Fairtree SA Equity Prescient Fund Q4 2024 Commentary
Market Overview
The FTSE/JSE All Share (ALSI) Index, Capped Shareholder Weighted (Capped SWIX) Index, and Shareholder Weighted (SWIX) Index each decreased by 2.1% during the quarter. Industrials increased by 0.2%, while Resources and Financials decreased by 5.6% and 1.2% respectively. The rand depreciated by 9.1%, ending the quarter at R18.8 against the US dollar.
During Q4, Bonds increased by 0.4% and Cash returned 2.1%. The MSCI Emerging Market Index decreased by 8.0% (in USD), underperforming the MSCI World Index, which decreased slightly by 0.2% (in USD). The MSCI South Africa Index decreased by 12.1% (in USD).
During Q4, Iron ore decreased by 9.5% to US$93.2/t and Brent crude oil increased by 4.9%, ending at US$74.6/bbl. Copper decreased by 10.7% to US$8652.7/t. Gold decreased by 0.4% to US$2624.5/oz, Platinum decreased by 7.6% to US$907.6/oz and Palladium decreased by 9.0% to US$912.6 /oz.
The VIX Index (Volatility or “Fear” Index) increased by 3.7% to 17.4 during Q4
Economic Overview
The final quarter of 2024 was dominated by the most debated US election in memory, the outcome of which was a Red clean sweep. Majorities in both the House and the Senate have opened the possibility of far-reaching US policy changes with a protectionist view that could have global ramifications, including increased tariffs and reduced taxes, coupled with upside risks to inflation. Post-election, the dollar strengthened sharply, exerting pressure on emerging market assets and commodities. Gold retreated from its highs as the promise of ending wars reduced safe-haven demand. Oil remained volatile, influenced by Trump’s pro-shale stance and escalating tensions between Israel and Iran. US discussions of a G7 Palladium sanction on Russia sparked a rally in Palladium, which benefitted the PGM counters, albeit briefly.
Other parts of the developed market have diverged considerably from the US, with European markets underperforming due to market concerns regarding the region’s economic and political outlook. The Eurozone finds itself in a difficult position, with economic indicators continuing to point to a loss of momentum. Manufacturing remains weak, and political problems in France and Germany look to cloud the outlook for 2025 further. Economic data released during December extended these trends, reflecting a softening global economy with resilient US growth and an ailing global manufacturing sector.
Despite constructive market expectations, Beijing’s stimulus announcements have been underwhelming in timing, magnitude, and effectiveness during the year. Given that the economy is experiencing debt deflation and balance sheet recession coupled with a soft eurozone trade partner, we believe a much larger stimulus will be required to offset the potential tariff headwinds in 2025.
On the local front, domestic counters held up relatively well compared to their emerging market peers over the quarter. South Africa’s medium-term budget, released at the end of October, underscored modest fiscal slippage, with revenue projections softened by underperformance in VAT and fuel levies. The market welcomed a conservative fiscal policy with the Treasury remaining committed to debt stabilisation, although increasing non-interest spending will likely continue to weigh on the budget deficit, which is expected to peak at 75.5% of GDP by fiscal year 2025/2026. SA discretionary retailers’ guidance for November and December sales exceeded expectations, largely underpinned by the absence of loadshedding, lower interest rates, and a two-pot system that seems more supportive than the Treasury guided for in the medium-term budget. This supported our positions across interest rate-sensitive counters throughout the quarter.
Portfolio performance
The Fund’s retail asset class returned -3.63% during the quarter, underperforming the FTSE/JSE Capped Shareholder Weighted (Capped SWIX) Index by 149 bps. The Consumer Discretionary sector was the key performance contributor during Q4. The Fund’s performance was positively impacted by positions in Pepkor (+20.17%), Mr Price (+10.39%), Absa (+8.16%), Super Group (25.21%) and British American Tobacco (+9.60%), while positions in Sasol (-28.25%), Glencore (-15.47%), FirstRand (-6.06%), Gold Fields (-8.08%) and Standard Bank (-8.50%) detracted from the performance.
Portfolio positioning and outlook
The year ended with caution and volatility as the market tried to anticipate what Trump’s new administration would introduce regarding policy, taxes and trade tariffs as he takes the helm on 20 January 2025. The Fed’s December rate cut meeting was hawkish and signalled a slower pace of easing ahead due to sticky inflation and slower global growth, which supported the dollar and created a headwind for commodities. Our positions across precious metals and bulk metals detracted from performance for the quarter. However, we remain bullish on gold, driven by continued central bank purchases and geopolitical tensions.
Although Trump’s exact tariff plans remain murky and ultimately could be more moderate than anticipated, possibly avoiding severe trade wars, the market remains concerned about the impact on China, with even Xi Jinping acknowledging economic challenges from “uncertainties” in his New Year’s address. The overarching macro theme for China in 2025 will be rising external hostilities amidst prolonged domestic economic hardship. It remains unclear if we have reached the true bottom of the property market slump, which in turn keeps domestic confidence subdued. Chinese policymakers will face significant challenges as they navigate this perfect storm.
