Fund Guide on Linked Platforms December 2017

Transcription

1 Fund Guide on Linked Platforms December 2017

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3 5 About STANLIB 6 Our investment capabilities 8 STANLIB core range 10 STANLIB funds on external guided architecture platforms 11 STANLIB funds on Tax-Free Savings Account 12 STANLIB funds on external open architecture platforms (linked platforms) 13 STANLIB offshore funds on external offshore platforms 15 STANLIB core and extended range insights 39 Contact details 3

4 Our presence across the African continent Ghana Uganda Kenya Namibia Botswana Lesotho Swaziland South Africa

5 A leading investment business We are a multi-specialist investment company in eight African countries with business partners in North America, United Kingdom, Europe, Middle East and Asia. We have USD45.4 billion assets under management and administration (ZAR593 billion) as at 30 June 2017 for over retail and institutional clients across Africa. About STANLIB STANLIB is a multi-specialist investment company in Africa. We have a physical presence in eight African countries and business partners in North America, the United Kingdom, Europe, the Middle East and Asia. With dedicated teams specialising in fixed interest, listed property, equities, research, multi-asset allocation, multimanagement and alternatives, we draw on the in-depth knowledge of a broad range of experts. This unique blend of skills and perspectives enables us to make better-informed decisions so we can help our clients, both individuals and institutions, to achieve their financial goals. Additional facts STANLIB has more than 100 investment experts. We have one of the oldest existing unit trusts in South Africa, the STANLIB Equity Fund. STANLIB pioneered the Fundisa Fund, which is a unit trust investment created to encourage lower income families to save for their children s tertiary education from as little as R40 per month. It is the first ever public/private partnership in the services industry. We employ over 696 employees directly. STANLIB manages over R100 billion in money market assets and we are the largest player in the money market space. We have won 83 Raging Bull Awards and 92 Morningstar Awards. STANLIB is proud to have been named Africa's best provider of Money Market Funds for 2017 at the Global Finance Awards. About this document This document is aimed at you, the financial adviser, providing a guide on how to access STANLIB funds via the following Linked Product Platforms: AIMS Alexander Forbes Allan Gray Ashburton Discovery Glacier Investec Momentum Old Mutual PPS PSG Sygnia Wealthport Additional updates on all STANLIB portfolios are available from your Investment Specialist or Relationship Manager, the STANLIB contact centre ( ) or by visiting our website at stanlib.com. 5

6 Our investment capabilities The benefit of a specialist investment company is that our investment experts can draw on many diverse viewpoints. By sharing knowledge and insights across capabilities, asset classes, industries and geographies, we are able to make connections between seemingly unrelated factors, uncovering hidden investment opportunities for our clients. Traditional asset classes Our active single manager capabilities invest across all traditional asset classes. We have a team that manages Fixed Interest solutions for all income needs. Our Listed Property team provides exposure in emerging and developed markets. Our Equity team identifies potential long-term outperformers. And our Multi-Asset and Absolute Return teams focus on delivering consistent returns. Alternatives A core capability for STANLIB is Alternatives. Our Alternatives business centres on uncovering unique opportunities across the African continent where we can leverage our on-theground networks to benefit investors. Our in-depth expertise extends across the fields of infrastructure development, private equity, property development, real estate investment trusts (REITS), and alternative credit. African infrastructure assets are increasingly recognised globally by investors as attractive for their diversification and risk/return attributes. Making long-term equity and equityrelated investments in greenfield and brownfield infrastructure projects in sub-saharan Africa, STANLIB s infrastructure team offers institutional clients unique and well researched investment opportunities in this exciting asset class. Passive single manager Our Passive single manager capabilities provide access to all the traditional asset classes. We cover fixed income, property, equity and multi-asset investing by using All Bond Index (ALBI) and inflation-linked bond trackers, property, equity and multiasset passive trackers. We also use smart beta and multi-factor equity strategies. Our Smart Beta capability helps clients to engineer a passive investment solution that better replicates their targeted investment outcomes. Whether clients aim to track growth, value or momentum stocks, or a combination of these and others, our dedicated Quantitative Investment Strategies team can engineer strategies using the low-cost index tracking approach. Multi-Manager STANLIB s Multi-Manager capabilities draw from across asset classes and managers to find the best solution for investors. We have specialist teams handling fixed income (money market, bonds and income funds), property (listed local and global property, and direct property investments), African equities, multi-asset (balanced, defensive, and real return specialist risk profiles), alternative fund of funds, global equities, and global bonds. We also offer dedicated multimanager advisory services. Our multi-manager business focuses on constructing the best type of portfolios based on clients investment outcomes and risk tolerances. We specialise in combining the right asset managers with the right mix of assets and investment vehicles to deliver investment value. Behind each of our multi-manager portfolios is a team of professionals who work with a global investment intelligence network to source investment ideas. Our ideas are supported by intelligent processes and smart systems and we constantly monitor global and local macro issues to take decisive and reasoned actions, when required. Our open channels of communication ensure our clients remain constantly informed of portfolio changes and investment rationale. Global partners To help us deliver investment excellence in the markets we serve, we have sourced a range of expert global partners to manage the ex-africa portion of our portfolios, namely Fidelity (cash funds), Brandywine (bonds), and Columbia Threadneedle (equities and multi-asset funds). 6

7 ACTIVE SINGLE MANAGER PASSIVE SINGLE MANAGER MULTI-MANAGER Money Market Fixed Income Bonds Income High Yield Investment Grade Liability Driven Investments Africa Income Bond Trackers Inflation Linked Bonds Trackers Money Market Bonds Income Listed Property Property Direct Property Developed Markets Listed Property Emerging Markets Listed Property Africa Listed Property Listed Property Trackers Listed Property Flexible Property Equity Equity Africa Equity Listed Equity Trackers Smart Beta (Factor Strategies) Multi-Factor Equity Strategies Global Equity SA Equity Global Equity Multi-Asset Absolute Return Multi-Asset Multi-Asset Passive Tracker Funds Balanced Defensive Balanced Real Return Specialist Risk Profiles Shari'ah Alternatives Infrastructure Development Private Equity Property Development REITs Unlisted Debt Africa Unlisted Debt Alternative Assets Fund of Funds Cash (Fidelity) Ex-Africa Global Bonds (Brandywine) Global Equity (Columbia Threadneedle) Multi-Asset (Columbia Threadneedle) Global Equity Global Bonds Global Cash Solutions Goal-Based Investing Active Risk Management Asset- Liability Management Completion Strategies Multi-Strategy Portfolio Construction Model Portfolios Manager Research Services 7

8 STANLIB Core Range Time horizon Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive Maximum exposure to growth assets 5 years+ STANLIB Equity Fund 100% 25% STANLIB Balanced Fund 75% 25% 25% 3-5 years STANLIB Absolute Plus Fund 60% 25% 25% 1-3 years STANLIB Balanced Cautious Fund 40% 25% 15% 1 years+ STANLIB Flexible Income Fund 25% 25% Domestic Equity Property Offshore 8

