Table 1: Asset class returns

Source: PSG Wealth research team

Domestic funds performance and positioning

Table 2: Fund performance versus sector average

The multi-asset solutions added absolute and relative returns over the quarter in review. The equity portion of our funds drove returns as stock selection within the resources portion of the building block added value. WBHO, Raubex and HCI were among the more notable performance detractors, while AngloGold Ashanti, Northam and Gold Fields led the top performers. The income building block also added value over the quarter, as the belly of the curve favoured by our underlying manager outperformed the longer end of the curve. Fund composition across all three solutions remained unchanged during the quarter.

Our underlying managers in the PSG IM MA Income FoF continue to favour bonds in the 3- to 7-year space. Funding increased allocations to them through deploying cash and trimming allocations to inflation-linked bonds. The portfolio delivered an above inflation return over the calendar year, improving absolute and relative performances since inception. In the Cautious and Growth FoFs, the income building block they share with the Income FoF helped cushion returns over 4Q24. Both funds added absolute returns over the quarter and ended the calendar year ahead of their benchmarks. This helped them maintain their above-average performance since inception and over their recommended investment horizons.

 

From a positioning standpoint, the overall equity exposure of our multi-asset funds declined over the quarter, reflecting a cautious stance from our underlying managers. Sectoral adjustments within the equity building block used across all three multi-asset funds saw a rotation from resources and financials, into industrials and real estate. In fixed income, our underlying managers trimmed their domestic bond exposure, especially in the 3- to 7-year maturity range, rotating into local cash.
Inflation-linked bond holdings were also reduced. The pronounced increase in cash holdings across all funds highlights a defensive market outlook among our underlying fund managers, who are prioritising capital preservation in the short-term.

The PSG IM Opportunity Equity FoF added 5.50% over the quarter, outperforming its benchmark by 3.60%. The solution maintained a full allocation to domestic growth assets, underscoring its underlying managers’ strong conviction in the local equity market. At sectoral level, the fund’s underlying managers reduced their exposure to resources and financials, with proceeds funding a tilt into industrials. Other adjustments from the fund’s underlying managers resulted in a marginal decrease in its real estate exposure, alongside a slight uptick in cash holdings. These changes, however, do not signal a fundamental shift in the fund’s overall risk profile, highlighting instead the fund managers’ active management of their domestic equity allocations to take advantage on perceived opportunities. No changes to fund composition were made over the quarter in review.

Table 3: Local FoF composition (%)

PSG IM Global Flexible Dollar Fund
The Global Flexible FoF added 2.70% in absolute terms over the quarter, outperforming its
benchmark by 2.80%. This contributed to the short-term performance of the average USD Flexible Allocation sector peer, which rose to 1.80% over 12 months. It also supported the fund’s longer-term track record, allowing it to maintain its outperformance of the benchmark since inception. In a market environment that favoured value over growth, our managers who followed the former style were the primary sources of alpha.

PSG Global Flexible was the top performer in the solution, adding 12% over the quarter. Security selection in materials, consumer staples and financials drove returns. Another notable contributor to performance was MFS Meridian Prudent Capital, which added 5.90%. The fund benefited from an underweight position in consumer discretionary and technology stocks, while stock selection in the industrials, financials and communication services sectors contributed positively to performance. Additionally, exposure to short-term US government securities and a gold ETF further supported returns. Sarasin limited overall gains, as its security selection in technology and consumer discretionary stocks detracted from performance. In terms of fund composition, no changes were made during the quarter—no funds were added or removed.

Table 4: Relative ranking