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Financial market performance in quarter one 2023 was broadly positive. Expectations are that the US Federal Reserve (“Fed”) rate hiking cycle is nearing an end. Factors supportive of this view are the continued deceleration in inflation and the recent turmoil in the banking sector. Inflation has slowed from 7.1% in November 2022 to 6.0% in February and is now at 5% in March. The recent banking turmoil which saw two mid-sized regional US bank failures and a “near miss” failure in Switzerland leading Swiss authorities to arrange that UBS merge with troubled Credit Suisse could lead central banks to reassess their respective interest rate trajectory.

Our Multi Asset Class risk-adjusted return Models all performed well within the first quarter environment and are in line with our expectations. No adjustments were made to any of the models within this quarter.



Global equity markets experienced a positive start to the year as the MSCI All Country World Index returned 7.31% during the first quarter of 2023. Gains in global stocks can largely be ascribed to participants in equity markets anticipating that the US Fed rate hiking cycle will soon come to an end. This opinion buoyed by the continued deceleration in inflation levels and evidence that US inflation has certainly peaked.

Our equity holdings within the models performed well, with the larger weighting towards iShares® MSCI EAFE ETF (which gives investors exposure to a broad range of companies in Europe, Australia, Asia, and the Far East) provided 8.96% return, reasonably ahead of the MSCI AC World Index. Our US equity ETF returned 7.93% over the same period.

Fixed Income

The bond market seems to confirm what the equity participants sense, that the rate hiking cycle may be coming to an end. Thus, longer term bond yields fell with the US 10-year benchmark moving downwards by 40 basis points ending the quarter at 3.49% well off its recent high of 4.25% in October 2022.

This perspective was evident within the more volatile fixed income markets and the high yield corporate bonds and emerging market bonds on our models returned 3.09% and 2.81% respectively during the first 3 months of 2023. The inflation linked bonds on the portfolios are still riding the “relatively higher inflation wave” and performed well with a 2.03% return for the quarter. Our newest bond position, ultra-short term US Treasury exposure, which was introduced to the models in mid-November 2022, returned 1.11%.

Private Equity

The Private Equity sector had a solid start to 2023. The iShares Listed Private ETF delivered a 4.98% return. The US based Private Equity players, KKR and Blackstone delivered great returns after a challenging 2022.

Blackstone finished the quarter almost 20% higher and KKR 13% higher. 2022 highlighted the new era we are in- one with heightened macro and market volatility. Going forward, traditional asset allocation portfolios will need to be relooked at to include private markets to provide new forms of diversification. Our private equity companies are well positioned for this trend.

Real Estate

With accelerated monetary tightening in the US, we have seen significant price, and inherently valuation declines in the real-estate sector, uncertain US monetary policy might still weigh on the sector as it’s a sector known to use more debt to expand and acquire (most of our top holdings have secured long-term financing agreements), nonetheless, valuations are more compelling and a peak in the interest rate cycle might be approaching. Looking from a global perspective, the global listed real estate index is trading at a 24% discount to Net Asset Value, levels last seen in 2018.

According to UBS, self-storage is now outperforming the overall market along with industrial and lodging, while office, retail, and residential are the laggards – we are not exposed to any of the laggards but to industrial, data, and infrastructure subsectors. In the MAS USD Moderate portfolio, the Data and Infrastructure real estate ETF was up by 2.17% in the first quarter of 2023 vs. the Dow Jones US Real Estate Index’s 0.59%. The digital storage and tower space supply has to keep up with increasing demand as the adoption rate of cloud storage and 5G roll-outs continue. Looking at growth expectations & valuations: the ETF we hold for this exposure has a dividend yield of 4.14%, the highest it has been since the launch of the ETF, the P/E ratio is 18.5x, down from 32x in 2021 and its Price to Funds From Operations is currently at 10.7 with an expected underlying earnings growth of circa 15% in 2023.


For the first quarter of 2023 our selection of infrastructure positions generally performed in line with global markets and continued with their positive momentum in share price movement from the previous quarter. Our ETF holdings consist of the iShares Global Infrastructure fund and the iShares Global Water ETF. Outperformance on our renewable energy and storage play, Engie, was a welcome surprize and resulted in a 10.82% positive return, whereas Cheniere the LNG producer which was added relatively recently gained 5.37%. No changes occurred during the past quarter. We remain confident that the selection of holdings provides us with a balanced approach via the ETF exposures and a specific focus on the Energy infrastructure stocks via Cheniere Energy, Engie and The Williams Company.


The S&P GSCI (Standard and Poors Goldman Sachs Commodity Index) moved lower in Q1, with energy leading the move. Notwithstanding the index’s underperformance relative to other asset classes, one of the standouts was gold, up nearly 13% for the quarter. We remain in favour of gold during these times, especially in the context of interest rates. When using history as a guide, the yellow metal could very well be poised for another strong rally not too long from now. When the Fed paused hiking rates in 2000, 2006 and 2008, gold rose 55%, 230%, and 70% respectively. The recent CPI number out of the US may very well be paving the way for an end to the current tightening cycle which should see the manifestation of lower real interest rates. Lower real rates lead to higher gold prices and vice versa.

Anti USD rhetoric has certainly gained momentum recently with the currency’s role being questioned. This is by no means a new phenomenon and predicting the greenback’s imminent collapse may be premature. Nevertheless, by way of examples, herewith a list of recent events to take heed of – Saudi Arabia joining the Shanghai Cooperation Organisation, China recently brokering a diplomatic agreement to normalize relations between Iran and Saudi Arabia which paves the way for a potential end to the 8-year long proxy war in Yemen between the two nations, and Xi Xinping’s recent call for peace in the Ukraine. The latter is particularly interesting because the White House has rejected calls for China to broker a cease fire, citing ratification of Russia’s “gains on the ground” if Xi is successful. Some may argue this is the sign of a hegemonic force losing grip on the geopolitical chessboard. Events such as these may see the gradual decline in the USD which is beneficial to gold and the commodity complex as a whole. Stay long in a well-diversified portfolio.

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About the Author

Nicholas Sorour
Portfolio Manager, Sasfin Wealth

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