections will occur from time to time and risks are higher than after most previous recessions.
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Stanlib Managed Balanced 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 12.7% 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 Balanced 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 12.7% 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 Balanced 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 19.4% 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 Balanced 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 Balanced 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 also 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, property & cash 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 to 1990/2001 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 Balanced 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 Balanced 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 Balanced 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 equity and property.
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Stanlib Managed Balanced 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$. During the period under review equity markets continued to rally on the back of investors' persistent appetite for risk, however bonds (USD -1.5%) & property (USD -5.9%) lagged. Equity outperformance YTD 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 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.
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. 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 Balanced 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 9% 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 is still positive 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 markets. While relative valuations have retreated they remain supportive for equities over other asset classes (record share buy back programs vindicate this). 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. 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. We therefore remain diversified across all asset classes.
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Stanlib Managed Balanced 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 (+13.5%) & bonds the worst (+1.4%). In rand terms investors also benefited from the currency being the worst performer in the world resulting in the portfolio gaining 23.6% over 12 months. The 3 year return is now also pleasing with an annual growth rate of 11.2% (ahead of the sector ave). 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 AC 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 supportive of 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 attractive. Prospects for global property are also positive as the divi 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.
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Stanlib Managed Balanced 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 well diversified across all asset classes.
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Stanlib Managed Balanced comment - Jun 06
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Tuesday, 28 November 2006
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Fund Manager Comment
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For the 1st time since Q1 2005 global equities (-0.5%) experienced a quarterly decline. Conversely bonds reversed the negative trend of 2005 by gaining 3%. Our asset allocation tilt of being overweight equity at the expense of bonds therefore detracted from returns. During the period under review 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! Within equities our tilt to growth stocks & small caps, which underperformed the broader market in May & June, hurt relative performance. Our overweight position in Japan & Emerging markets also 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 although this has been mitigated by our large exposure to the America fund (USD -5.8%) underperforming the S&P 500 (USD -1.4%). Being overweight Asia aided returns but 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%). Major changes during the quarter include the purchase of the China & India Focus funds as well as the Latin America fund as we thought the sell off in emerging markets was overdone.
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Stanlib Managed Balanced comment - Mar 06
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Friday, 25 August 2006
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Fund Manager Comment
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A surprise upturn in global growth helped equities outperform bonds in Q1 as did inflationary concerns, which continue to undermine bond prices. Tactical asset allocation helped the fund outperform its benchmark as it was overweight equities at the expense of bonds. Our overweight position in Emerging markets (USD +12.1%) also contributed to returns as did our underweight exposure to the US (+4.2%) which was the worst performing region. Within the US the American Growth fund was however the top relative performer with a gain of 11.3%. 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.
We remain comfortable with our 60% equity exposure as our positive outlook for the global economy is reinforced by the strong uptrend of the OECD Leading Indicator and implies further under performance of bonds. Earnings yields of all major equity markets are higher than their 10 year bond equivalents and consensus earnings growth of greater than 11% over the next two years should provide an underpin to stocks. We believe the current environment characterised by a strong rand, emerging bond market spreads at record lows and the JSE trading at a premium to some developed equity markets provides balanced investors an ideal opportunity to buy this fund.
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Standard Bank Managed Balanced comment - Sep 05
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Tuesday, 20 December 2005
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Fund Manager Comment
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In USD terms global bonds (-1.1%) underperformed equities (+6.6%) in Q3 as inflationary concerns caused yields in developed markets to rise. This favoured the portfolio as asset allocation is skewed towards equities (60% of TNA). Investors in the fund also benefited from the portfolio outperforming its benchmark, which can largely be attributed to our east vs west geographic tilt (overweight Japanese & Asian equities while underweight the US). In this regard the Japanese market rebounded strongly in Q3 to be the top performing major exchange, while the US was the worst. Our Japan fund added to relative returns by beating the Topix, as did our South East Asia 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 beating the MSCI EMUindex.
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! Within the bond component of the portfolio exposure to corporate bonds proved to be beneficial, while our underweight exposure to Japanese bonds also contributed to returns.
The biggest threat to the portfolio would be profit taking in equities (MSCI up 66% since October 2002 lows) as well as over-tightening by the Fed. To counter this, the portfolio is well diversified across asset classes, regions and styles. Any downside within equities should however be limited as markets are underpinned by attractive valuations. Forward PE ratios in most major markets are below the mean of the last 10 years, while earnings yields are above bond yields making equities attractive on a relative basis.
