FUND COMMENTARY

The past quarter saw big drops across equities and listed property with South African listed property being hit the hardest. The local Core Range's SA listed property allocation only includes Real Estate Investment Trusts (REITS) which did not suffer nearly as much as the Real Estate Holding & Development shares; REITS were down by only 13.4% while the Holding & Development shares were down by 31.2% over the quarter. In the local Core Range the Real Estate Holding & Development shares are included under SA equity which therefore resulted in its benchmark returning 8.2% over the past 12 months, versus the 9.4% of the standard SWIX index. The SA equity carve-out in the three local funds were up between 7.7% and 9.2% across, the differences arising due to larger transaction cost on the newer Core Accelerated Fund which has grown rapidly over this period. For reference, a balanced fund typically incurs around 0.15% in transaction costs (brokerage and Securities Transfer Tax (STT)) every time it doubles in size. For this reason we subsidised all asset management related fees in the Core Accelerated fund until it reached R100 million to reduce the impact of transaction cost on the portfolios returns while the fund is small.

South African fixed income provided some downside protection to the local Core Range with SA bonds delivering the best returns over the past 12 months, up 16% in the Core Diversified Fund. The cash holdings in the Core Guarded and Core Diversified Funds benefitted from the 2% yield pickup vs STeFI Call, partly due to their holdings in the Nedgroup Investments Core Income, Nedgroup Investments Money Market and Nedgroup Investments Corporate Money Market Funds.

On the offshore side, the Nedgroup Investments Core Global Fund (USD) which is used in the local Core Range, experienced double digit growth over the past 12 months. This was mainly due to global equities having a very good year. However, due to the significant strengthening of the rand towards the end of the year, the rand returns of the offshore portion in the local Core Range and the Nedgroup Investments Core Global Feeder Fund were muted.