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25 Aug 2018

Dear Client


  1. In our previous newsletter I referred to our Moriah Global FoF with its administrator, International Assurance in Mauritius.  The fund has grown again very well for the month of July with an estimated 1.64% in USD. I have not seen funds outperforming more consistently, than the underlying funds of Moriah Global over the past 34 years since I have been in this industry. Just over the past twelve months up to 31 July 2018 the fund did 16.78% nett of all fees in ZAR. One may say that is only because of the depreciation of the rand over that period.  However, the USD growth nett of all fees over the 12 Month period has been an excellent 15.21%!


  1. We have managed the Moriah Global Fund more conservatively since January 2011 because of which the CAR of the fund in USD is now a moderate 4.5% p/a and in ZAR 12.65% p/a.  By the end of 2016 we became aware of the fact that the strategy of president Trump is going to be a huge boost for the American Economy, after which we have increased our exposure to American Growth Funds.  That includes the Berkshire fund of the well-known Warren Buffet, to which we do not have access via South Africa.


  1. If you know of something better, I would be pleased to hear from you and I am not sarcastic when I say that.  We are not fund managers ourselves, we are fund of fund managers always looking out for good consistent returns and we have been referred more than once to a very good fund by some of our clients.


  1. As mentioned previously South African Hedge Funds as well as South African Unit Trusts have been making a comeback over the last two months, but not closely comparable to the top, mainly USA offshore growth funds.


  1. With president Trump’s drastic deregulation of the US economy, his trade war and his lowering of the corporate tax rate from 35% to 21%, the USA economy and funds are hugely benefiting from that, which momentum should carry on according to most economists for the next two years, but unfortunately to the disadvantage of emerging markets like China, Russia, Brazil, SA, and others etc. With South Africa’s additional political problems, we advise clients who have already exposure to our Moriah Global FoF to contact us to consider increasing their exposure, as well as clients who do not have exposure at all, not because the offshore fund managers are necessarily better fund managers than the local ones.  In both the cases namely, our South African unit trust FoF and our South African Hedge FoF, we believe that out of the two thousand available SA funds we have the top ten, namely in the case of Balanced FoF, Aylett Equity, Centaur Flexible and PSG Flexible which have done more than once previously up to 40% p/a and more.


  1. According to the article of Guilietta Talevi in the Business day of Friday 14 August 2018, the top four Hedge funds in South Africa, over the past five years are 36One, Peregrine Capital, Fairtree and Laurium which are four of our eight Kanaan Hedge FoF funds.  We believe that the other four namely Steyn Capital, IDS select opportunity and Senqu are also amongst the top ten Hedge Funds in South Africa.  However, both our Kanaan Hedge FoF and Kanaan Bci Balanced FoF are unlikely to perform over the next two years as well as the USA growth funds.


  1. Taking into account that the ANC have now decided to change section 25 of the constitution so as to be able to expropriate land without compensation and even more concerning the fact that they have decided to change the law which protects the independence of the reserve bank, certain of our clients have requested to move 100% of their investments offshore, while the SA public is still allowed to move R10 Million per person offshore.  Before 1994 South Africans were only allowed to take pocket money for the purposes of holidaying offshore and there is a fear that the present exodus of Rands of more than 600 Million USD, just over the past week according to Reuters, would cause the South African Government to decide to change the R10 Million per person back to R0 per person.


  1. We believe that clients who are dependent on their income from their investments, should be careful. If the outcome of the general election next year is received positively by international markets the rand which is the most unpredictable currency in the world can increase overnight in value with more than 30%, under which circumstances a client who needs capital from offshore will lose accordingly.  We advise investments that you want to make now offshore should not be investments that you need over the short term.  Under these circumstances the appreciation of the Rand will not be a problem, because rand depreciation over the long term is almost as sure as Newtons gravitation laws, with Rand depreciation over the 40-year period now just more than 5% p.a.


Friendly Greetings



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