9 Risk profile Fund Time horizon Fund objective Portfolio limits Regulation 28 * Performance fees Offshore exposure Launch date Aggressive STANLIB Equity Fund 5 years+ This fund aims to provide long-term capital growth by investing in both local and offshore equities. Exposure to offshore assets is limited to a maximum of 25% x x Jan-70 Moderately aggressive STANLIB Balanced Fund 3-5 years This fund aims to provide capital growth over time at a lower risk than pure equity funds. The fund invests in a diversified spread of cash, bonds, property, equity and offshore assets. Exposure to equities is limited to a maximum of 75% x Aug-94 Moderate STANLIB Absolute Plus Fund 3-5 years This fund aims to provide investors exposure to the potential upside of domestic equities with limited downside. It aims to provide capital protection over a rolling one-year period by investing in financial instruments that protect the portfolio in down markets. Exposure to equities is limited to a maximum of 60% x Dec-05 Moderately conservative STANLIB Balanced Cautious Fund 1-3 years This fund aims to provide reasonable capital growth and income over a three-year investment horizon. It invests in a diversified spread of cash, bonds, property, equity and offshore assets with a maximum of 40% in property and equities. Exposure to equities and properties is limited to a maximum of 40% x Jan-09 Conservative STANLIB Flexible Income Fund 1 year+ This fund aims to provide income generation and capital growth, targeting outperformance over traditional money market income funds, by investing in the full spectrum of fixed interest instruments and property. Maximum weighted average maturity of two years and exposure to offshore and property is limited to a maximum of 25% x Apr-04 *Regulation 28 stipulates that the maximum exposure to equities and property combined is 90% 9

10 STANLIB funds on external guided architecture platforms Ashburton Investments STANLIB Bond Fund (A) 0.75% STANLIB Global Bond Feeder Fund (B3) ** 0.30% STANLIB Global Balanced Cautious Feeder Fund (B3) ** 0.50% STANLIB Global Balanced Feeder Fund (B3) ** 0.50% STANLIB Property Income Fund (B1) ** 1.00% Investec i-select # STANLIB Absolute Plus Fund (B1) 1.0% STANLIB Aggressive Income (B1) 0.90% STANLIB Balanced Fund (B1) 1.0% STANLIB Balanced Cautious Fund (B1) 1.0% STANLIB Equity Fund (R) 1.0% STANLIB Euro Currency Fund of Funds (A) 0.50% STANLIB European Equity Feeder Fund (B3) ** 0.70% STANLIB Flexible Income Fund (B1) 0.75% STANLIB Global Balanced Feeder Fund (B3) ** 0.50% STANLIB Global Balanced Cautious Feeder Fund (B3) ** 0.50% STANLIB Global Equity Feeder Fund (B3) ** 0.50% STANLIB Global Property Feeder Fund (B3) ** 0.40% STANLIB Income Fund (B6) 0.60% STANLIB Property Income Fund (B1) 1.00% STANLIB SA Equity Fund (R) 1.00% STANLIB US Dollar Currency Fund of Funds (A) 0.50% PPS Investments STANLIB Absolute Plus Fund (B1) 1.00% STANLIB Balanced Fund (B1) 1.00% STANLIB Equity Fund (R) 1.00% Investment management fee Annual management fee Annual management fee 10

11 PSG Asset Management Total annual fee Fund rebate STANLIB Absolute Plus Fund (B1) 1.00% 0.00% STANLIB Aggressive Income Fund (B1) 0.90% 0.00% STANLIB Balanced Fund (B1) 1.00% 0.00% STANLIB Bond Fund (R) 0.75% 0.00% STANLIB Euro Currency Fund of Funds (A) 0.50% 0.10% STANLIB European Equity Feeder Fund (B3) ** 0.70% 0.00% STANLIB Extra Income Fund (R) 0.75% 0.00% STANLIB Flexible Income Fund (B1) 0.75% 0.00% STANLIB Global Balanced Feeder Fund (B3) ** 1.00% 0.00% STANLIB Global Bond Feeder Fund (B3) ** 1.50% 0.50% STANLIB Global Equity Feeder Fund (B3) ** 1.00% 0.00% STANLIB Global Property Feeder Fund (B3) ** 0.60% 0.00% STANLIB Income Fund (B6) 0.60% 0.00% STANLIB Property Income Fund (B1) 1.00% 0.00% Sygnia Emporium STANLIB Flexible Income Fund (B1) 0.75% Investment management fee Wealthport STANLIB ALSI 40 Fund (A) 0.42% STANLIB Balanced Fund (B1) 1.00% STANLIB Bond Fund (A) 0.75% STANLIB Extra Income Fund (R ) 0.75% STANLIB Flexible Income Fund (B1) 0.80% STANLIB Income Fund (B6) 0.60% STANLIB Index Fund ( R) 0.50% STANLIB Institutional Money Market Fund (B13) 0.50% STANLIB Property Income Fund (B1) 1.00% ** + underlying funds Annual management fee STANLIB funds on Tax-Free Savings Account Fund and class Glacier Investec Momentum PSG Wealthport STANLIB Absolute Plus Fund X X X X STANLIB Aggressive Income Fund X X X X STANLIB ALSI 40 Fund X X X STANLIB Balanced Cautious Fund X X X STANLIB Balanced Fund X X X X X STANLIB Bond Fund X X X STANLIB Enhanced Yield Fund X X X STANLIB Equity Fund X X X X STANLIB Extra Income Fund X X X STANLIB Flexible Income Fund X X X X X STANLIB Global Balanced Cautious X X X Feeder Fund STANLIB Global Balanced Feeder Fund X X X STANLIB Global Equity Feeder Fund X X STANLIB Global Property Feeder Fund X X X X STANLIB Income Fund X X X STANLIB Index Fund X X X STANLIB Property Income Fund X X X X X STANLIB SA Equity Fund X X X 11

12 STANLIB funds on external open architecture platforms (linked platforms) Domestic AIMS Alexander Forbes Discovery Glacier Momentum STANLIB Absolute Plus Fund* X X X STANLIB Aggressive Income Fund X X X X X STANLIB ALSI 40 Fund X X X X STANLIB Balanced Fund* X X X X X STANLIB Balanced Cautious Fund* X X X X STANLIB Bond Fund X X X X STANLIB Equity Fund X X X STANLIB Extra Income Fund* X X X X STANLIB Flexible Income Fund* X X X STANLIB Income Fund X X X X X STANLIB Index Fund X X X X STANLIB Property Income Fund X X X X X STANLIB Resources Fund X X X X STANLIB SA Equity Fund X X X X STANLIB Shari ah Equity Fund X X X X X * Regulation 28 Compliant Global (Rand Denominated) AIMS Alexander Forbes Discovery Glacier Investec Momentum STANLIB Euro Currency Fund of Funds X X X X STANLIB European Equity Feeder Fund X X X X X STANLIB Global Balanced Cautious Feeder Fund X X X X X STANLIB Global Balanced Feeder Fund X X X X X STANLIB Global Bond Feeder Fund X X X X X STANLIB Global Equity Feeder Fund X X X X X STANLIB Global Property Feeder Fund X X X X X STANLIB US Dollar Currency Fund of Funds X X X X 12

13 STANLIB offshore funds on external offshore platforms Equity Currency Momentum Wealth International Glacier International Allan Gray Old Mutual International STANLIB European Equity Fund EUR X X STANLIB Global Emerging Markets Fund USD X X STANLIB Global Equity Fund USD X X X Fixed Interest and Cash Currency Momentum Wealth International Glacier International Allan Gray Old Mutual International STANLIB Global Bond Fund USD X X X X STANLIB Euro Cash Fund EUR X STANLIB Sterling Cash Fund GBP X STANLIB US Dollar Cash Fund USD X Managed Solutions Currency Momentum Wealth International Glacier International Allan Gray Old Mutual International STANLIB Global Balanced Fund USD X X X STANLIB Global Balanced Cautious Fund USD X X X X Property Currency Momentum Wealth International Glacier International Allan Gray Old Mutual International STANLIB Global Property Fund USD X X X For more information on STANLIB s offshore range, please speak to your Investment Specialist or visit All of the above funds are FSB approved. 13

