Table 1: Asset class returns in rand terms

Domestic funds performance and positioning

PSG Investment Management domestic funds
Our three domestic multi-asset solutions outperformed their benchmarks during the third
quarter as investor sentiment towards South Africa continued to improve. Government
bonds and money market instruments contributed significantly to the income portion of these
portfolios. The equity component also generated positive returns, particularly due to strong
stock selection in the Industrials and Financials sectors. Discovery, Raubex, and WBHO were among the most notable contributors to performance. While Resources stocks detracted from returns, with Northam and Glencore being significant detractors, the overall equity allocation remained positive.

The PSG IM Opportunity Equity FoF continued to add value over the quarter. The fund’s
underlying managers’ favoured stocks added value, leading to outperformance relative to its
benchmark over the period in review. Vunani, with its focus on listed real estate and financials, was a standout performer during the quarter due to its effective stock selection within these sectors. Our underlying managers see improvements in the macroeconomic environment and power generation as positive for the domestic counters they favour.

Table 2: Fund performance versus sector average

 

Sector and asset allocation
The fund composition remained unchanged during the quarter. Our underlying managers in
the PSG IM MA Income FoF shifted their bond holdings towards medium-term maturities
(3-7 years), while reducing their exposure to domestic cash due to attractive yields.
Offshore allocations decreased slightly due to market fluctuations. The portfolio delivered
an above-average return over the quarter, boosting since inception performance.

The equity building block in both Cautious and Growth FoFs contributed positively to
returns, primarily driven by strong stock selection in industrials and financials. Companies
like Standard Bank, Discovery, and Nampak were particularly beneficial. However, resource
stocks, including Glencore and Northam Platinum, hindered performance. Despite this,
both funds had a successful quarter, maintaining their above-average performance since
inception and outperforming over their recommended investment horizons.

In the PSG IM Opportunity Equity Fund of Funds, underlying managers who favour
financials and listed property saw their stock selections in these sectors add significant
value. Our underlying managers continue to identify undervalued businesses locally and
anticipate improved market sentiment. During the quarter, they increased their exposure
to financials by reducing their holdings in industrials.

Table 3: Local FoF composition (%)

 

PSG IM Global Flexible Dollar Fund
The PSG IM Global Flexible FoF (USD) ended the quarter ahead of its benchmark. The
fund’s investment strategy, which combines equity and fixed income, yielded impressive
results, especially over the past year. Over the period, the fund achieved a 17.2% return
in dollar terms, ahead of its sector benchmark by 1.1%. This performance is attributed
to several underlying managers, particularly Baillie Gifford, whose exposure to highgrowth companies like Tesla and Duolingo drove returns. While the growth factor style
faced challenges relative to value investing during the quarter, Baillie Gifford’s skilful
management ensured continued outperformance.

Despite the potential for volatility due to the mandate’s flexibility, we remain optimistic
about the long-term prospects of the Global Flexible FoF. Investors are encouraged to
maintain a disciplined approach and adhere to the recommended investment horizon of
seven years to fully benefit from the fund’s positioning.

Table 4: Relative ranking