Page 180 - Profiles's Unit Trusts & Collective Investments - September 2024

CHAPTER 9

Please comment on the year ahead and, if possible, estimate the performance of your fund
over 2 or 3 years. What are your targets and objectives for the year ahead?
The market is pricing in, with high certainty, the first US rate cut to occur in September 2024,
given the continued moderation of inflation and loosening of the labour market. The US Fed has a
dual mandate, covering inflation and maximising employment. Emphasis is currently on bolstering
the labour market, as data prints are suggesting rising risks to unemployment. Geopolitical
tensions still exist and do pose an upside risk for inflation, but this impact is being assigned a low
probability.
The fund is currently aiming to achieve 10% to 10.5% per annum gross of fees. This is an
indication of running yield and dependent on potential changes to policy rates over the coming
year. We cannot forecast capital movements with a high degree of certainty.

Please give your views regarding interest rate trends and the yield curve over the next 1 to 2
years. What interest rates can investors expect? Do you anticipate further repo rate cuts?
We believe interest rates have peaked and we expect rate cuts to commence shortly. Over the
next year, we can expect the repo rate to decline by about 1%. This would bring the SA repo rate to
7.25%. Following the formation of a GNU in South Africa, there has been a downward revision of
sovereign risk, and renewed growth prospects in South Africa. This combination should result in
further flattening of the yield curve. Our view is based on current market dynamics and subject to
revision. A lot depends on how aggressively the US eventually cuts rates.

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