2 1 J u l y 2 0 1 4 | P S G C a s c a d e s - P i e t e r m a ri t z b u rg | 0 3 3 3 4 7 2 6 2 0 | w a r r e n . f o r b e s @ p s g . c o . z a
w ww . p s g . c o . z a / c a s c a d e s /
Geopolitical concerns weigh on investor sentiment








Japan – The Japanese market was closed on Monday for a holiday.
Hong Kong – The Hang Seng Index traded slightly lower to flat on Monday, while shares on mainland China
were also trading in negative territory, with investors setting aside a large amount of money for
impending eleven initial public offerings (IPOs) which were approved last week.
European Markets – Reuters reports that European markets closed almost unchanged on Friday despite
escalating tensions between Russia and the West which limited investor appetite for risk assets and
counteracted strong earnings reports from Sweden.
U.S. markets – According to Reuters, the Dow reached another intraday record high on solid earnings
from companies such as Morgan Stanley and UnitedHealth but closed sharply lower on Thursday on the
back of news that a Malaysian Airlines passenger jet had been shot down and crashed near the UkraineRussia border.
Local markets – Business Day reports that JSE All Share Index closed 0.18% lower on Friday but still ended
0.30% higher for an eventful week as geopolitical concerns in Ukraine and the Middle East weighed on
investor sentiment and created a modest risk-off scenario.
Rand - The Rand is trading slightly firmer at R10.6412 against the US Dollar, with the Euro quoted at
R14.4079 and the British Pound at R18.1549.
Precious Metals – The gold price was steady in Singapore on Monday trading above the $1,300 an ounce
support level as investors anticipate increased geopolitical risks as the West began demanding answers
from Russia over the shot down Malaysian plane. The gold price last traded at $1,311.76, with the
platinum price quoted at $1,488.90, while the palladium price is trading at $879.60.
Oil Price - Brent crude oil price is trading steady on Monday, as geopolitical concerns around the
Malaysian jetliner increased. Brent was last trading higher at $107.24 a barrel.
http://news.psgonline.co.za/2014/07/geopolitical-concerns-weigh-on-investor-sentiment/
Model Strategy Report 2nd Quarter 2014: PSG Cascades
Model portfolios facilitate an effective management system for clients wishing to invest in a portfolio of
well-diversified unit trusts. At present Model Portfolios form the cornerstone of the unit trust strategies
managed for the clients of this office using the administration services of Investec Management Services
(IMS), Allan Gray Asset Management and PSG Invest.
Using this system, we endeavour to pick the country’s Top Managers for the purpose of building risk
appropriate strategies that deliver superior performance. Each model is designed according to a risk profile
and managed under Full Discretionary Mandate by PSG. Portfolios are monitored quarterly and
adjustments implemented within the construct of the mandate; if required. Research and technical support
is provided by PSG Multi-Management in Johannesburg.
Investment growth based on current holdings – June 2014
Portfolio Name
Aggressive Risk
Moderate Flexible
Moderate (Reg.
28)
Cautious Risk
*
**
***
****
One Year
Performance
31.63%
21.03%
22.34%
Benchmark
Performance
28.62%*
19.52%**
16.77%***
Three Year
Performance
19.32% per annum
16.62% per annum
17.29% per annum
11.93%
12.30%****
12.02% per annum
Benchmark
Performance
17.41% per annum*
15.05% per annum**
13.86% per
annum***
11.45% per
annum****
ASISA SA Equity General
ASISA SA MA High Equity
ASISA SA Medium Equity
ASISA MA Low Equity
The Aggressive Risk Model produced a return of 5.14% for the quarter ending 30 June 2014 and 31.63% for
the full twelve months; beating its benchmark comfortably. According to Morningstar, the portfolio carries a
weighted PE of 12.79 and Price to Book (PB) of 1.73. The star performer of the portfolio was the PSG Equity
Fund which delivered a 12 month return of 37.45%. Coronation Top 20 produced a return of 33.27% for the
same period. Steinhoff remains the portfolios largest holding and is carried by the PSG Equity Fund and the
Nedgroup Value as each fund’s largest single position. 11% of the portfolio is held offshore.
No adjustments were made to this portfolio for the quarter ending 30 June 2014. A portfolio rebalance is
planned to re-align weightings to model allocations.
The Moderate Flexible Model endeavours to provide a flexible investment solution that can facilitate
adjustments to asset allocation as opportunities ( or risks) warrant such changes. As it stands the portfolio
retains a 60% weighting in equities, of which 15.8% is held offshore. This exposure is headed by a position in
Berkshire Hathaway; followed by holdings in Microsoft, Sainsbury, Porsche Automobile Holdings and iShares
MSCI ACWI ETFs. No dramatic changes to asset allocation have occurred this quarter with cash and bond
weightings remaining similar to what was reported in the previous quarter. The largest position in the
portfolio is Steinhoff at 4.63%.
No adjustments were made to this portfolio for the quarter ending 30 June 2014. A portfolio rebalance is
planned to re-align weightings to model allocations.
The Moderate (Reg.28) Model is designed to comply with Regulation 28 of the Pensions Fund Act; and will
aim to retain a weighting of at least 25% of the portfolio in fixed interest instruments. Equity weighting was
dropped from 71% in the previous quarter to 68.3%; marked by a reduction in Global Equities (18% to 15.1%)
and the inclusion of equity hedges. Offshore Cash has increased with local bonds and cash remaining at
almost identical levels to last quarters report. The largest holding is British American Tobacco; followed by
Steinhoff and Sasol. The offshore exposure includes a large holding in the Investec GSF Global Opportunity
Fund and the Orbis ( Allan Gray) Optimal SA Fund.
No adjustments were made to this portfolio for the quarter ending 30 June 2014. A portfolio rebalance is
planned to re-align weightings to model allocations.
The Cautious Model allows conservative clients the option of investing into a low volatility strategy with cash
beating returns. Equity allocation is currently 26.80% with large positions in domestic cash and bonds. Asset
Allocation largely remains similar to the previous quarter with small adjustments downwards in equity, and
higher adjustments in bonds and real estate. Nedgroup Stable managed by Foord Asset Management is the
largest fund in the model. British American Tobacco, Standard Bank and NewGold ETF are the top three
positions this quarter.
No adjustments were made to this portfolio for the quarter ending 30 June 2014. A portfolio rebalance is
planned to re-align weightings to model allocations.
www.facebook.com/psgcascades/