Old Mutual Investors comment - Sep 06 - Fund Manager Comment02 Nov 2006
During the third quarter, the MSCI World Index posted a gain of 5.1% in sterling terms. Global equities recovered following May's market correction, as investor sentiment was buoyed by the prospects of an end to monetary tightening in the US, combined with earnings announcements that were generally on the more positive side. All eyes were firmly on the US, where following two years of rapid back-to-back interest rate increases, the Federal Reserve opted to leave interest rates unchanged at both their August and September meetings. The news brought relief to consumers and business borrowers alike, as it suggests that the top of the interest rate cycle may have been reached. All of the major regions made good gains during the quarter. The best performer was Europe ex UK, which rose by 7.8% in sterling terms. The region has benefited from a pick-up in economic activity and improved business confidence and the market progressed despite a further interest rate hike from the European Central Bank.
In our view, the economic outlook remains favourable for equities. The global interest rate cycle remains delicately poised. In the US the top of the cycle may well be upon us, but in Japan and Europe further interest rate increases are likely. Economic growth continues to flow through to strong corporate profits growth, while despite their strong gains during the quarter, equity market valuations remain compelling. Meanwhile, the supply and demand situation also remains positive for equities. Merger and acquisition activity remains rife and venture capitalists continue to hunt for well-priced assets.
Old Mutual Investors comment - Jun 06 - Fund Manager Comment23 Aug 2006
The second quarter was characterised by massive volatility in the All Share Index, driven mainly by global fears about inflation and possible further interest rate hikes.
Equity markets across the world came under pressure, with emerging markets bearing the brunt of the correction as speculative investors switched out of emerging market equities into interest-bearing assets. Locally, we saw the first rise in short term interest rates since 2002, which added to the selling pressure in our markets. Financial and industrial shares were sold down sharply, while resources and rand hedges were protected to some extent by the weakening rand.
During the quarter, we made some switches in the portfolio, driven by relative value situations, as certain shares were sold down to attractive levels. Overall, we added more exposure to resources and trimmed the financial and industrial exposure.
The question now is whether we are at the end of the bull market or whether this is just a healthy correction following a 3-year bull run in equities. We sit in the healthy correction camp because we believe the fundamentals driving our market are still healthy and that our market was not unrealistically priced. However, we are not expecting the market to deliver the same attractive returns we experienced over the last three years and, looking forward, believe investors will receive more realistic returns.
Old Mutual Investors comment - Mar 06 - Fund Manager Comment23 May 2006
Following the pullback in the All Share Index during February, the market accelerated strongly in March, delivering a 7.13% total return. The pickup in the market was broadly spread, with most sectors doing well. The forestry and paper, platinum and IT software sectors did particularly well during the month. The positive sentiment in the local market during February was mainly a result of positive global markets, foreign appetite for local shares, as well as local companies continuing to report strong earnings growth. Commodity shares strengthened on the back of higher commodity prices, which responded to still strong global economic growth momentum.
Looking back over the quarter, the market's strong total 13.3% performance was a surprise. We believe this rally has been driven, to a large extent, by foreign funds increasing their holdings in SA, structural changes within the country and emerging markets being viewed as a favourable investment destination.
We did not make any major sector changes to the portfolio. We continue to invest in line with our base case view, which favours local consumer-driven companies, as well as gross domestic fixed investment (GDFI) stocks. We continue to hold an overweight position in resources given our expectation that the commodity cycle may last longer that generally expected.
Looking forward the economic environment is supportive of company earnings and we believe the local equity market will continue to give investors an attractive real return on a relative basis.
Old Mutual Investors - Failing to impress - Media Comment03 Mar 2006
Old Mutual Investors began to slide down the rankings in mid-2005, its returns muted by a modest exposure to resources and an above-average exposure to financials. This did not make it unique in a polarised market but did nothing to fire up enthusiasm for a fund whose returns have hovered around its sector's average for some years. Positives are: no upfront fee on investments over R5 000; and a low 1,14% management fee.
Financial Mail - 03 March 2006
Old Mutual Investors comment - Dec 05 - Fund Manager Comment30 Jan 2006
The stock market was very generous in December, delivering an exceptional return of 8% for the month. The total return of the All Share Index came to 47% for the year, which was certainly a stellar performance, especially following 2004's strong returns.
The last quarter's performance was driven by a number of sectors, but resources and financials deserve a mention. Banks in particular performed strongly towards year-end after lagging for most of the year. Meanwhile, resources were driven by continuing strong commodity prices, in particular soaring gold and platinum group metal prices.
During the quarter, we added to the fund's resources exposure by adding Amplats, Implats, Sasol, Anglo American and Sappi. This was done on the back of strong commodity prices and a positive world economic growth outlook. On the industrial side, we added to the telecoms sector by buying MTN, Reunert and Telkom given their attractive relative growth prospects. On the selling side, we trimmed holdings in Absa, Discovery, FirstRand, Bidvest and Massmart after strong price appreciation.
Looking forward into 2006, we remain confident about the prospects for the local equity market. Although the market is no longer cheap, we still believe that, given expected earnings growth, the market is offering reasonable value. The economic environment is supportive of company earnings and on a relative basis we believe the local equity market will continue to give investors an attractive real return.