Balanced fund investors have endured a tough few years, and 2018 has to date proved no exception. A volatile currency, weak performance from local equities and listed property have combined to deliver underwhelming returns for investors. Notwithstanding a poor performance in September, where equities were weak and the currency strengthened, the ClucasGray Equilibrium fund has gained 3.7% since the beginning of the year, compared to 0.62% for the peer group. Over the last year, the Equilibrium Fund iis up 8.7% versus 2.7% for the peer group.

We believe the best way to demonstrate our conviction around the opportunity set in the local market is in the asset allocation changes we have made in the ClucasGray Equilibrium Fund. Recent equity market developments have resulted in what we deem to be numerous mispriced opportunities in local equities. As a result we have been systematically reducing our exposure to local income assets, and adding to equities - we believe the prospective returns for equities from current levels warrant higher weightings.

For a more detailed inderstanding of our views and positioning, please read the latest ClucasGray Asset Management quarterly, which can be found on www.cgam.co.za.

The ClucasGray Equilibrium Prescient Fund is a Regulation 28 compliant, multi-asset high equity fund. The fund aims to provide long term capital growth ahead of its peer group by delivering both income and capital growth in excess of inflation over time. The fund aims to achieve these objectives through an active approach to asset allocation, and via superior stock selection. Fundamental analysis, a valuation discipline and a belief that inefficient markets create opportunities in mispriced assets underpin both our asset allocation and stock selection process.

Following the emerging market crisis that impacted many South African companies, July saw welcome relief to select sectors. Financials rallied over 6%, although this gain was offset by declines in Resources and Industrials. Year to date, only the Resources sector has shown positive returns (+16%), with Financials, Industrials and Property all declining – in the case of Property the decline has been brutal, with the sector falling more than 20%. In an environment of subdued returns, the ClucasGray Equity Fund has gained over 12% over the last year, with the JSE Swix and the Peer group gaining just over 5% and 3% respectively. We have made numerous changes to the portfolio over the last few months. New additions include Tiger Brands and Grindrod, and we increased weightings in Old Mutual, Clover, select banks and the combination of British American Tobacco and Reinet. To fund these purchases we have sold out of Quilter and Remgro, and reduced exposure to Naspers, Sasol, amongst others. The operating environment is always dynamic - whilst uncomfortable at times, we remain resolute in our belief that patient investors will in due course reflect favorably on the opportunities that are currently being presented. For a more detailed explanation of our views and positioning, please refer to the June 2018 quarterly commentary on our website, www.cgam.co.za.