MEETING PURPOSE
Our investment team aim to meet every week to discuss the macro environment and how this could impact our current and future portfolio construction.
KEY TAKEAWAYS
- South African assets have outperformed recently but the economic fundamentals remain weak
- The team is overweight resources/commodities in our high growth funds only. This carries short term performance risk but aligns with current short and long term views
- Global assets underperformed SA risk assets over the last year. With the benefit of hindsight, this has caused marginal underperformance relative to the sector peer group
- We currently believe that our fund positioning and underlying managers are appropriately positioned based on fundamentals, a valuation overview, technical analysis as well as the team’s sentiment per asset class
TOPICS
South African Market Review
- MSCI South Africa was 3rd best performing EM over past 3 months, up ~20% in USD
- Consensus earnings revisions positive for 3 months in a row, driven by PGMs
- SA equities still look relatively cheap vs history and EM peers
- Outperformance driven more by companies with foreign earnings than domestic-focused firms – Naspers/Prosus and Gold Stocks are notable outperformers
- The team sees continued value in resources, gold miners, platinum, and some mid-caps supplying miners
Global Market Conditions
- Global government debt levels are extremely high at $340 trillion
- US debt at $36 trillion and is 65% of global equity market cap
- Yield curve dynamics and bond market behaviour unusual/concerning
- Geopolitical tensions are rising: US-China tariffs, EU retaliation threats/Ukraine-Russia
- Tech stocks are looking expensive on P/E and P/S metrics
Fund Positioning Comments
- IP Active Beta neutral SA equities added some property, short duration bonds
- Overweight DM vs EM equities, underweight global bonds and property
- Worldwide Active Beta overweight resources via 12-13% Satrix Resi exposure
- International Managed Flexible reduced fixed income, 6.5% in commodities (mainly gold)
The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness.3