The positive SA election in May and the resultant government of national unity have lifted sentiment both domestically and offshore, but concerns remain about whether the new government coalition can remain intact long enough to drive meaningful reform. Foreign relations will be a key theme for the year ahead and will be closely scrutinised, with South Africa being no exception. Comments from the recent BRICS summit on strengthening ties among member countries have added to this pressure, underscoring foreign policy tensions within South Africa’s coalition government.
The outlook for 2025 is challenging to forecast and uncertain. Thus, we have ensured that the portfolio has liquidity and diversification to position it for many possible outcomes. While uncertainty and volatility are concerning, they often create compelling opportunities, which we will continue to pursue.
Topics
we are fairtree
Download our Factsheet
Download the quarterly report to view comprehensive information and performance data.
We are Fairtree
Subscribe to our newsletter
Stay informed with the latest insights and updates. Subscribe to our newsletter for expert analysis, market trends, and investment strategies delivered straight to your inbox.
"*" indicates required fields
FAIRTREE INSIGHTS
Your may also be interested in
Explore more commentaries from our thought leaders, offering in-depth analysis, market trends and expert analysis.
Fairtree Global Flexible Income Plus Fund Q2 2025 Commentary
After the very slow start for US equities during the first quarter, and the superior performance emanating from the EU and the UK, the second quarter witnessed a turnaround in fortunes with the tech-heavy NASDAQ delivering its fourth-best quarterly performance number over the past 18 years.
Fairtree Balanced Prescient Fund Q2 2025 commentary
We anticipate continued macroeconomic uncertainty throughout 2025. Global investors remain cautious amid evolving geopolitical tensions and shifting trade policies.
Fairtree Global Equity Fund Q2 2025 Commentary
US equities ended the quarter 11.2% higher; however, they experienced pronounced volatility following President Donald Trump’s ‘Liberation Day’ announcements of tariffs on imported goods.
Disclaimer
Fairtree Asset Management (Pty) Ltd is an authorised financial services provider (FSP 25917). Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CISs are traded at the ruling price and can engage in scrip lending and borrowin
A schedule of fees, charges and maximum commissions is available on request from the Manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance has been calculated using net NAV to NAV numbers with income reinvested. The performance for each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and dividend withholding tax. Full performance calculations are available from the manager on request. There is no guarantee in respect of capital or returns in a portfolio. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to www.fairtree.com.
Highest rolling one-year return 101.47% (Benchmark: 54.24%) and lowest rolling one-year return -23.82% (Benchmark: -24.53%) (information to 31 December 2024). The fund has returned an annualised return of 14.31% since inception (November 2011) (benchmark annualised return of 10.08% since inception). The fund’s annualised performance over 1-year is 15.70% (Benchmark: 13.41%). The fund’s annualised performance over 3-years is 11.01% (Benchmark: 8.50%). The fund’s annualised performance over 10-years is 11.73% (Benchmark: 6.93%). Fund returns disclosed are annualised returns net of investment management fees and performance fees. Annualised return is weighted average compound growth rate over the period measured. Fund investment risk indicator level: Aggressive. Full performance calculations are available from the manager on request. Annualised performance: Annualised performance shows longer term performance rescaled to a 1-year period. Annualised performance is the average return per year over the period. Actual annual figures are available to the investor on request. Highest & Lowest return: The highest and lowest returns for any 1 year over the period since inception have been shown. NAV: The net asset value represents the assets of a Fund less its liabilities.
This document is confidential and issued for the information of the addressee and clients of Fairtree Asset Management only. It is subject to copyright and may not be reproduced in whole or in part without the written permission of Fairtree Asset Management. The information, opinions and recommendations contained herein are and must be construed solely as statements of opinion and not statements of fact. No warranty expressed or implied, as to the accuracy, timeliness, completeness, fitness for any particular purpose of any such recommendation or information is given or made by the Manager in any form or manner whatsoever. Each recommendation or opinion must be weighed solely as one factor in any investment or other decision made by or on behalf of any user of the information contained herein, and such user must accordingly make its own study and evaluation of each strategy/security that it may consider purchasing, holding or selling and should appoint its own investment or financial or other advisers to assist the user in reaching any decision. The Manager will accept no responsibility of whatsoever nature in respect of the use of any statement, opinion, recommendation, or information contained in this document. This document is for information purposes only and does not constitute advice or a solicitation for funds.
About you…
By proceeding, I confirm that:
- To the best of my knowledge, and after making all necessary inquiries, I am permitted under the laws of my country of residence to access this site and the information it contains; and
- I have read, understood, and agree to be bound by the Terms and Conditions of Use described below.
- Please beware of fraudulent Whatsapp groups pretending to be affiliated with Fairtree or Fairtree staff members.
If you do not meet these requirements, or are unsure whether you do, please click “Decline” and do not continue.