14 Multi-specialist investment backed by * years of collective investment experience. * As at 30 June 2017 stanlib.com STANLIB is an authorised financial service provider. 14

15 STANLIB core and extended range insights Absolute Return STANLIB Absolute Plus Fund 17 Multi-Asset STANLIB Balanced Fund 19 STANLIB Balanced Cautious Fund 20 Equity STANLIB Equity Fund 23 STANLIB SA Equity Fund 24 Fixed Interest STANLIB Aggressive Income Fund 26 STANLIB Flexible Income Fund 27 STANLIB Bond Fund 28 STANLIB Income Fund 29 Property STANLIB Property Income Fund 33 Global Solutions STANLIB Global Equity Feeder Fund 34 STANLIB Global Property Feeder Fund 35 STANLIB Global Balanced Feeder Fund 36 STANLIB Global Balanced Cautious Feeder Fund 37 Note: STANLIB funds not listed above are accessible on Linked Platforms and detailed on page 8 and 9. 15

16 Absolute Return Team Marius Oberholzer joined STANLIB in September 2013 as co-head of Absolute Return Strategies. Marius took over as head of the team in September of Marius joined us from Sarala Capital in Cape Town, where he was a managing partner responsible for providing strategic direction for the firm. His role was focused on corporate finance solutions and spearheading the group s unlisted investment activities. Marius Oberholzer Head of Absolute Return Prior to this, between 2000 and 2012, Marius worked at TT International in London before being seconded to Hong Kong in 2004 to help establish TT International s Asia-based operations. He focused primarily on managing TT s Asian Hedge Fund as its portfolio manager as well as providing insights across the firms other investment offerings both on a bottom up and top-down macro basis. Marius holds a BCom degree from Stellenbosch University and an MSc in global finance from Stern Business School at New York University and the Hong Kong University of Science and Technology Vaughan Henkel moved to the absolute franchise in January 2017 working on fundamental equity selection. Vaughan joined STANLIB in 2013 as an investment strategist from RMB Morgan Stanley, where he had been head of research and South Africa strategist. At RMB Morgan Stanley, he held full responsibility for local asset allocation, equity selection and thematic and quantitative research. Prior to this, Vaughan performed a similar role in strategy and director of research at JP Morgan. Vaughan s has extensive prior analysis experience in the telecoms sector. Vaughan Henkel Portfolio Manager Vaughan holds a BSc in electronic and electrical engineering from Wits University, and completed Wits Business School s Management Advancement Programme. He is also a CFA charterholder and a member of the CFA Institute. Peter van der Ross joined STANLIB in January 2016 as a portfolio manager of Absolute Return. Peter has 19 years of investment management experience, as well as a background in life insurance at Momentum Asset Management and Liberty. He was previously head of LibFin Investments, where he was the custodian of the relationship between Liberty and STANLIB, as well as other service providers and worked closely with the STANLIB Absolute Return team. Before joining Liberty, Peter was head of investment strategy at Momentum Asset Management where he chaired the Asset Allocation Committee. He also spent five years at RMB Asset Management. Peter van der Ross Portfolio Manager Peter holds a bachelor of business science from the University of Cape Town and is a CFA charterholder. 16

17 STANLIB Absolute Plus Fund (Regulation 28 compliant) This fund is a specialist portfolio that aims to achieve capital growth, as well as some level of capital protection over the long-term. In the short-term the fund aims to profit from rising equity markets and protect investors against capital losses in weak equity markets. Who should invest? This fund is targeted at investors who: Are aiming for a certain level of targeted return and capital preservation over their investment term Find comfort in their money being managed towards clearly defined investment objectives Fund update quarter The final quarter of 2017 provided significant returns for property (+8.3% in rands) and equities (+7.4% in rands) due to the outcome of the ANC elective conference. The rand strengthened by 8.6% in the quarter, making US dollar returns impressive. Other asset classes were positive, but not as impressive. Bonds delivered +2.2%, global bonds -7.8% in rands, primarily due to the strong rand. The S&P500 was down 3.1% in rands (rand strength again.) South African financials delivered +16% in the final quarter. The primary market drivers for the final quarter of 2017 were the medium term budget policy statement and ANC elective conference in South Africa, and strong global growth. Fund information 1 Year ended 31 December 2017 Fund size R4.68 billion Fund standard deviation (ann) 3.64 Benchmark standard deviation (ann) 1.03 Risk profile Moderate Asset allocation 17.76% 7.33% 5.15% 4.38% 21.76% 36.92% 6.57% Domestic Equity Domestic Bonds Domestic Cash Domestic Property Global Equity Global Bonds Global Cash Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark CPI The medium term budget policy statement delivered at the end of October was a negative surprise to the market. This was due to the lack of a tangible plan to finance the fiscal deficit, rather than the deficit itself. This caused a significant bond sell off. The ANC elective conference was the primary driver of returns for the final quarter. Most managers were loath to take positions given the uncertainty of the outcome. South African exposed assets reacted accordingly when Cyril Ramaphosa won the ANC presidency. However, the margin of victory was slim, less than 200 votes, and the ANC top six is split into two camps. We believe the reformist agenda may occur slower than expected. In our view the populist agenda is solidly in place, given a 2019 election. The global environment continued to be strong with a synchronised expansionary phase well in place. The US Federal Reserve hiked rates and US president Donald Trump signed the comprehensive tax reform bill into law. Growth remained strong in Europe and quantitative easing is scheduled to remain in place until September 2018, or longer if needed. The final quarter of 2017 delivered returns strong enough to allow bonds to exceed inflation for the year. South African property s annual return of 17.2% came close to the 21% return of the FTSE/JSE All Share Index. The strong rand limited the performance of offshore equity assets, but MSCI World Index delivered 8.4% in rands (20.1% in US$). While the rand and bond markets ended the year well, the risks from the fiscal position must be balanced against the strong global growth environment. We continue to monitor our risk positions very actively in order to deliver inflation beating returns. 17

18 Multi-Asset Team Robin Eager joined the STANLIB investment team in 2005 as an industrial analyst and shortly thereafter became a general equity manager in the aggressive equity space. In 2007 Robin moved to the Multi-Asset investment space where he is currently the head of the team. He had previously spent five years working in private equity and corporate finance in London finance investing in various emerging markets and the UK. Robin began his career in 1998 with Standard Bank s Corporate Finance team in Johannesburg, advising on corporate re-structures, mergers and acquisitions, and public to private transactions. Robin Eagar Head of Multi-Asset Warren Buhai re-joined STANLIB in 2009 and is a senior portfolio manager in the Multi-Asset team. His previous experience with STANLIB was in research and portfolio management in resources and commodity-related funds. In the interim, Warren obtained experience in the US, as managing director of investments for a US$500 million private-client business targeting opportunities in developed, emerging and frontier markets. Prior to joining STANLIB, Warren spent five years gaining broad industry experience with Standard Bank s Corporate Finance team. Warren Buhai Senior Portfolio Manager Warren obtained his bachelor s and honours degrees studying part-time while working primarily in the audit division of Ernst & Young where he qualified as a chartered accountant. He is also a CFA charterholder. 18

