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Global equity markets finished 2024 relatively subdued, with the MSCI World Index returning -0.2% in U.S. dollars (USD) and +1.9% in local currency in Q4. Notwithstanding the mild Q4 returns, the index had another remarkable year, delivering +19% in USD and +21% in local currency; a cumulative two-year gain of nearly +50% in USD. U.S. election sentiment drove performance in Q4, with the highly cyclical, growth-tilted sectors leading. Consumer Discretionary was the quarter’s top performer (+9%), largely thanks to Tesla which rallied +54% in Q4 due to investor optimism surrounding the potential benefit from President Trump’s economic and industrial policies, meanwhile the Health Care (-11%) and Materials (-14%) sectors saw double-digit losses in Q4. Communication Services (+7%) and Information Technology (IT) (+5%) also reported good quarterly gains on hopes of deregulation and corporate tax cuts. AI euphoria has seen these sectors continue their strong performance from 2023, returning +34% and +33% respectively, with the ‘Magnificent Seven’ stocks driving both the sectors’ and overall market’s returns for the second year in a row. Financials, which returned +4% in Q4 and a highly impressive +27% in the year, was the only other sector to outperform the MSCI World Index. Low quality cyclicals on the other hand were out of favour. Energy (-3% in Q4) and Real Estate (-9% in Q4) finished the year flat, while Materials was the only sector to finish 2024 in the red (-6%). Somewhat unsurprisingly, the typically defensive sectors also struggled to deliver good relative returns in a strong up market: Health Care returned just +1% for the year, while Consumer Staples was slightly stronger (-7% Q4, +6% 2024).
Turning to geographies, in Q4, Singapore (+3% USD, +9% local) and the U.S. (+3%) were the only major markets to finish ahead of the index in USD, as higher U.S. treasury yields and expectations from the incoming Trump administration saw the dollar strengthen against major international currencies. Other than Hong Kong (-10% USD and local), local currency returns tended to be more favourable: Japan (-4%, +6%) outperformed in yen terms, while Europe, barring France (-10%, -3%) and Switzerland (-11%, -5%), saw low-single-digit returns in local currency. The pattern was similar for the year: Singapore (ahead by more than 30% in USD and local) and the U.S. (+25%) outperformed the MSCI World Index, while Japan was in-line in local currency (+8%, +21%). Italy (+11%, +19%) and Germany (+10%, +18%) led the European markets, while political turbulence left France (-5%, +1%) and Hong Kong (0% USD and local) weaker.
Portfolio review
The Ashburton Portfolio delivered -2.88% in December and -2.76% since inception (~Q4). Whereas the MSCI World Index returned -2.61% in the month and +0.84% since inception of the Ashburton Portfolio ~Q4. For the full year 2024, the Global Franchise Representative Account provided a respectable absolute return of +9.04%, in keeping with the investment team’s long-term compounding expectation of c.9-10% p.a., however it was unable to match another impressive year from the MSCI World which returned +18.67%. Given the Strategy is designed for long-term capital appreciation through steady and predictable compounding, lagging the index in years of such extraordinary returns is not unusual, as witnessed in 2013 and 2023.
Source: Morgan Stanley Investment Management. Data as of December 31, 2024.
Disclaimer:
Waystone Management Company (Lux) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF) (ref A00000395 & S00000734), Waystone Management Company (Lux) S.A. is a company located in Luxembourg, L-1273 Luxembourg at 19, Rue de Bitbourg. This document is Issued by Ashburton Fund Managers (Pty) Limited (The Investment Manager) (Reg number 2002/013187/07), which has its registered office at 3 Merchant Place, 1 Fredman Drive, Sandton, 2196, South Africa and is an authorised financial services provider (FSP number 40169), registered with the Financial Sector Conduct Authority (FSCA). In South Africa, the Fund(s) is/are approved for promotion under section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and changes, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (Ashburton CIS), of the same address. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa. In the event a potential investor requires material risks disclosures for the foreign securities included in a portfolio, the manager will upon request provide such potential investor with a document, outlining potential constraints on liquidity & repatriation of funds; Macroeconomics risk; Political risk; Foreign Exchange risk; Tax risk; Settlement risk; and Potential limitations on the availability of market information. The value of participatory interests and the income from them may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to the future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. CIS portfolios are traded at ruling prices and can engage in borrowing and scrip lending. A full detailed schedule of fees, charges and commissions is available from Ashburton on request and incentives may be paid and if so, would be included in the overall costs. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage the portfolio more efficiently in accordance with its mandate. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton Fund Managers (Pty) Limited is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient. The original recipient solely responsible for any actions in further distribution of this document and should be satisfied in doing so that there is no breach of local legislation or regulations. This is a marketing communication. Additional information about this product, including brochures, application forms and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com.
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