Commentary for the quarter ended 31 March 2025
Market Performance Review
Global equities were extremely volatile during the first quarter of the year, as investors attempted to digest tariff -related developments driven by the Trump administration. The MSCI World Index declined by -1.7% in Q1 2025, dragged down by US equities, which fell -5.9% in March to close the quarter down -4.5%. European and UK equities fared much better, returning +10.6% and +9.7% respectively. Emerging market stocks (MSCI EM Index: +3.0%) also performed well, broadly benefiting from a weaker US Dollar, stronger industrial and precious metals, and a rebound in Chinese equities (+15.1%).
Locally, the Rand strengthened by 2.5% against the US Dollar, despite increasing political tensions among Government of National Unity (“GNU”) members, as contestation around the adoption of a fiscal framework tabled by the South African Finance Minister intensified. While GNU instability is likely to fuel uncertainty in the months ahead, the local market had a strong quarter, returning +5.8% in Rand terms (+8.6% in US Dollars). From a sector perspective, the action was concentrated in the resources complex, which rallied +27.9%, while the rest of the market remained relatively subdued. While there were some exceptions, the overall SA Industrial and Financial indices returned only +3.1% and -2.0% respectively.
Gold and Platinum Group Metal (“PGM”) equities enjoyed a sensational quarter on the back of a strong commodity price rally. From a stock perspective, Gold Fields and Anglogold delivered year-to-date returns of +67% and +66% respectively, while Northam Platinum, Impala, and Amplats were all up in excess of 30%.
Fund Performance
The Northstar BCI Equity Fund returned +3.5% (net of fees), lagging the JSE Capped SWIX (+5.8%) and the ASISA South African Equity – SA General Peer Average (+4.2%). While the fund enjoyed a strong hit rate and good stock picking, its overweight position in clothing retailers (MRP and Pepkor) and underweight exposure to gold equities were the main reasons for underperformance during the quarter. On the positive side, the fund benefited from strong contributions from overweight positions in MTN (+34%), Northam (+35%), Anheuser-Busch (+21%), Prosus (+13%), and Standard Bank (+8%).
Positioning and Expectations
The fund has delivered strong performance over the past 18 months, significantly benefiting from a rebound in SA-sensitive assets during the second half of 2024. In the past quarter, SA Inc-exposed stocks—such as SA banks, insurers, property, and various industrials—have broadly retreated, while precious metal equities experienced a remarkable rally due to increased macro uncertainty around Trump’s policies and tensions within the local political environment caused by GNU instability.
While we believe that challenging global macro conditions are likely to persist in the quarters ahead —and volatility may increase further—we also see significant opportunities emerging as the market sells down. We continue to seek out and add exposure to risky assets during the current correction. At the same time, the fund maintains a large position in Gold and PGM equities as a hedge against potential market turmoil.
Finally, it’s worth noting that current market conditions are providing opportunities to add exposure to high -quality companies with excellent fundamentals at very attractive valuations. Although we cannot predict short-term dynamics, we believe the fund is well positioned to deliver attractive medium-term returns.