Global Equities come second boosted by AI
China worst performing with a decline of63%
Net Total Assets increased by 4.52%
Debswana Pension Fund’s (DPF) Net Total Assets increased by 4.52% from P10.2 billion in Q1,2023 to P10.527 billion in Q2 as Global Equities, Emerging Market Bonds, Emerging Market Equities and African Equities rallied in the quarter.
According to the fund’s Q2 2023 brief, the top performing asset class for the Fund was African Equities, which increased 10.06% (in Pula). “African Equities had a stellar performance for the quarter driven by increasing demand, strong commodity prices, and robust economic growth,” the fund says. “African Equities continue to deliver improved returns after a prolonged period of significant underperformance, thereby becoming a strong diversifier for the Fund’s portfolio.”
The next top performing asset class for Q2 was Global Equities, which rose 7.99%. DPF says Global Investor optimism remained high as markets continued with the positive momentum from the previous consecutive quarters. “Global Equities led the surge spurred by strong corporate earnings, moderating inflation, improved labour markets, increased investor confidence, and a positive economic outlook,” DPF says. The S&P 500 index generated 8.7% in the second quarter of the year underpinned by resilient corporate earnings, soaring technology stocks, moderating inflation, and a positive economic outlook. DPF says technology counters were the major driver of growth in the quarter, fuelled by rising interest and optimism in Artificial Intelligence (AI).
The fund views that the strong performance of AI stocks in Q2 demonstrates the growing importance of AI to the global economy and society. “AI is a disruptive technology with the potential to revolutionise many industries and solve some of the world’s most pressing problems if utilised responsibly.” NVIDIA, a chip-processing firm, has benefited tremendously from the demand for its products that help facilitate AI technology.
DPF brief indicates that NVIDIA has grown by approximately 101% in the last year and by approximately 366% in the last 3 years. DPF says AI has powered the growth of cloud computing businesses of major technology firms such as Amazon, Alphabet and Microsoft, thereby providing a much-needed tailwind for stock performance. “There are concerns amongst investors that the current rally of AI-fueled technology stocks could be a bubble, similar to the dot-com bubble of 2001,” DPF cautions.
For the Emerging market (EM), bond performance was driven by easing inflationary pressures, reduced volatility, stronger Emerging Markets (EM) currencies, an improved economic outlook, and attractive valuations. Emerging Market bonds advanced 6.52%.
Emerging Market Equities, Global Property and Global Cash, delivered a strong performance in the quarter, generating 5.31%, 2.49%, and 2.29%, respectively. Similarly, the DPF brief shows that domestic assets generated positive results for the quarter. Botswana Property, Botswana Equities and Botswana Bonds contributed positively, yielding 2.22%, 4.45%, and 1.97%, respectively. DPF says Botswana Cash was muted for the quarter, returning 0.26%. The worst performing Asset Class for the quarter was China which declined by 7.63% as the fund says China and Chinese capital markets continued to struggle in the second quarter of the year. China’s economic recovery remains weak, subsequently dampening investor sentiment.
The Fund’s Market Channel increased by 4.76% during the quarter, the Conservative Channel rising 4.32% and the Pensioner Channel improved by 4.17%. “During the period under review, returns remained consistent with Debswana Pension Fund’s Life Stage Models investment strategy; whereby the most aggressive Market Channel outperformed the most while the least aggressive Pensioner Channel registered relatively lower returns,” DPF says adding that on a twelve-month basis, the Fund generated positive returns net of investment fees. During the 12 months, the Market Channel delivered 16.38%, while the Conservative Channel rose 14.87% and the Pensioner Channel generated 14.19%. “The Fund has steadily recovered from previous negative yielding quarters.”
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