From Gary Booysen on the top floor,

Dear Money Morning Reader,

The debate rages on over which is best: an actively managed fund or a passive tracker. An active manager is someone who selects a portfolio based on his own system of analysis whereas a passive manager will simply buy and sell shares to keep a fund precisely weighted so that the value reflects that of the tracked index. The entire debate hinges on one central principle, namely, the efficient market hypothesis.

If you believe the market prices securities correctly and these prices quickly adjust to reflect the true underlying value of the instrument then you should be looking for a passively managed fund. The fee structures are kinder with these funds than their actively managed counterparts. On the other hand if you think that markets move slowly and that professional stock pickers can react quickly enough to news, to consistently outperform the market then you’re looking for an active fund.

But there is a way you can have the best of both worlds. It’s through a process of fundamental indexation. With fundamental indexation the weightings of the portfolio are decided by fundamental measures such as: Sales, cash flow, and dividends paid. It avoids the host of problems associated with market trackers e.g. the dominance of shares with high market capitalizations but maintains the low fee structure of a passive tracker.

The Old Mutual Rafi40 tracker Fund, run by Loftie Botha, is based on fundamental indexation and has delivered 54.27% over the last twelve months. Botha currently has R298.3m under management and states his primary objective as providing “long-term capital growth, with a secondary objective of delivering a reasonable income over time”. The fund is made up of the usual blue chip stalwarts with Billiton, Old Mutual and Anglo comprising just under 10% each. To find out more check out www.oldmutualunittrusts.co.za.

Turning to the markets...

The JSE all share index slumped 0.97% yesterday. The gold mining index slipped 0.64%. Resources fell 0.71%. Banks bucked the trend with a 0.4% gain, while financials lost 0.76%. Industrials pulled back 1.36% and the platinum mining index decreased 0.61%.

London's FTSE100 shed 0.37%. The Dow Jones collected 0.5% and the Nasdaq closed up 0.49%.

Tokyo's Nikkei closed down 1.42%. Hong Kong's Hang Seng lost 0.35%.

Brent crude is currently trading at $72.81 per barrel.

Spot gold's trading at $1,128.98 and platinum was last quoted at $1,419.50.

And here's how the rand is performing against the major currencies:
R/$7.58
R/₤12.31
R/€11.16