19 STANLIB Balanced Fund (Regulation 28 compliant) The STANLIB Balanced Fund provides capital growth over time at a lower risk than pure equity funds. It invests in a diversified spread of cash, bonds, property, equity and offshore assets, with a maximum of 75% in equities. This fund is suitable for retirement savings schemes. Who should invest? This fund is targeted at investors: Aiming to achieve capital growth with lower risk than equity only funds With a time horizon of five years or more to invest With a moderately aggressive risk profile Fund update quarter The STANLIB Balanced Fund produced a return of +2.3% for the quarter ending 31 December 2017 and a one-year return of +9.6%. Continued improving synchronised global growth and two significant events in South Africa in December characterised the final quarter of the year, ensuring increased volatility to end a year of high equity returns. First came news of the CEO s resignation of large multinational household goods company Steinhoff amid accounting irregularities, which caused its share price to fall 90%. The election of Cyril Ramaphosa as ANC president followed later in the month. This was viewed positively by markets and reduced the uncertain political risk that had been building throughout The rand, bond markets and locally focused companies shares showed strong performance into year end. Fund information 1 Year ended 31 December 2017 Fund size R5.8 billion Fund standard deviation (ann) 5.44 Benchmark standard deviation (ann) 7.23 Risk profile Moderate Asset allocation 25.37% 5.14% 10.30% 17.17% 42.02% Domestic Equity Domestic Bonds Domestic Cash Domestic Property Global Equity Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark 60% FTSE/JSE Shareholders Weighted All Share Index 25% BEASSA All Bond Index 9% MSCI World Index 6% Barclays Global Aggregate Bond Index Local equities (+9.6%) were the best performing asset class in the fourth quarter, followed by local property (+8.3%) and local bonds (+2.2%). The ongoing improvement in global growth, together with ultra-low interest rates, translated into a positive environment for risk assets globally with volatility in asset prices falling as the growth momentum gained traction. However, despite this positive backdrop, rand strength of 8.6% in the quarter following reduced political risk meant negative rand returns for both global equities (-3.5%) and global bonds (-7.8%). From a local equity market perspective, financials (+16.0%) were the leading beneficiary of reduced political risk, but the stronger rand in the quarter curtailed resources (+4.9%) and industrials (+4.7%) gains. While it is clear we are in one of the longest equity bull markets and business cycles in history, the market continues to have strong tailwinds of improving, synchronised global growth and ongoing accommodative monetary policies by the world s largest central banks. In managing the fund, we are always cognisant of the positive tailwinds, and risks that are inevitable the longer this cycle lasts. We take protection out against market corrections when we believe it s appropriate, but continue to believe an exposure to a mix of diversified local and offshore asset classes gives investors an optimal solution to generate above inflation returns over the long term. 19

20 STANLIB Balanced Cautious Fund (Regulation 28 compliant) The STANLIB Balanced Cautious Fund is a low equity balanced fund aimed at providing reasonable capital growth and income over a three-year investment horizon. This fund invests in a diversified spread of cash, bonds, property, equity and offshore assets, with a maximum of 40% in property and equities. This fund is suitable for retirement savings schemes. Who should invest? Fund information 1 Year ended 31 December 2017 Fund size R7.3 billion Fund standard deviation (ann) 3.24 Benchmark standard deviation (ann) 3.27 Risk profile Moderately conservative This fund is targeted at investors: Asset allocation With a time horizon of three years to invest Aiming for moderate capital growth and a reasonable level of income With a moderately conservative risk profile Fund update quarter % 12.95% 21.41% 0.96% 5.80% 23.22% 26.55% Domestic Equity Domestic Bonds Domestic Cash Domestic Property Global Equity Global Bonds Global Cash The STANLIB Balanced Cautious Fund produced a return of +1.8% for the quarter ending 31 December 2017 and a one-year return of +8.3%. Continued improving synchronised global growth and two significant events in South Africa in December characterised the final quarter of the year, ensuring increased volatility to end a year of high equity returns. First came news of the CEO s resignation of large multinational household goods company Steinhoff amid accounting irregularities, which caused its share price to fall 90%. The election of Cyril Ramaphosa as ANC president followed later in the month. This was viewed positively by markets and reduced the uncertain political risk that had been building throughout The rand, bond markets and locally focused companies shares showed strong performance into year end. Local equities (+9.6%) were the best performing asset class in the fourth quarter, followed by local property (+8.3%) and local bonds (+2.2%). The ongoing improvement in global growth, together with ultra-low interest rates, translated into a positive environment for risk assets globally with volatility in asset prices falling as the growth momentum gained traction. However, despite this positive backdrop, rand strength of 8.9% in the quarter following reduced political risk meant negative rand returns for both global equities (-3.5%) and global bonds (-7.8%). From a local equity market perspective, financials (+16.0%) were the leading beneficiary of reduced political risk, but the stronger rand in the quarter curtailed resources (+4.9%) and industrials (+4.7%) gains. Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark 45% STeFI Call Deposit Rate Index 25% FTSE/JSE Shareholders Weighted All Share Index 15% BEASSA All Bond Index 6% Barclays Global Aggregate Bond Index 5% FTSE/JSE SA Listed Property Index (SAPY) 4% MSCI AC World Index (ZAR) While it is clear we are in one of the longest equity bull markets and business cycles in history, the market continues to have strong tailwinds of improving, synchronised global growth and ongoing accommodative monetary policies by the world s largest central banks. In managing the fund, we are always cognisant of the positive tailwinds, and risks that are inevitable the longer this cycle lasts. We take protection out against market corrections when we believe it s appropriate, but continue to believe an exposure to a mix of diversified local and offshore asset classes gives investors an optimal solution to generate above inflation returns over the long term. 20

21 Equity Team Herman van Velze joined STANLIB in 1995 as a research analyst. Since then he has held the positions of head of Research, portfolio manager, head of Balanced Funds and he is currently the head of Equities and a member of STANLIB s executive committee. His service with STANLIB was intermitted by two years in a resource-focused private equity company as a deal originator. Herman van Velze Head of Equities The Equities team manages a range of equity funds and sets out to invest in equities that show distinct intrinsic value and the potential to outperform the market. As head of Equities, Herman oversees a number of portfolio managers and analysts that provide company research to the team and actively pursues investment ideas. Opportunities are refined and extensively reviewed by the team under his leadership and considered for the portfolio. The resources sector remains a key interest of his and he actively researches the sector. Theo Botha is currently a portfolio manager in the equity team and has been with STANLIB since Theo is a highly experienced industry professional who was previously head of the Industrial Research team at STANLIB, with direct research responsibility for the luxury goods, food manufacturing, hospitals and pharmaceutical sectors. Prior to joining Liberty Asset Management as a research sector head in 1999, Theo had spent nine years with UAL/NIB Asset Management in various research and fund management positions. Theo Botha Portfolio Manager Theo completed his BCom honours degree in 1989, majoring in investment management, and he has been a CFA charterholder since Kobus Nell joined STANLIB in 2003 on completion of his auditing articles. His early career included managing roles in the unit trust pricing, corporate actions and confirmations departments, where he was instrumental in automating a number of key system processes. During this period in operations, he also learned the ropes at matching and settlements, client reporting and securities lending. Kobus Nell Portfolio Manager Kobus joined the investment team as an equity dealer in 2007 and was promoted to assistant portfolio manager in the unconstrained equity team in He also managed the STANLIB Gold and Precious Metals Fund from 2011 until it was merged in 2014 into the STANLIB Resources Fund, which he is currently managing. Kobus is now a portfolio manager for the Multi-Asset team which he joined in He is a PricewaterhouseCoopers-trained chartered accountant and is also a CFA charterholder. 21

