2019/05/24 00:00:00

Taken in isolation, the first quarter of 2019 has been an extremely robust start for equity markets with returns of most major world equity benchmarks close to 10% or more. In the US market, the S&P500 Index has given a 13.11% return year to date with the broader Russell 2000 Index giving just over 15.51% since the beginning of January. European and Asian developed markets have experienced similar gains with emerging market returns being slightly lower at 9.76% year to date.
From a return perspective, this is the best start to a given year since 1987 for the S&P 500 Index and the third best return since 1950 (the S&P gained significantly in the first three months of 1975 with large drawdowns later in both 1975 and 1987). The picture over the last three months of 2018 however was considerably less bullish with the S&P 500 Index suffering a loss of just over 13%. Uncertainty around several large macroeconomic themes have created significant concern in the minds of investors. Additionally, the forward-looking equity market is beginning to diverge in its view of returns over the next couple of years to come. As a result of the large gains experienced by the S&P 500 in a bull market that has lasted over the last ten years, investors are beginning to question the continuation of the momentum in returns. This, coupled with less than optimistic sentiment as a result of trade considerations, a European economy struggling to find its stride amid political uncertainty and emerging markets facing headwinds, it all led to a rapid sell off in the final quarter of 2018. While we believe that the selloff of late last year was not justified by the economic data, we are of the belief that the pickup in volatility as well as investor uncertainty is likely to continue into the foreseeable future. The South African rand weakened moving from 14.08 to 14.50 to the dollar over the month. This gave a boost to the equity return for South African investors resulting in a return of 1.24% in ZAR for the month and 13.08% for the quarter.
Contributors to performance: The Fund underperformed the MSCI World (excludes emerging markets) benchmark with a performance of 0.58% for the month with the benchmark giving 1.38% for the month On a YTD basis however, the Portfolio outperformed the benchmark with a return of 13.21% relative to 12.65%. Notable single stock gains emanated from Nvidia (16.40%), British American Tobacco (15.32%) and Celgene (13.5%).
Detractors from performance: The Fund had exposure to Boeing. The group struggled as worries over safety concerns of the 737 Max aircraft led most aviation officials and airlines to ground their fleets. The stock fell -13.31% for the month of March.