Ginsburg & Selby SCI WW Flex Fund - Dec 19
The 4th quarter of 2019 continued to be supportive for risk assets as easing geopolitical tension and support from the major central banks buoyed investor sentiment. Global Equity Markets (MSCI AC World) returned 9.1% in US Dollars during the quarter, taking the 2019 year return to 27.3%, the best calendar year return of the decade.
Supported by better than expected economic fundamentals, easing trade tensions, and an accommodative FED, the US equity market (S&P 500) returned 9.1% during the quarter, taking their 2019 return to 31.5%, the highest amongst the major developed markets. The “Phase 1” trade deal with China as well as the third rate cut for 2019 by the FED helped ease investors anxiety, leading to an increased appetite for risk assets. This was further complemented by continued economic expansion, as GDP growth, unemployment and forward-looking business and manufacturing surveys continued to look healthy.
The UK equity market was the best performing developed market over the quarter, returning 12.0% in US Dollars and taking the year-to-date return to 24.0%. The positivity on the region was as a result of their general election outcome, as the Conservative party won their largest majority since 1987. This result should help to get a Brexit withdrawal agreement passed through parliament, therefore minimizing the risk of a no-deal Brexit.
The improved sentiment towards global risk assets, as well as the completion of a “Phase 1” trade deal between China and the USA, led to strong gains in Emerging Markets, with the MSCI Emerging Market index returning 11.9% in US Dollar terms. For the full calendar year, the Emerging Market Index returned 18.9%.
Despite the country’s dire economic position, South African assets also benefited from the improved sentiment. The JSE All Share index returned 4.6% in Rand terms during the quarter, taking the 2019 return to 12.1%. The equity market performance, however, masks the tough economic conditions, as the economy unexpectedly contracted by 0.6% in Q3. The GDP growth outlook for Q4 (official numbers released early 2020) is just as bleak, as rolling blackouts added further headwinds to the country’s diminishing growth outlook.
The Rand had a strong quarter, strengthening by 7.8% against the US Dollar to end the year at R13.98. Similarly, the Rand appreciated against the GBP and the Euro, to end the year at R18.52 (+0.9%) and R15.70 (+5.0%) respectively.
The Ginsburg & Selby SCI Worldwide Flexible Fund generated a return of +1.50% in Rand terms over the quarter, outperforming the fund’s benchmark (+1.0%) and the ASISA Worldwide flexible peer group (+1.46%).
The outperformance during the quarter was attributed to the strong returns generated by the underlying managers, with most outperforming their respective benchmarks. Notable performers during the quarter were the Allan Gray SA Equity Fund and the Tantalum Balanced Fund, which returned 5.0% and 4.1% respectively.
Despite all the uncertainties faced in 2019, markets continued to inch towards record highs. As we enter 2020, many of these uncertainties have eased, but remain unresolved (i.e. US/China trade tension, global growth, geopolitical risks etc). The Fund, therefore, continues to be positioned appropriately for this uncertain environment with the risk asset exposure at 69% and offshore exposure at 60%
The portfolio may invest in global and local securities, government, corporate and inflation linked bonds, debentures, non-equity securities, property shares, property-related securities, preference shares, money market instruments and assets in liquid form.
The portfolio may also invest in participatory interests and other forms of participation in portfolios of collective investment schemes or other similar schemes operated in territories with a regulatory environment which is to the satisfaction of the manager and trustee of a sufficient standard to provide investor protection at least equivalent to that in South Africa and which is consistent with the portfolio's primary objective.
The manager may make active use of listed and unlisted financial instruments to reduce the risk that a general decline in the value of equity, property and bond markets may have on the value of the portfolio. The manager shall have the maximum flexibility to vary assets between the various markets, asset classes and countries to reflect the changing economic and market conditions.
The manager may vary the ratios of securities or assets in liquid form in changing economic environments or market conditions, or to meet the requirements in terms of legislation. The manager may retain cash or place cash in on deposit in terms of the deed and supplemental deed. The manager will be permitted to invest on behalf of the portfolio I offshore investments as legislation permits.