22 Equity Team Anwaar Wagner joined STANLIB in 2015 as a portfolio manager in the Multi-Asset team, with 19 years of investment management experience including five years of international investing. He previously worked at Old Mutual Global Emerging Markets (GEM) boutique as the portfolio manager of the GEM Fund. In that role, Anwaar was responsible for the concept and launch of the GEM Fund including the formation of their investment philosophy, investment process, portfolio management and equity analysis. Anwaar Wagner Portfolio Manager Prior to that, he worked as head of basic materials, equity analyst and portfolio manager for the Old Mutual Resources Fund. His passion and wealth of industry experience has seen him win three Raging Bull Awards and S&P Micropal Awards. Anwaar started out as a trainee analyst at Oasis Management before moving to Metropolitan Asset Managers in Anwaar holds a Bachelor of Business Science from the University of Cape Town 22

23 STANLIB Equity Fund The STANLIB Equity Fund is a general equity fund that aims to outperform its composite benchmark over time. The fund uses a bottom-up stock-picking approach and can invest in local and offshore equities. This fund has a mandate that is not restricted to any specific investment style. Investments are focused around companies that are housed within the fund s benchmark, with offshore being limited to a maximum of 25% of the fund. Who should invest? The fund is targeted at investors: Aiming to achieve capital growth with a time horizon of five years or more to invest Who want a single equity fund for local and offshore equities Who prefer an equity mandate that is not restricted to a specific investment style Fund update quarter The JSE Shareholder Weighted All Share Index returned +9.6% in rands and the MSCI All Country World Index rose 5.8% in US dollars over the quarter amid encouraging news on the global economy, earnings, oil prices and tax reform in the US. The STANLIB Equity Fund delivered a return of 4.2% for the quarter. Positive contributors to performance were overweight positions in Kumba Iron Ore, and underweight positions in Steinhoff, Aspen, Vodacom and Mondi. Detracting from performance in the quarter were underweight positions in Naspers, Barclays Africa Group and Discovery; and overweight positions in international, Steinhoff Retail Africa and AB Inbev. Alexander Forbes, on its renewed growth strategy, Santam as the highest quality short-term insurer and African Rainbow Minerals for exposure to a diverse portfolio of resource assets were added to the fund in the fourth quarter. We purchased Sappi for its fast growing exposure to higher margin packaging papers and AB Inbev with its high quality global beer portfolio. We sold our Steinhoff holding in the quarter. We continue to hold an underweight position in healthcare and an overweight in the resources sector going into The healthcare call is premised on fundamental reasons as there is very little, if any, growth expected in the sector s top line drivers. ecommerce and etailing subsidiaries of the group. We expect South African financials to have a muted year and we do not expect the South African Reserve Bank to embark on an interest rate down cycle in the first six months of the year. No outlook statement is complete without mentioning Steinhoff as this will continue to remain in the news. In light of December 2017 s events we revisited our investment case for the company. The current situation leaves little room for equity investors to expect a meaningful return on their shares. The fall from grace of a company this size often takes much longer to stabilise than initially envisaged. It will be some time before it can be properly assessed and understood. We sold our holdings in Steinhoff and would rather use the opportunity to invest in companies that offer investors greater conviction. Fund information 1 Year ended 31 December 2017 Fund size R3.9 billion Fund standard deviation (ann) Benchmark standard deviation (ann) Risk profile Aggressive Asset allocation 32.49% 3.03% 3.90% 0.48% 60.10% Domestic Equity Domestic Cash Domestic Property Global Equity Global Cash Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark FTSE/JSE Shareholders Weighted All Share Index Synchronised global growth and the continued drive by Chinese authorities to close their inefficient production units buoyed resources. We project forward consensus earnings to be at least 40% below spot metal prices, leaving room for analysts to significantly upgrade earnings. Resource companies have improved operational efficiencies and investors have already seen substantial cash returned to shareholders. The fund retains its significant exposure to Naspers as the fortunes of its largest investment, Tencent remain constructive. We are factoring in further operational improvement in the 23

24 STANLIB SA Equity Fund The STANLIB SA Equity Fund is a general equity fund that aims to outperform the JSE Shareholders Weighted Index (SWIX) over time. The fund uses a bottom-up stock-picking approach and can only invest in SA equities. This fund has a mandate that is not restricted to any specific investment style. Holdings are focused around companies that are constituents of the fund s benchmark. Who should invest? This fund is targeted at investors: Aiming to achieve capital growth with a time horizon of five years or more Who want a single equity fund for local equities Who prefer an equity mandate that is not restricted to a specific investment style Fund update quarter The JSE Shareholder Weighted All Share Index returned 9.6%, during the fourth quarter of The South African Resources Index delivered 4.9%, industrials 4.7% and financials 16%. The STANLIB SA Equity Fund delivered a return of 7.8% for the quarter. Positive contributors to performance were overweight positions in Kumba Iron Ore, Sanlam and Curro, and underweight positions in Aspen and Vodacom. Detracting from performance in the quarter were an overweight in Steinhoff International, Steinhoff Retail Africa, EOH and AB Inbev, and an underweight in Barclays Africa Group. Alexander Forbes, on its renewed growth strategy, Santam as the highest quality short-term insurer, and African Rainbow Minerals for exposure to a diverse portfolio of resource assets were added to the fund in the fourth quarter. We purchased Sappi for its fast growing exposure to higher margin packaging papers and AB Inbev with its high quality global beer portfolio. We sold our Steinhoff holding in the quarter. We continue to hold an underweight position in healthcare and an overweight in the resources sector going into The healthcare call is premised on fundamental reasons as there is very little, if any, growth expected in the sector s top line drivers. Synchronised global growth and the continued drive by Chinese authorities to close their inefficient production units buoyed resources. We project forward consensus earnings to be at least 40% below spot metal prices, leaving room for analysts to significantly upgrade earnings. Resource companies have improved operational efficiencies and investors have already seen substantial cash returned to shareholders. constructive. We are factoring in further operational improvement in the ecommerce and etailing subsidiaries of the group. We expect South African financials to have a muted year and we do not expect the South African Reserve Bank to embark on an interest rate down cycle in the first six months of the year. No outlook statement is complete without mentioning Steinhoff as this will continue to remain in the news. In light of December 2017 s events, we revisited our investment case for the company. The current situation leaves little room for equity investors to expect a meaningful return on their shares. The fall from grace of a company of this size often takes much longer to stabilise than initially envisaged. It will be some time before it can be properly assessed and understood. We have sold our entire holdings in Steinhoff. We would rather use the opportunity to invest in companies that offer investors greater conviction. Fund information 1 Year ended 31 December 2017 Fund size R2.0 billion Fund standard deviation (ann) Benchmark standard deviation (ann) Risk profile Aggressive Asset allocation 4.86% 3.40% 91.74% Domestic Equity Domestic Cash Domestic Property Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark FTSE/JSE Shareholders Weighted All Share Index The fund retains its significant exposure to Naspers as the fortunes of its largest investment, Tencent, remain 24

