CADIZ ASSET MANAGEMENT

In December, global monetary policy diverged further across major central banks. The US Federal Reserve cut interest rates by 25 basis points, citing slower job creation and rising unemployment as justification for slightly less restrictive policy. The Bank of England also reduced rates by 25 bps following a narrow vote, noting that while inflation remains above target, it is expected to return to target more quickly.

By contrast, the European Central Bank kept policy rates unchanged, stating that monetary policy is appropriately positioned as inflation remains close to target and recent growth has improved. Japan continued to stand apart, with the Bank of Japan raising its policy rate by 25 bps to 0.75%, signalling increased confidence in the durability of inflation and further progress away from ultra‑accommodative settings.

In South Africa, November CPI inflation eased to 3.5% y/y from 3.6% in October. Core inflation rose marginally to 3.2%, but overall price pressures remain contained. Third‑quarter GDP growth measured 0.5% q/q, with activity improving across nine of ten sectors. Household consumption remained resilient, while fixed investment rebounded after three consecutive quarterly declines.

The rand strengthened meaningfully over December, appreciating from above R17.00/$ to around R16.56/$, supported by improved global sentiment, a firmer domestic outlook and a weaker US dollar following Fed rate cuts.

Looking ahead, the National Budget in the first quarter will be a key focus for domestic bond markets, with investors seeking clear evidence of commitment to fiscal discipline, debt stabilisation, and expenditure control.

The Cadiz BCI Money Market Fund continued to fulfil its mandate and delivered competitive returns for December. The fund remains strategically positioned despite the low-interest rate environment. Its approach includes a focused allocation to high-quality corporate credit to enhance yield, while fully adhering to mandate guidelines and avoiding unnecessary risk. As a result, the Fund has continued to outperform its benchmark, the Alexander Forbes Short Term Fixed Interest (STeFI) Composite.

The fund’s forward yield stands at 7.74%, reflecting its attractive risk-adjusted profile and its ability to generate steady income in a moderating interest rate environment.

The Cadiz BCI Enhanced Income Fund’s performance was largely supported during the month by its exposure to nominal bonds and corporate credit. Bond yields declined amid strong demand for government securities, while continued investor appetite for corporate paper supported further gains in December. Trading activity was largely shaped by cash flows, portfolio positioning, and the reinvestment of maturing assets. The fund remains well positioned to capitalise on opportunities across both the corporate and government sectors.

The forward yield of the fund is 8.23%, with a longer effective duration of 0.82.

The Cadiz BCI Absolute Yield Fund’s December performance was mainly driven by its allocation to nominal and inflation-linked bonds, with further support from corporate credit exposure. A long bond position contributed positively as yields continued to decline over the month. Trading activity focused on deploying available cash, adjusting portfolio positioning, and reinvesting proceeds from maturing instruments. The Fund continues to be actively managed to capture opportunities while maintaining disciplined risk management.

The forward yield of the fund is 8.31%, while duration was lengthened to 2.33.

The Cadiz BCI Bond Fund enjoyed another good month in December, delivering a positive return supported by improving economic fundamentals that drove a further decline in yields. Performance was again led by the medium- and long-term segments of the yield curve. The FTSE/JSE All Bond Index (ALBI) returned 2.75% for the month, lifting its year-to-date gain to 24.24%. The Fund continues to generate returns in line with its mandate and remains strategically positioned to capture opportunities across the yield curve.

The forward yield of the fund is 8.65%, while duration was lengthened to 6.71.