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
- Continued Offshore Fund Outperformance: The MitonOptimal International Managed Fund is in the 1st quartile since its January 2024 mandate, mainly driven by a barbell strategy (value/commodities and technology), fund manager selection adding value (Orbis, Ranmore and recently adding to Infrastructure ETF and improved performance by Guinness Equity Income Fund)
- Market Rotation Confirmed: The market is rotating from crowded US technology exposure (S&P 500 up only 1% YTD) to underinvested assets like Emerging Markets (EM up 11.7% YTD), cyclical sectors like Energy and Basic Materials.
- Commodity Thesis Intact: Recent volatility was a healthy consolidation, not a reversal. Miners are showing strong results (e.g., Gold Fields EBITDA +100%) and disciplined capital allocation, unlike the 2000s cycle.
TOPICS
Client Feedback & Engagement
- After the recent Garden Route client feedback sessions, the team received positive feedback on the cohesive presentations from Roeloff and Jacques.
Fund & Model Performance Review
- Catalyx Hegde AMC: Generated 12.4% vs. the high equity sector’s 10.28%, confirming the value of alternative strategies.
- ZAR-Hedged Offshore Index Structured Note: Returned 10.1% since September 2023, outperforming the world index (-2.5%) by hedging ZAR appreciation and benefiting from exposure to Europe, EM, and Japan.
- Offshore Models:
- Consistency: Dollar Balanced models on Momentum and Glacier platforms show similar strong performance, validating the investment process despite platform-driven manager allocation differences.
Market & Macroeconomic Overview
- Sector Rotation: A clear rotation from tech/discretionary to energy, materials, and consumer staples is underway.
- S&P 500 Divergence: The S&P 500 is up only 1% YTD, while the equal-weighted S&P 500 is up 6.57%, showing that performance is broadening beyond the “Magnificent Seven.”
- EM Outperformance: EM is up 11.69% YTD, driven by Brazil (+17.48%) and Mexico (+11.73%), while China and India lag. This underlines the importance of avoiding the benchmark EM Index as an investment holding.
- Alpine Macro Survey: Confirms the MitonOptimal team views are now consensus:
- Sentiment: Record-high GDP growth and earnings growth expectations, with risks being elevated inflation expectations later in the cycle.
- Positioning: Overweight global stocks, underweight global bonds/cash, overweight commodities.
- Biggest Risk: Inflation regaining momentum.
Commodity & Resource Sector Deep Dive
- Recent Volatility: The January/February metals sell-off was a healthy consolidation, not a reversal of the bull thesis.
- Strong Earnings: Miners reported excellent results with strong cash generation and disciplined capital allocation (dividends, buybacks).
- Gold Fields Limited: EBITDA +100% to $5.5B, with a $30 cash dividend and $4.50 special dividend.
- BHP Group Limited: Copper now accounts for >50% of earnings, a first.
- Global Demand: International investors (e.g., BlackRock) are net buyers, owning significant stakes in JSE-listed miners. The JSE’s resource index is an international index, not driven by local sentiment.
- UBS Analysis: Spot prices imply significant earnings upgrades for gold (+24% vs. consensus) and platinum (+54%), confirming the strong fundamentals.
- Portfolio Adjustment: The Coherent Commodity AMC has trimmed metals overweight and increased energy exposure.
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