STANLIB Global Balanced Feeder Fund- Mar 19
The portfolio returned 11.5% over the quarter compared with 9.4% from the composite benchmark. In aggregate, asset-allocation effects accounted for 23 bps of the relative return. The overweighting of equities and underweighting of bonds helped performance. Being overweight in cash detracted. Selection drove performance, adding 204 bps. Modest negative effects in the cash and property portfolios were more than offset by positive effects in the equity and fixed-income allocations, as both comfortably outperformed their benchmarks.
Global equities (as measured by the MSCI AC World Index) bounced back strongly, returning 12.3% for the quarter in dollar terms. Global Bonds returned 2.2%, benefiting from both falling core yields and tightening credit spreads. Amid more signs of slowing global growth, investors welcomed increasingly dovish signals from key central banks. Apparent progress in US-China trade talks provided further support, as did Chinese stimulus measures - both actual and anticipated. At its March policy meeting, the Federal Reserve indicated that US rates were unlikely to rise in 2019, and that it would stop reducing its balance sheet in September. Treasury yields fell sharply in response and the US yield curve briefly inverted - a move seen by many as a harbinger of recession. The ECB pushed out its next projected rate hike to 2020, cut its Eurozone growth forecast for 2019, and pledged another round of stimulus via cheap loans for banks. Brexit dominated the headlines in Europe. The UK parliament rejected the EU withdrawal agreement three times. While MPs also ruled out a no-deal exit they then voted down every other Brexit plan put in front of them. With time running out, the EU granted a short extension to Article 50. Despite the mounting turmoil, sterling strengthened over the quarter as no-deal fears receded somewhat. The major equity regions all delivered strong gains. In dollar terms, the US outperformed the MSCI AC World, while the UK was broadly in line with the global index. Asia ex Japan lagged modestly, with Europe ex UK and emerging markets further behind. Japan was the main laggard, with sentiment towards its export heavy market dampened by disappointing global economic indicators.
The cycle is clearly mature but we don’t 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. We expect global equity markets to make gentle positive progress, corporate profits to continue growing, companies to behave in an equity-friendly way and valuations to remain supportive. While 2018 was not a great year for bonds, 2019 looks set to produce more attractive outcomes for those who can navigate divergent monetary policy and credit cycles. The degree of 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 increased leverage, but now a number of companies in these areas are reducing debt levels.
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.