Table 1: Asset class returns in rand terms

Domestic funds performance and positioning

Our three domestic multi-asset solutions added absolute value over the second quarter as
sentiment improved. Allocations to domestic government bonds added the most value to
the fixed income building block. The equity component added to returns following improved
domestic market conditions. Stock selection within industrials and financials was a positive
contributor to absolute performance. Discovery, Remgro and ABSA were among the largest
contributors to returns. Stock selection within resources detracted from building block
performance, with AngloGold Ashanti, Gold Fields and Glencore detracted the most.

The PSG IM Opportunity Equity fund of funds (FoF) experienced an improved quarter as
SA Inc shares and some of its underlying managers favour rebounded. The fund delivered an
above average return over the period to improve its since inception performance. Perpetua,
which has the largest allocation to industrials in the solution, saw its stock selection in the
sector drive it to be the top performer over the quarter

Table 2: Fund performance versus sector average

 

Sector and asset allocation
No changes were made to the underlying funds used in the domestic solutions. In the
PSG IM MA Income FoF, our underlying managers trimmed exposure to longer-dated
bonds, deploying it to the belly of the curve. Allocations to domestic cash were also
deployed there given the attractive yields on offer. Allocations to offshore equities fell
marginally on market movement. The portfolio generated an above-average absolute
return over the quarter and continues to outperform the average MA Income category
peer since inception.

The equity building block used in both the Cautious and Growth FoFs added to absolute
returns as security selection within industrials and financials added the most to returns.
AB InBev, Afrimat and Discovery were among the largest contributors to performance.
Selected resource counters limited gains, with AngloGold, Glencore and Amplats
detracting the most over the quarter. As a result, both funds had a stellar quarter which
helped improve since inception performance. Outperformance over their respective
recommended investment horizons also remains robust.

The PSG IM Opportunity Equity FoF underlying managers with a preference for financials
saw those add the most value over the quarter. Overall, our underlying managers continue
to see opportunities domestically, citing attractive valuations and improving sentiment
following the national elections. On the whole, our underlying managers prefer industrials,
with the exception of Vunani, who hold the largest allocations to financials and resources
among them. 

Table 3: Local FoF composition (%)

PSG Investment Management (IM) Global Flexible Dollar Fund
The PSG IM Global Flexible FoF (USD) added a positive absolute return over the quarter.
Returns were driven by our underlying managers that allocate to the growthier areas of
the market. HSBC and Sarasin added the most value over the period, while Veritas and
MFS detracted the most. In terms of the key characteristics and objective of the Global
Flexible solution, it has a long-term capital growth mandate, but aims to deliver this return
at lower than full equity volatility. Given the growth mandate of the portfolio, it is important
to understand that the underlying managers are not focussed on short to medium term
outcomes, positioning rather to achieve strong long-term total returns. Over the full market
cycle, we believe this mix of underlying managers remains positioned to outperform. 

Table 4: Relative ranking