2019/05/30 00:00:00

Fund review
The STANLIB Balanced Cautious Fund produced a return of +5.4% over the quarter ended 31 March 2019, relative to its benchmark return of +3.7%.
Market overview
The first quarter of 2019 started with a complete turnaround after a very difficult 2018 for risk assets. The switch in messaging and actions by the world’s major central banks, led by the US Federal Reserve, to be more accommodative with their monetary policy actions spurred a rebound post the material 2018 fourth quarter equity selloff.
Despite the global growth outlook continuing to deteriorate in the first quarter of the new year, the dovish actions of the major central banks, together with easing concerns around the US/China trade tensions, pushed offshore equities (+12.9% in rand terms) to their highest quarterly US dollar return since 2010. After underperforming in the last quarter of 2018, the US equity market (+13.9%) outperformed emerging market equities (+12.4%) although offshore property (+14.5%) was the best performing major asset class, with offshore bonds (+2.5%) and offshore cash (+1.0%) also giving positive, albeit low returns in the quarter. Despite increasing concerns surrounding the local growth outlook following the return of Eskom’s loadshedding, South African risk assets followed the offshore lead to show decent gains, with the local equity market (SWIX) +6% in the quarter led by Resources (+17.8%), followed by Industrials (+7.4%) and Property (+1.5%), with Financials (-0.4%) lagging. The Resources sector included strong gains for precious metals companies, with Impala Platinum (+66%) and Sibanye Gold (+57%) leading the way, while the Industrials sector saw a rebound in some index heavyweights that had been struggling, including British American Tobacco (+29%) and Richemont (+12%). Local bonds (+3.8%) and cash (+1.8%) also produced positive returns in the quarter.
Looking ahead
The outlook for 2019 has weakened from a global growth perspective. However, a positive feature is the continued lack of inflationary pressures globally, allowing central banks to maintain an accommodative monetary policy stance, which should act as a tailwind for risk assets. Locally, the general election scheduled for 8 May is the main short-term event that could drive asset classes post Moody’s maintaining their stable outlook and investment grade credit rating on SA’s sovereign debt. In managing your fund, we are always cognisant of both the positive tailwinds, as well as the risks that are inevitable the longer this cycle persists. We take out protection against market corrections when we believe it is appropriate, but we continue to believe that exposure to a mix of diversified asset classes both locally and offshore provides you with an optimal solution to generate above-inflation returns in the long term.
The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.