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Standard Bank Managed Balanced comment - Jun 05
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Thursday, 17 November 2005
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Fund Manager Comment
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During the period under review global equities delivered a modest positive return (MSCI up 0.4%), while bond markets continued the negative trend set in Q1 with the SBWGBI falling a further 1% in dollar terms. Against this the fund was up 0.9%, thereby outperforming its benchmark. South African's benefited from the rand being the worst performing currency in the world resulting in the fund gaining over 6%in rand terms.
Within major equity markets SEA was the best performer, with Japan being the worst. Our 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. Our largest holding, the America fund, also added to relative returns by outperforming the S&P 500 (20% for the year vs. benchmark 6%). Within Europe all underlying funds are top quartile and beat their benchmarks! As for the bond portfolio, it benefited from successful tilts to dollar and sterling bonds, while relative returns were also boosted by the core International bond fund which outperformed its benchmark.
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. The biggest threat to the portfolio is the risk of over-tightening by the Fed. To counter this we are well diversified across asset classes, regions, size and styles.
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Standard Bank Managed Balanced comment - Mar 05
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Friday, 1 July 2005
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Fund Manager Comment
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Returns of asset classes in dollar terms were generally disappointing with global equities & bonds declining by 1.8% & 3.1% respectively during Q1. While market performance was disappointing for the quarter, both asset classes have had a phenomenal run over the last 3 years resulting in the fund gaining over 31%.
Of the major markets, the best performer was South East Asia while the US was the worst. We were underweight the latter, which assisted in relative 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 rates in the US as well as the oil price, which rose above $57/barrel during the period under review. Within in the bond portfolio we are overweight European bonds due to the bleak top down view of the region. The fund is however neutral on European equities due to attractive valuations with a tilt to small caps via the Euro smaller companies fund that hasn't been affected by the stronger euro (it was also our best holding gaining 7.7% in dollar terms). Performance of Japanese equities was disappointing as company earnings slowed. In addition our core Japan fund underperformed its benchmark thereby detracting from relative returns, however our satellite Japan smaller companies fund that gained 4.4% offset this.
The underlying bond managers have increased their weightings to government bonds as current spread levels do not compensate investors for the additional risk. Within corporates the focus has shifted to quality with half the allocation in AAA rated credit. Most of the underlying equity 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 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 Balanced comment - Dec 04
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Thursday, 17 March 2005
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Fund Manager Comment
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In dollar terms, global equities (11.6%) got the better of bonds (9.0%) during Q4. For most of the year the portfolio was marginally overweight equities and underweight bonds, but hadn't benefited from this position as equities had come under pressure for much of 2004 due to record oil prices, turmoil in Iraq and concern over rising interest rates. The strong rebound in Q4 helped equities end the year in the black for the second consecutive year, gaining 15.2%, thereby outperforming the 10.7% return of global bonds. The fund was up 11.8% during the quarter and therefore outperformed the benchmark return of 10.6%.
Using MSCI regional dollar returns, South East Asian markets were once again the best performers during 2004 gaining 29%. Europe was the next best (22.4%) followed by Japan (15%) with the US lagging (10.7%). The fund's underweight position in US bonds, cash and equities added to relative returns, while the overweight position in Japanese equities detracted. 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. The bond portfolios generally have a focus on quality with more than half in AAA rated credit. The government bond portion has also been increased because our underlying bond managers have been taking profits on corporate bonds as they believe current spread levels do not compensate investors for the additional risk.
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Standard Bank Managed Balanced 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 1.1% in dollar terms, outperforming the composite benchmark index, which returned 1.0% over the same period. Positive returns were derived from exposure to the fund's fixed-income holdings, which constituted the largest portion of the fund. Exposure to US and Japanese equities detracted from performance. Among fixed-income securities, issuer selection was the primary driver of performance over the period. The fund also benefited from its holdings in lower-rated euro-denominated bonds and a tactical allocation to selected euro mortgage bonds in Sweden. Changes in the shape of the yield curve proved rewarding to returns during the period. US equities contributed negatively to performance. Exposure to telecommunication services and commercial services & supplies companies detracted from relative returns, while holdings within the consumer durables & apparel, and pharmaceuticals & biotechnology sectors, and an underweight position in the food, beverage & tobacco sector contributed positively to performance. Exposure to Japanese equities also detracted from returns. 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 exposure to US and UK equities relative to the benchmark index. The fund remains overweight European and Japanese equities. Although the US economy is recovering, the portfolio manager believes that uncertainties over employment figures, consumer spending and corporate earnings still prevail. He 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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