After having placed much emphasis on what the US Federal Reserve was likely to do at its next meeting (consensus expected tapering of quantitative easing of $10 to $15bn), markets were left confused when it was announced that the Fed would not be tapering in September. To reiterate our previous comment, 'Thankfully, we are committed to long-term investing and ensuring that we make the best decisions for our clients with an investment horizon of 3 to 5 years. Thus, our focus remains on investing in high quality companies and asset allocation that will yield superior returns for our clients over the long term,' the Fed's decision to not taper was somewhat of a non-event for the Efficient Worldwide Flexible Fund.
Now, at the time of writing, news headlines are citing 'deadlock'. Midnight tonight is the deadline for an agreement on the ObamaCare (the Affordable Care) Act. As we've seen in recently with similar events, both the Republicans and Democrats are holding out to the very last minute in a delicately poised game of 'cat and mouse'. An even bigger deadline looms on 17 October when an agreement must be reached regarding the raising of the US debt ceiling.
There will always be an element of uncertainty in financial markets. Over the short term this uncertainty can cause extreme volatility and therefore, making speculative decisions is tantamount to placing a bet at a casino. However, during these times of uncertainty, markets can be irrational, presenting a long-term investment opportunity. A great example of this is the rand/dollar exchange rate. After having traded at R9.80 before the announcement of the Federal Reserve's tapering decision, the rand quickly strengthened to R9.54 after it was announced that tapering was not going to take place. Now, at the time of writing, (30 September), the rand is actually trading at R10.14 to the dollar. Making a short-term call would have either made or lost you a lot of money. Over the long term however, it is very plausible to expect the rand to depreciate against the US Dollar.
Other than taking some profits on both Want Want China and Inditex (the holding company of Zara) as they both reached their target prices, the Efficient Worldwide Flexible Fund remained mostly unchanged during the month. Asset allocation is currently as follows: 75.24% equities, 3.67% property, 5.22% bonds, and 15.88% cash. The fund's offshore holdings is 77.06% and we believe that this allocation best reflects our long-term investment outlook.