PPS Portfolios Review
PPS Funds of Funds update as at 31 March 2017
For the second time in three months, the US Federal Reserve (Fed) increased US interest rates by 25 basis points amid rising
confidence that the economy is poised for more robust growth.
Some market participants had feared the Fed would move to a more hawkish position, with a faster pace of rate hikes ahead.
However, the closely-watched “dot plot” that shows each member’s expectations of where rates will be in coming years changed little
from the previous meeting. The market currently expects two more rate hikes this year, which is in line with the bank’s projections
from December 2016.
On the 29 March, UK Prime Minister Theresa May triggered the formal two-year process of negotiations that will lead to Britain
leaving the European Union (EU) after more than 40 years. The terms of Britain’s exit will have to be agreed by all 27 remaining
national parliaments. Negotiations with EU nations are expected to begin in mid-May.
As March drew to a close, news broke of drastic changes to President Jacob Zuma’s administration.
This followed constant rumours in the prior months that the President was planning to reshuffle his cabinet. The removal of Pravin
Gordhan and Mcebisi Jonas from their positions as Finance Minister and Deputy Finance Minister drew the biggest criticism. In
reaction, the rand lost over 6% to the US dollar from its strongest point the afternoon prior to the reshuffle. South Africa’s ten-year
government bond yield is currently trading at 8.9%.
We believe the South African equity market remains slightly expensive, but that there are opportunities in certain sectors. After
maintaining a slight underweight position in local equities we have increased our position to neutral using cash flows.
We slightly decreased our bond exposure across all mandates by 2.5%. The proceeds from the sale will be kept as cash in the
portfolios.
Our longer-term view is that there is currently more risk associated with investing in domestic equities. The foreign exposure in
the PPS Managed Flexible Fund of Fund increased to 55%.
We remain at full offshore exposure in our Regulation 28-compliant fund of funds.
Performance to 31 March 2017
Fund
PPS Conservative FoF
1 year return
3 years p.a return
5 years p.a return
4.23%
7.31%
8.60%*
Benchmark: CPI +2%
8.31%
7.73%
7.79%
PPS Moderate FoF
2.92%
6.79%
9.53%*
Benchmark: CPI +4%
10.31%
9.73%
9.80%
PPS Managed Flexible FoF
-0.81%
5.54%
9.31%*
Benchmark: CPI +6%
12.31%
11.74%
11.80%
∗ Reflects the performance of the original arrange as the select Fund Range does not yet have a five-year track record.