TRANSCRIPT

Hi, I’m Melvyn Lloyd portfolio manager at INN8 Invest and today I’ll give you a quick market overview for the month of December. We’ll then look at the performance of the different market indices, and lastly, we’ll look at the performance of the INN8 Invest portfolios and see how they performed relative to their respective benchmarks.

So just starting with a quick market overview. December was yet another difficult month, with prospects of the global recession weighing on investor sentiment. During the last FOMC meeting of 2022, the Fed raised interest rates by 50 basis points, to a range of 4.25% to 4.5%, pushing interest rates to their highest levels since 2007. Fed Chair, Jerome Powell, also stated that further rate hikes will be appropriate in order to get inflation back to the target rate of 2% over time.

We also saw policymakers from other economies following suit, with both the European Central Bank and the Bank of England raising interest rates by 50 basis points in December.

In China, the government decided to abandon its zero COVID policy but a sharp rise in the number of new cases dampened investor sentiment and short-term economic growth prospects.

The Bank of Japan surprised markets in December after the increasing the upper limit of its tolerance ban on 10-year government bonds to 0.5% from 0.25%, and locally President Cyril Ramaphosa survived the fallout from the Phala Phala scandal and was re-elected as party leader of the ANC for a second term.

Just looking at the different market indices – and this is up until the end of December – and I am specifically going to focus on the blue bars, which are the one month returns. SA ILBs produced healthy returns for the month of 2.6%. SA Property also had a decent return of 1.1% and then Global Bonds, SA Bonds, SA Cash, and Global Cash, all produced a return of between 0.5 and 0.6%. But then looking at your other growth assets like Global Property, SA Equity and Global Equity, they struggled during the month of December, and all produced a negative return.

If one looks at the performance of the INN8 Invest portfolios and specifically looking at the one-month figures now, it’s good to see that the majority of these portfolios produced a return in line with their respective benchmarks, with only the High Growth and Flexible Growth portfolios marginally underperforming, and that’s given the performance of risk assets during the month of December.

If one ever looks at it over a longer, more meaningful period, like the one-year period, one can see that all these portfolios have comfortably outperformed their respective benchmarks.

If one then just looks at the performance during the month of December, starting with the Granite Multi Income Fund that produced a return of 0.8% for the month. We use that particular fund in our Flexible Income portfolio and their exposure to R2030 as well as R186 bonds contributed meaningfully to performance as well as the exposure to select property stocks such as SA Corporate and Growth Point.

Then the Ninety One Cautious Managed fund also produced a return of 0.8% for the month. We used that particular fund in our Stable and Moderate Growth portfolios and their local bond exposure was the biggest contributor to performance, specifically, their longer dated bonds and ILB exposure, and they also had very good stock selection on the offshore side.

And then lastly, the BCCI Fundsmith Equity Feeder fund, that particular fund produced a return of. 2.4% for the month. And that’s an extremely good return, considering that global equity markets were down more than 4% in Rand terms for the month. We used that particular fund in our Flexible Growth portfolio, and they had very good stock selection with the top three contributors to performance being Estée Lauder, Novo Nordisk and Stryker.

Thank you for watching and we hope to see you again in February for our next DFM monthly bulletin. Bye for now.