25 Fixed Interest Team After gaining early experience in the treasury environment at Telkom and at Senbank, Henk Viljoen joined the then Liberty Asset Management in 1990, and was appointed head of Fixed Income. Henk retained this role throughout the amalgamation with Standard Corporate and Merchant Bank that formed STANLIB, and for many years led a multi-award-winning team which built an undisputed reputation as the most astute and consistently successful Bonds/Fixed Income unit in the South African industry. Henk Viljoen Co-head of Fixed Interest In 2008, Henk handed over responsibility for the day-to-day management of all third-party, life asset and retail bond funds. He retained executive responsibility as head of Fixed Income and chairman of the Interest Rate Committee the key macro factor forum that determines the duration positioning of STANLIB s fixed income mandates. He now jointly manages the team with Victor Mphaphuli. Victor Mphaphuli is a key member of STANLIB s multi-award-winning Fixed Interest team, which is one of the largest in South Africa.Victor is one of the top fixed income fund managers in the country and has won ABSIP Awards for fund management as well as Raging Bull Awards. He initially joined the team as a bond dealer and later assumed added responsibility for portfolio management. He was promoted to head of Bond and Income Funds in 2008, assuming full responsibility for the daily management of these funds. In 2016 Victor was promoted to co-head of Fixed Interest which he jointly manages with Henk Viljoen. Victor Mphaphuli Co-head of Fixed Interest Victor began his financial services career as a trainee foreign currency dealer with Standard Bank s teasury division in After gaining experience as a bond market dealer with Nedbank Investment Bank, he joined STANLIB s forerunner Liberty Asset Management in

26 STANLIB Aggressive Income Fund The STANLIB Aggressive Income Fund aims to provide investors with a high level of income in addition to capital growth over the longer term. The fund offers flexible exposure to property, bonds and money market instruments through different economic environments. This fund is a more aggressive solution than the STANLIB Flexible Income Fund, allowing for a maximum property exposure of 50%. It has no duration limit. Who should invest? The fund is targeted at investors who: Would like to achieve a high level of income with the potential for capital growth Seek elements of both fixed instruments and property in a well-diversified fund Prefer one actively managed solution for all their fixed interest needs Fund update quarter The size of the STANLIB Aggressive Income Fund was largely unchanged at R2.2 billion in the fourth quarter of The portfolio s modified duration increased by 0.2 years to 3.1 years to capture the value created by the expected decline in bond yields. The fund s exposure to listed property was decreased by 7% to 33% during the quarter to lock in value created by the property market. The All Bond Index returned an impressive 5.7% in December, leading to a one-year return of 10.2% in The performance is largely attributed to the market rally following the election of the perceived market friendly candidate as ANC president. It was a quarter of two halves for the bond market. Year-todate performance lows were recorded early in the quarter due to negative effects of the worse than expected medium term budget policy statement tabled in October. The statement showed worsening fiscal metrics, with no clear plan to improve these in the medium term. This led to Standard & Poor s downgrading local and foreign currency sovereign ratings, placing them firmly in junk territory. Moody s placed the country on a ratings review for a downgrade. The unexpected rating agency action led to the rand and 10- year bond recording year-to-date weakest levels of 14.58/$ and 9.5% respectively. The 5-year CDS spread worsened by 50 basis points to trade 220bps, closing the year at 157bps after improving in the latter part of the quarter due to the unwinding of political risk premium. The 10-year bond yield ended the quarter largely unchanged at 8.59% while the rand rallied to 12.25/$, the strongest level in two years, before closing at 12.30/$. Foreigners were net sellers of R18 billion of local bonds in the quarter as ratings downgrades sparked fears the country would be excluded from global bond indices. This brought 2017 net inflows down to R50 billion. half the size of the previous programme. Synchronised global growth in 2018 and tighter labour markets are expected to be inflationary, which might lead to tighter monetary conditions from the major central banks. The South African Reserve Bank left interest rates unchanged during the quarter, citing risks to the currency emanating from a volatile political environment and possible rating downgrades, despite benign inflation. The market will watch the State of the Nation Address and the 2018 budget in the first quarter with keen interest, as these will likely determine the future course of credit rating decisions. Fund information 1 Year ended 31 December 2017 Fund size R2.2 billion Fund standard deviation (ann) 3.23 Benchmark standard deviation (ann) 3.29 Modified duration 6.86 years Risk profile Moderate Asset allocation 8.54% 2.09% 40.06% 49.31% Domestic Property Domestic Bonds Domestic Cash Other Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark 33.33% FTSE/JSE SA Listed Property Index (SAPY) 33.33% BEASSA All Bond Index 33.33% STeFI Composite Index The US Federal Reserve hiked short-term rates by 25 basis points in December, in line with market expectations, bringing 2017 cumulative hikes to 75 basis points. The European Central Bank continued with monetary stimulus as they extended their quantitative easing programme by another nine months, but at 26

27 STANLIB Flexible Income Fund (Regulation 28 compliant) The STANLIB Flexible Income Fund is a fixed interest fund that aims to provide income generation and capital growth, targeting outperformance over traditional money market and income funds, by investing in the full spectrum of fixed interest instruments and property. This fund offers investors one solution to manage their fixed interest needs across changing interest rate cycles. It has no maturity limitations. Property and offshore is limited to a maximum of 25% of the fund. Who should invest? The fund is targeted at investors who: Require a specialist fixed interest fund as part of a diversified portfolio Have a longer term investment horizon than traditional money market income funds Prefer one actively managed solution for all their fixed interest needs Fund update quarter The size of the STANLIB Flexible Income Fund increased by R100 million to R1.6 billion at the end of the fourth quarter of We cut the modified duration of the portfolio by 0.15 years, to 2.5 years to capture the value created by the decline in bond yields towards year end. The fund s exposure to listed property was unchanged at 8%. The All Bond Index returned an impressive 5.7% in the month of December, leading to a one-year return of 10.2%. The performance is largely attributed to the market rally following the election of the perceived market friendly candidate as ANC president. It was a quarter of two halves for the bond market. Year-todate performance lows were recorded early in the quarter due to negative effects of the worse than expected medium term budget policy statement tabled in October. The statement showed worsening fiscal metrics, with no clear plan to improve these in the medium term. This led to Standard & Poor s downgrading local and foreign currency sovereign ratings, placing them firmly in junk territory. Moody s placed the country on a ratings review for a downgrade. The unexpected rating agency action led to the rand and 10-year bond recording year-to-date weakest levels of 14.58/$ and 9.5% respectively. The five year CDS spread worsened by 50 basis points to trade 220bps, closing the year at 157bps after improving in the latter part of the quarter due to the unwinding of political risk premium. The 10-year bond yield ended the quarter largely unchanged at 8.59% while the rand rallied to 12.25/$, the strongest level in two years, before closing at 12.30/$. Foreigners were net sellers of R18 billion of local bonds in the quarter as ratings downgrades sparked fears the country would be excluded from global bond indices. This brought 2017 net inflows down to R50 billion. growth in 2018 and tighter labour markets are expected to be inflationary, which might lead to tighter monetary conditions from the major central banks. The South African Reserve Bank left interest rates unchanged during the quarter, citing risks to the currency emanating from a volatile political environment and possible rating downgrades, despite benign inflation. The market will watch the State of the Nation Address and the 2018 budget in the first quarter with keen interest, as these will likely determine the future course of credit rating decisions. Fund information 1 Year ended 31 December 2017 Fund size R1.6 billion Fund standard deviation (ann) 1.90 Benchmark standard deviation (ann) 0.42 Modified duration 2.47 years Risk profile Moderately conservative Asset allocation 8.76% 7.96% 83.28% Domestic Property Domestic Bonds Domestic Cash Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark 110% STeFI composite The US Federal Reserve hiked short-term rates by 25 basis points in December, in line with market expectations, bringing 2017 cumulative hikes to 75 basis points. The European Central Bank continued with monetary stimulus as they extended their quantitative easing programme by another nine months, but at half the size of the previous programme. Synchronised global 27

