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Sep 2018 News
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Dear Client

 

The growth or loss of our fund of funds, in which you are invested were as follows for the month of September 2018.

 

Fund of Funds

September Growth

Kanaan Hedge FoF

-1.6%

Kanaan Balanced FoF

-2.15%

Moriah Global FoF

-3.5% (0.22% USD)

 

One should not stare blindly at a single month’s growth or loss, but the negative performance of Kanaan Hedge FoF and Kanaan Balanced FoF is still a big disappointment considering these funds have not performed well over the past 2 years. According to the information we have the underlying funds of both Kanaan Hedge FoF and Kanaan Balanced FoF are prize-winner funds and the best that one could do under the circumstances is to stay patient.

 

Above you will see that the larger the exposure of the fund of funds to USD, the larger the negative growth had been, because the Rand had somewhat of a recovery after the extreme depreciation of more than 20% for the year up to end of August. Moriah Global FoF’s YTD was 9.85% in USD and 30.55% in ZAR by the end of August, in other words, the Rand depreciation up to end of August had been 30.55% – 9.85% = 20.7% and it is therefore understandable that there would be a degree of recovery of the Rand, especially after the appointment of Tito Mboweni as minister of finance. However, we are not bothered by the short term appreciation of the Rand, as the Rand will depreciate against the USD over the long term, because of a much more efficient American Economy. The average Rand depreciation over the past 40 years has been a little more than 5% per year!

 

What is more important to note is that Moriah Global FoF YTD up to the end of September is now at a healthy 10.09% in USD and will most probably end 2018 with +/-15% in USD! In South Africa, via Balanced FoF, we invest the maximum in locally registered offshore funds like Old Mutual Global, namely 30% of the portfolio and the average of the three underlying offshore funds of Balanced FoF namely, Old Mutual Global, Mi-Plan and Blue Alpha is +/-8% YTD in USD, compared to the +/-10% of Moriah Global’s underlying funds, which is also excellent. We expect that the 30% in Offshore South African registered funds , will end 2018 with more than 10% in USD.

 

Your investments in compulsory contribution funds like living annuities and pension are unfortunately not allowed to be invested in funds registered offshore, but we encourage clients with voluntary contribution funds, as we often do, to invest in Moriah Global FoF. The minimum investment there is unfortunately USD15 000 and at the current Rand/ USD exchange rate of +-R14.50 that is about R220 000.

 

We do not give too much notice to the severe world-wide market correction of the past few days, because of the American Reserve banks’ decision to increase their interest rates, which caused American shares and funds, as well as that of the rest of the world, to drop badly. Most economists feel the American correction is temporary, since the increase of American interest rates is based on good news, namely that the America economy, since the election of Trump twee years ago, has been growing so well that it has caused inflation, which must now be kept in check by increased interest rates. A majority of economists do not consider the American share market as overvalued and therefore also do not consider the current correction as the start of a crash.

 

Friendly greetings

 

Andre Delport

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