Neville Chester is a senior portfolio manager with 27 years of investment experience.

Nic Stein is an analyst and portfolio manager with 15 years of investment industry experience.


The Fund returned 1.5% for the quarter and 15.5% for the last 12 months. The long-term performance of the Fund remains pleasing against both the peer group and the benchmark.

Our overweight banks and MTN positions contributed to relative quarterly performance, while overweight positions in Anheuser-Busch InBev and the diversified miners detracted.


The quarter was characterised by stubbornly high inflation prints, which are being met with the prospect of continued interest rate hikes; US economic growth being very resilient; concerns about Chinese growth and its housing market; and heightened East-West geopolitical tensions. Despite all of this, the MSCI World Index gained 6.8% and is now within a whisker of its all-time high.

Conditions were even tougher on the domestic front, with high levels of loadshedding and the threat of sanctions for possible weapons supply to the Russians having a marked impact on the SA economy. The JSE Capped SWIX managed to eke out a 1% gain for the quarter. Some of these themes are discussed in more detail below.

It was a tough and volatile quarter for most metal markets. The market remains very data point driven, largely centred on the possibility and extent of stimulus measures introduced by the Chinese government (along with the sub-sectors that stand to benefit). Chinese property sales remain weak as developers have been overleveraged and buyers are cautious. This is having an impact on short-term iron ore demand. Demand for energy transition metals remains resilient, while base metal inventories remain at multi-decade lows and supply growth constrained. Any base metal demand surprises here are likely to be met with a supply squeeze. The diversified mining shares sold off on weak sentiment and we added to all of these positions in the Fund.

Our platinum group metals (PGM) thesis has been tested by the fast pace of battery electric vehicle (BEV) adoption (despite us already having robust adoption assumptions in place), largely due to the pace of Chinese BEV capacity. The resultant impact on PGM demand (lowering PGM prices) collided with expectations of high producer cost increases owing to SA loadshedding. In fact, at current prices, a number of SA assets are at breakeven or worse. We reduced our Implats holding materially over the quarter.

While the Chinese data was a headwind for commodity prices, it was a tailwind for consumer-facing Chinese businesses as they benefited from the reopening after the country abandoned its ‘zero-Covid’ policy. This, coupled with a resilient US consumer, saw Richemont grow its annual sales by 14% in constant exchange rates. The share price performed strongly on the back of this. We are concerned that the market is extrapolating this growth rate and have reduced the size of our holding. Richemont remains a fantastic business, with excellent long-term fundamentals.

Another Chinese-themed beneficiary this quarter was our Naspers/Prosus holding. A more benign Chinese regulatory environment, coupled with the Group announcing a simplification of its cross-holding structure, aided a good share price performance.

MTN performed strongly as the new Nigerian President announced a number of tough decisions (scrapping the fuel subsidy and allowing the Naira to trade freely) that we expect to benefit the Nigerian economy in the long run.

Within the domestic universe, considered stock picking is required to identify businesses that can deliver real earnings growth despite the subdued growth outlook and rising costs of doing business. A slew of weak results across the retailers have illustrated the pain that comes when costs grow faster than the top line. We favour businesses with strong franchises that can grow faster than the underlying economy and that can pass cost pressures on to customers.

Our bank holdings remain an “anchor tenant” within our domestic-facing holdings. They trade on low ratings and high dividend yields and continue to grow earnings strongly as they benefit from the South African Reserve Bank’s interest rate increases. Although they are exposed to the tough consumer environment, conservative advances growth into this cycle and high levels of provisioning should mitigate increased credit losses. Within the banks, we sold out of ABSA and applied the proceeds to existing holdings in Standard Bank and Nedbank.


Looking at the price-earnings ratio, dividend yield and upside for the Fund, we remain optimistic about the Fund’s future return prospects from this base.

SA retail readers

Neville Chester is a senior portfolio manager with 27 years of investment experience.

Nic Stein is an analyst and portfolio manager with 15 years of investment industry experience.

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