STANLIB Global Balanced Feeder Fund- Sep 19
The STANLIB Global Balanced Feeder Fund returned +2.6% over the quarter compared with +0.8% from the composite benchmark. In aggregate, asset-allocation effects were negative, detracting 17 bps from the relative return. The overweighting of cash accounted for most of this, though the underweight position in bonds and overweight in property also detracted. This was more than offset by positive selection effects, which made a relative contribution of 211 bps, largely driven by equities. The equity allocation comfortably outperformed its benchmark, as did the fixed income allocation, albeit to a lesser degree. Market overview
Global equities (measured by the MSCI ACWI index) returned 3.8% in dollar terms for the quarter, while bonds (Barclays Global Aggregate) returned 3.3%. Both asset classes were supported by dovish signals from key central banks. Equities and corporate bonds also benefited from hopes for an end to the US-China trade war. These hopes took a knock in May when President Trump pressed ahead with tariff increases against China and proposed new duties on the remainder of imports from the country. China responded in kind, while investors responded by selling risk assets. Later, Trump further ramped up trade tensions by threatening Mexico with steep tariffs unless it dealt with “the illegal immigration problem”. Risk assets bounced back strongly in June. Mexico struck an immigration deal with the US, avoiding tariffs in the process, and Trump confirmed he would meet with his Chinese counterpart at month end. While receding trade-war fears were a factor, the June rebound was mainly propelled by central bank commentary. The Federal Reserve and ECB both hinted they were prepared to cut rates if necessary. The ECB even suggested that more quantitative easing could be on the cards. Of the main equity regions, Europe ex UK was the strongest performer in dollar terms, followed by the US. The UK trailed global averages as hard-Brexit fears weighed on the pound. Emerging markets and Asia ex Japan lagged further behind. Both were held back in April by a stronger dollar (which later weakened) and were then hit hard in May’s risk-off rout. The MSCI Japan also underperformed; a stronger yen dampened sentiment towards its many exporters, but also bolstered returns for dollar-based investors in the index.
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. The warning signs we monitor that would suggest a sharp turnaround are not all flashing red. Our central case is that US growth should moderate 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 are becoming 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.
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.
The STANLIB Global Balanced Feeder Fund shall be a general equity feeder fund portfolio.
STANLIB Global Balanced Feeder Fund is a feeder fund seeking to achieve an investment
medium for investors, which shall have as its main objective, to maximise long term total return.
Apart from assets in liquid form, it will consist solely of participatory interests in a single portfolio of
a collective investment scheme 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, namely the STANLIB Global Balanced Fund, under the
STANLIB Funds Limited Scheme domiciled in Jersey.