28 STANLIB Bond Fund (Regulation 28 compliant) The STANLIB Bond Fund is a fixed interest fund that aims to provide income generation and capital growth by investing in longer dated fixed interest securities. The weighted average maturity of this fund must be more than two years. This fund has a higher volatility than money market and traditional income funds, but a lower volatility than an equity fund. Who should invest? The fund is targeted at investors: Who want an optimised total return of capital and income With a moderately conservative risk profile Fund update quarter At the end of the fourth quarter the size of the STANLIB Bond Fund was R3.5 billion, an increase of R300 million from the previous quarter. After being reduced to 0.7 years below the benchmark during the quarter in response to the deteriorating bond outlook following a disappointing budget speech, the modified duration was increased to 6.98 years, slight above benchmark, as bond yields reached fair value levels. The fund retained an overweight position in credit and was underweight 12+ area of the yield curve. The All Bond Index returned an impressive 5.7% in the month of December, leading to a one-year return of 10.2%. The performance is largely attributed to the market rally following the election of the perceived market friendly candidate as ANC president. It was a quarter of two halves for the bond market. Year-todate performance lows were recorded early in the quarter due to negative effects of the worse than expected medium term budget policy statement tabled in October. The statement showed worsening fiscal metrics, with no clear plan to improve these in the medium term. This led to Standard & Poor s downgrading local and foreign currency sovereign ratings, placing them firmly in junk territory. Moody s placed the country on a ratings review for a downgrade. The unexpected rating agency action led to the rand and 10-year bond recording year-to-date weakest levels of 14.58/$ and 9.5% respectively. The five year CDS spread worsened by 50 basis points to trade 220bps, closing the year at 157bps after improving in the latter part of the quarter due to the unwinding of political risk premium. The 10-year bond yield ended the quarter largely unchanged at 8.59% while the rand rallied to 12.25/$, the strongest level in two years, before closing at 12.30/$. Foreigners were net sellers of R18 billion of local bonds in the quarter as ratings downgrades sparked fears the country would be excluded from global bond indices. This brought 2017 net inflows down to R50 billion. The South African Reserve Bank left interest rates unchanged during the quarter, citing risks to the currency emanating from a volatile political environment and possible rating downgrades, despite benign inflation. The market will watch the State of the Nation Address and the 2018 budget in the first quarter with keen interest, as these will likely determine the future course of credit rating decisions. Fund information 1 Year ended 31 December 2017 Fund size R3.5 billion Fund standard deviation (ann) 6.07 Benchmark standard deviation (ann) 6.58 Modified duration 6.98 years Risk profile Moderately conservative Asset allocation 4.77% 95.23% Domestic Bonds Domestic Cash Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark BEASSA All Bond Index The US Federal Reserve hiked short-term rates by 25 basis points in December, in line with market expectations, bringing 2017 cumulative hikes to 75 basis points. The European Central Bank continued with monetary stimulus as they extended their quantitative easing programme by another nine months, but at half the size of the previous programme. Synchronised global growth in 2018 and tighter labour markets are expected to be inflationary, which might lead to tighter monetary conditions from the major central banks. 28

29 STANLIB Income Fund The STANLIB Income Fund is a fixed interest fund that aims to provide a reasonable level of income as well as capital stability. The fund invests in high-yielding South African fixed interest assets including government and corporate bonds, fixed deposits and money market instruments. The weighted average maturity of this fund may not exceed two years. Who should invest? The fund is targeted at investors requiring: A regular quarterly income that aims to generate returns above money market over a two to three year period A traditional low risk income fund Fund update quarter Flows into the STANLIB Income Fund continued to increase. R1.7 billion inflows were recorded in the fourth quarter, taking the fund size to R27.7 billion at the end of Fund returns are attractive compared to money market returns, despite the defensive positioning due to investments in high yielding securities. The fund s modified duration decreased from 0.60 years to 0.34 years to further position the fund defensively for a possible ratings downgrade. The All Bond Index returned an impressive 5.7% in the month of December, leading to a one-year return of 10.2%. The performance is largely attributed to the market rally following the election of the perceived market-friendly candidate as ANC president. It was a quarter of two halves for the bond market. Year-todate performance lows were recorded early in the quarter due to negative effects of the worse than expected medium term budget policy statement tabled in October. The statement showed worsening fiscal metrics, with no clear plan to improve these in the medium term. This led to Standard & Poor s downgrading local and foreign currency sovereign ratings, placing them firmly in junk territory. Moody s placed the country on a ratings review for a downgrade. The unexpected rating agency action led to the rand and 10-year bond recording yearto-date weakest levels of 14.58/$ and 9.5% respectively. The five year CDS spread worsened by 50 basis points to trade 220bps, closing the year at 157bps after improving in the latter part of the quarter due to the unwinding of political risk premium. The 10-year bond yield ended the quarter largely unchanged at 8.59% while the rand rallied to 12.25/$, the strongest level in two years, before closing at 12.30/$. Foreigners were net sellers of R18 billion of local bonds in the quarter as ratings downgrades sparked fears the country would be excluded from global bond indices. This brought 2017 net inflows down to R50 billion. The South African Reserve Bank left interest rates unchanged during the quarter, citing risks to the currency emanating from a volatile political environment and possible rating downgrades, despite benign inflation. The market will watch the State of the Nation Address and the 2018 budget in the first quarter with keen interest, as these will likely determine the future course of credit rating decisions. Fund information 1 Year ended 31 December 2017 Fund size R27.7 billion Fund standard deviation (ann) 0.47 Benchmark standard deviation (ann) 0.07 Modified duration 0.34 years Risk profile Conservative Asset allocation 17.58% 2.79% 79.63% Government Credit Cash Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark STeFI Composite Index The US Federal Reserve hiked short-term rates by 25 basis points in December, in line with market expectations, bringing 2017 cumulative hikes to 75 basis points. The European Central Bank continued with monetary stimulus as they extended their quantitative easing programme by another nine months, but at half the size of the previous programme. Synchronised global growth in 2018 and tighter labour markets are expected to be inflationary, which might lead to tighter monetary conditions from the major central banks. 29

