Strong fourth quarter for RF mutual funds

Wealth management firm Royal Fidelity (RF) Merchant Bank & Trust Ltd is reporting satisfactory performance of its mutual funds for the fourth quarter ending December 2021.

For its Select Balance Fund, the return was 1.86 per cent for the three month period under review. That Fund returned 1.11 per cent for the month of December alone. There was a return of 8.4 per cent for the calendar year.

Meanwhile, the Premium Income Fund returned 0.39 per cent for the month of December and 1 per cent for the fourth quarter. There was a calendar year return of 3.4 per cent.

“Over the quarter we saw elevated inflation, hawkish central bank policy shifts and the emergence of the Omicron COVID-19 variant. In US bond markets, 10-year government yields were largely unchanged. Yields followed a downward trajectory for most of the quarter before reversing in the final weeks of the year as sentiment improved,” the company said in its fourth quarter report.

“The US 10-year Treasury yield was little changed for the quarter, from 1.49 per cent to 1.51 per cent. It reached 1.7 per cent in October amid elevated inflation and expectations of policy tightening, then a low of 1.36 per cent in early December amid fears over the Omicron COVID-19 variant. The US 2-year yield increased from 0.28 per cent to 0.73 per cent. Corporate bonds lagged government bonds for the quarter.

“In investment-grade, the US market saw modestly positive total returns. It is expected that the Fed will use a disciplined approach regarding the reduction of quantitative easing, the steadying of asset purchases and indicating what they’ll do in terms of rate hikes. There are shifting expectations over the pace of rate hikes in coming years.”

The company reported that its Strategic Growth Fund outperformed the benchmark by 1.28 per cent and 1.3 per cent in December and quarter four, respectively.

This Fund returned 1.83 per cent for December and 2.95 per cent for the quarter under review, reflecting a solid performance for the period.

“In the fourth quarter, developed market equities continued to rally, providing investors with the third calendar year in a row of strong positive returns. Strong earnings growth drove equities higher,” said the report.

“The emergence of the highly infectious Omicron variant led to a spike in equity market volatility at the end of November, but markets quickly recovered as data from South Africa and the UK indicated a lower risk of severe disease,” it added.

It noted that current corporate strength and the prospect of further potential earnings growth in 2022 outweighed the risk factors over the quarter despite the fact that hospitalizations rose towards the end of the year in several countries.

However, it added that “the fear of a weaker future growth backdrop, partly due to projected central bank policy normalization, led to a flattening of the US yield curve”.

“Small caps also underperformed large caps over the quarter as uncertainties about future growth weighed on their performance. Tech as a sub-sector was one of the strongest performers over the quarter, with chipmakers performing especially strong. Real estate also performed well, as investors expect e-commerce to continue to grow and drive further demand for industrial warehousing.” 

Energy and financial names made more muted gains over the quarter. (PR)