STANLIB Global Balanced Feeder Fund- Sep 18
The fund returned 5.1% over the quarter, underperforming its benchmark, which returned 5.4%. The underlying dollar fund returned 2.4% over the quarter, marginally lagging the composite benchmark by 5 bps. In aggregate, asset-allocation effects were positive overall. Being overweight in equities and underweight in bonds aided performance. This was more than offset by selection effects, which were negative in aggregate: a positive effect in fixed income was outweighed by negative effects in the property and cash allocations.
Global equities delivered strong gains in aggregate, outperforming global bonds as optimism about the booming US economy and robust corporate results overcame fears about global trade and country-specific risk in emerging markets. Core bond yields rose and credit spreads narrowed as safe-haven demand ebbed and US monetary policy tightened. On the trade front, the US and EU pledged to “work toward zero tariffs on nonauto industrial goods”. The US also reached a preliminary trade deal with Mexico, to which Canada eventually subscribed. There was no such breakthrough in USChina relations, with each continuing to hit the other with new tariffs. Perhaps the quarter’s most eye-catching piece of data was US second-quarter GDP growth of 4.2% (annualized). This was due in part to President Trump’s tax cuts, but also to frontloading by exporters before import tariffs came into force. The Turkish lira fell to record lows in August, sparking fears of contagion into other emerging markets, but stabilized in September following a sharp rate hike by the Turkish Central Bank. Italy was another source of volatility, as investors worried that the new coalition government’s maiden budget would breach EU deficit rules. Among the major equity regions, the US fared best. Japan was next strongest, buoyed by a weaker yen. UK equities fell on Brexit-related uncertainty. The MSCI Emerging Markets index also fell in dollar terms, weighed down by weakness in China, which bore the brunt of the trade-war fears.
The broad global macroeconomic environment can be characterised as ‘Goldilocks like’, with decent growth and only gentle rises in inflation in most regions. The global economic setting is not sufficiently hot to warrant aggressive monetary tightening, nor so cold as to create fears of economic recession. For now, we anticipate that these conditions will persist. Our reflationary economic outlook, together with good earnings forecasts, bodes well for risk assets. We have upgraded our view on the US equity market to “neutral”. Despite the formation of an anti-establishment government in Italy, we think the risk of a eurozone break-up is low: both the coalition parties have toned down their euro-scepticism of late and most Italians still support the currency union. Bond markets remain supported by accommodative monetary policy, including – for the rest of this year at least, outright quantitative easing in the eurozone, and demand for income should remain a positive force. The credit cycle is, however, fairly mature and, although earnings have been strong, the benefits have been largely accruing to shareholders. With bond yields still low, returns are expected to be muted. 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.