30 Listed Property Team Keillen Ndlovu manages the largest, most successful listed property fund in South Africa,he STANLIB Property Income Fund. After beginning his property career with Standard Bank Properties in 2004, Keillen transferred to STANLIB in 2005 as a listed property analyst. After becoming a full-time fund manager in 2008, he successfully assumed increased responsibilities and fund management exposure, and was appointed head of STANLIB s Listed Property team in Keillen Ndlovu Head of Listed Property The Listed Property team has won numerous awards over the past decade, and under his tenure has expanded its listed property offering from South Africa to the rest of Africa, emerging markets and developed markets. Riaan Gerber has been with the Listed Property team since 2007, managing listed property portfolios and analysing listed property securities in both developed and emerging markets, including South Africa. He joined STANLIB in 2005 and gained experience in financial and management accounting, tax, internal audit and financial management at both STANLIB and Standard Bank. Riaan Gerber Property Analyst Chloe Wing See Ma joined the Listed Property team as a listed property analyst in She focuses mainly on research within the local and offshore listed property markets. She also comanages the Emerging Markets Property Fund. She was previously at Rand Merchant Bank where she worked as a credit analyst within the real estate investment banking space. Her qualifications include a bachelor of architectural studies, BSc property studies (cum laude), BSc honours degree in property studies (cum laude), a postgraduate diploma in Enterprise Management. She is working towards completing the Chartered Financial Analyst Programme. Chloe Wing See Ma Property Analyst 30

31 Listed Property Team Lawrence Koikoi joined STANLIB Listed Property team as a listed property analyst and will be covering South Africa and Rest of Africa. Lawrence has been with the Standard Bank Real Estate investment team four years gaining experience in the entire real estate financing and investment life cycle of a typical real estate transaction. He joined the team in 2011 as an assistant transactor when it made its first investment outside South Africa. His primary responsibility was assigned to compiling financial models for all new transaction in the rest of Africa division. Lawrence Koikoi Property Analyst His responsibilities increased to include drafting investment papers, review and negotiations on legal agreements, cross-border tax planning and structuring, management of transaction draw downs and financial performance review and facilitation of due diligence on key real estate investment transactions which Standard Bank made in Rest of Africa. He was also part of the team that was mandated to unwind the real estate investment division of Standard Bank in Lawrence is a qualified chartered accountant. Ahmed Motara joined the Listed Property team in September 2016 and focuses primarily on local listed property research. He also assists with portfolio management for the SA-focused property funds. He has 13 years sell-side research experience focusing primarily on the South African listed property sector. He spent ten years with Deutsche Securities and the last three years with Renaissance Capital as equity analyst (vice president). He was a rated analyst in the listed property sector as well as the electrical and other equipment sector. Ahmed Motara Property Analyst 31

32 STANLIB Property Income Fund The STANLIB Property Income Fund invests in listed property shares and aims to provide a high level of income in addition to capital growth over time. It uses proprietary research to identify investment opportunities that aim to achieve superior long-term risk-adjusted returns. This fund aims to be fully invested in property at all times. Who should invest? The fund is targeted at investors who: Require a high level of income in addition to capital growth with a time horizon of five years to invest Want to include property as part of their diversified portfolio Fund update quarter The fund underperformed the benchmark by 2.06% over 12 months, delivering 15.9% versus the benchmark return of 17.5%. The top contributors to fund performance over the fourth quarter were underweight positions in Arrowhead and Nepi Rockcastle. The underweight position in Arrowhead was driven by our continued concerns on the overall quality of the South African portfolio, with an exceptionally weak outlook statement negatively impacting the stock. We closed our underweight position in Nepi Rockcastle materially in the quarter at an attractive entry price, given continuing strong portfolio fundamentals. The top detractors to fund performance were the overweight position in Hammerson and Delta. Hammerson continues to bear the brunt of concerns around the impact of Brexit, while Delta continues to be negatively impacted by uncertainty and delays on an uncompleted BBBEE transaction. On a total return basis, listed property delivered 8.3% in the quarter, outperforming local equities (7.4%), cash (+1.8%) and local bonds (2.2%). Even with the rand strengthening 7% against the euro in the quarter, South African Listed Property Index (SAPY) property stocks linked to offshore earnings delivered double-digit total returns over the quarter. Stocks with South African portfolios showed strong performances, with strong share price performance evident in late the fourth quarter on the back of positive sentiment emerging around the ANC elective conference. Over 2017, listed property featured among the best performing asset classes (17.2% total return), underperforming equities (21.0%), and outperforming cash (7.5%) and bonds (10.2%). Normal market behaviour of seeing investors either choose South African property portfolios or offshore portfolios was upended in the final quarter of the year. The top six performing stocks in the quarter were a mix of offshore (Nepi Rockcastle 16%, Resilient 14%, Fortress: 9%) and local (Growthpoint: 14%, Investec Property Fund: 12%, Hyprop: 11%) focused stocks. This outcome manifested even with marginal bond weakness and material rand strength over the quarter. The fund continues to have exposure to all these stocks, and continues to offer a balance between defensive South African property portfolio exposure and strong offshore distribution growth exposure, underpinned by strong physical property fundamentals in both instances. Results reported during the quarter continued to show the local economic environment remains challenging and in some instances disappointed more than anticipated. Singledigit dividend per share growth is the best case scenario for most South African stocks with reasonable quality local property portfolios without material offshore earnings. In some instances, negative dividend per share growth is increasingly anticipated for weaker quality South African property portfolios. Rental growth in South Africa remains under pressure, with rental negotiations remaining difficult for landlords. Results from companies with material offshore portfolios did not disappoint expectations. We anticipate 8-9% distribution growth for the SAPY over the next 12 months. We continue to expect some South African companies with significant offshore exposure to exhibit double-digit distribution growth in rands over the next 12 months. The SAPY currently offers a forward yield of 7.2%, below the 10-year bond yield (8.5%). However, listed property provides the benefit of a growing income stream in comparison to cash and bonds. Over the next 12 months we expect listed property to deliver a total annualised return of 13%, on the assumption that the local bond yield in 12 months is 8.75%. Fund information 1 Year ended 31 December 2017 Fund size R8.0 billion Fund standard deviation (ann) 4.53 Benchmark standard deviation (ann) 4.89 Risk profile Aggressive Asset allocation 1.80% 98.20% Domestic Property Domestic Cash Performance figures (%) (31 December 2017) Quarter 1 Year 3 Years 5 Years Fund Benchmark Source: Morningstar Fund benchmark FTSE/JSE SA Listed Property Index 32

33 Global Solutions Keillen Ndlovu manages the largest, most successful listed property fund in South Africa,he STANLIB Property Income Fund. After beginning his property career with Standard Bank Properties in 2004, Keillen transferred to STANLIB in 2005 as a listed property analyst. After becoming a full-time fund manager in 2008, he successfully assumed increased responsibilities and fund management exposure, and was appointed head of STANLIB s Listed Property team in Keillen Ndlovu Head of Listed Property The Listed Property team has won numerous awards over the past decade, and under his tenure has expanded its listed property offering from South Africa to the rest of Africa, emerging markets and developed markets. Alex Lyle is a senior portfolio manager at Columbia Threadneedle Asset Management, a company which he has worked for in its various guises for more than 25 years. He joined Hambros Bank s unit trust division in 1980, which was acquired by Allied Dunbar in 1981 and subsequently became part of Threadneedle which was bought by American Express in Neil Robson Head of Global Equities (Columbia Threadneedle) Neil Robson joined Columbia Threadneedle in 2011 as a portfolio manager within the Global Equities team. He is the deputy manager of the Threadneedle Global Select Fund and manages a number of global equity mandates for institutional clients. Before joining Columbia Threadneedle, Neil worked as a Fund Manager at companies including Martin Currie, Barings and Citibank. In addition, he was Head of Global Equity at Pioneer Investments from 2003 to Alex Lyle Head of Managed Funds EMEA 33