Commentary for the quarter ended 30 June 2025
Performance Review
The Northstar BCI Managed Fund delivered a solid quarterly return of 6.0%, slightly underperforming the peer average of 6.4%. However, over the past 12 months, the fund has demonstrated strong outperformance, achieving a return of 17.8% compared to the peer average of 15.1%.
The quarter was marked by significant market volatility across asset classes, triggered by President Trump’s announcement of tariffs on April 2, which initially led to a global equity sell-off. Markets rebounded sharply after the tariff deadline was postponed by 90 days, supported by robust corporate earnings, signs of contained inflation, ongoing economic resilience, and rapid advancements in artificial intelligence.
Globally, Information Technology (+23.2%), Communication Services (+19.1%), and Industrials (+14.9%) led the recovery, while Energy (-5.0%) and Health Care (-4.1%) lagged. Global bonds also performed well, returning 4.5% in USD terms, bolstered by a weaker Dollar amid rising fiscal concerns.
Locally, despite diplomatic tensions and a volatile Rand, South African equities (particularly resources and financials) returned 9.5%, and fixed bonds delivered 5.9%. The fund’s overweight positions in Gold Fields, Richemont, Northam Platinum, Valterra, and underweight exposures to Harmony, Aspen, and Nedbank drove the 11.9% return from local stocks.
Local fixed income holdings delivered a 3.0% return, buoyed by strong fixed bond returns, outperforming the cash benchmark (SteFI 3m) by 1.2 percentage points. Despite the Rand’s 3.4% strength, global exposures via the Northstar Global Flexible Fund (+6.8% in USD) and Northstar Global Income Fund
(+4.2% in USD) further enhanced portfolio returns.
Market Outlook
Looking ahead, global markets are expected to remain volatile but supported by strong fundamentals in select sectors. Continued advancements in technology and stabilizing inflation provide a constructive backdrop for global equities, particularly in the Information Technology and Communication Services sectors. However, risks, including stretched valuations, geopolitical tensions, and fiscal concerns in major economies, could temper gains. Rising commodity prices, particularly for gold and platinum, driven by safe-haven demand and Chinese industrial demand, respectively, may continue benefiting resource-heavy markets like South Africa.
Locally, the formation of the Government of National Unity has bolstered investor confidence, while infrastructure upgrades and the end of load shedding have contributed to sustained economic momentum. The JSE All-Share Index’s 9.5% quarterly gain reflects these tailwinds, with global revenue giants such as Richemont, Naspers, Prosus, and British American Tobacco mitigating local volatility. With inflation stabilizing around 5% and the South African Reserve Bank signaling potential rate cuts by
2026, consumer confidence could improve, lifting domestically focused sectors such as banking and retail.
Portfolio Positioning
The Northstar BCI Managed Fund remains well-diversified, striking a balance between opportunity and caution to achieve a 5% real return for medium-risk investors. The fund maintains exposures to high- performing locally listed stocks, such as Naspers, Richemont, Anheuser-Busch, Gold Fields, AngloGold and Northam Platinum, capitalizing on rising commodity prices and global revenue streams. The portfolio’s local fixed income holdings continue to benefit from attractive yields, while global exposures through the Northstar Global Flexible and Income Funds provide resilience against Rand volatility.
Looking forward, the fund sees value in selectively increasing exposure to domestically focused sectors such as banks (e.g., Standard Bank, Absa) and retailers (e.g., Shoprite), which have lagged due to high interest rates and cautious consumer spending. These sectors could benefit from anticipated rate cuts and improving consumer confidence in 2026. The fund’s global equity holdings, guided by the Northstar Global Equity Buy List, and its allocation to US Treasuries via the Northstar Global Income Fund, ensure a balanced approach to navigating global and local market dynamics.
