The allocation to global equities has been a positive contributor to the fund's longer term returns, but over the last year the underweight allocation to local equities and overweight allocation to cash has detracted from the fund's performance. However, while local equities performed well in 2014 as a whole, they underperformed bonds and only just beat cash in the second half of the year. Consequently, more recently the fund's cautious stance on local equities has contributed to a better risk-adjusted return. We continue to see local equities as expensive relative to global equities and are happy to maintain our preference for global equities within the fund.
One of the most significant asset allocation shifts in the fund during 2014 was the extent to which we increased our exposure to long-dated local government bonds. Particularly since the start of June, we have used cash and sold inflation-linked bonds to buy long-dated government bonds. Our view has been that local government bonds should benefit from falling inflation and weak growth, which means that the central bank is unlikely to increase interest rates by much this year. The recent sharp fall in the oil price has only added to our conviction of this view and we added to our holdings of long-dated government bonds into price weakness in December. With inflation expected to average about 5% in 2015, long bond yields offer a forward real yield of about 3.5%. This is, in our view, attractive compared to very low global real bond yields and compares favourably to historic real bond yields in South Africa.
Other beneficiaries of the lower bond yield environment include selected local equities such as property companies, financials and retailers. We have for some time had a significant overweight allocation to financials, which has benefited the fund's performance. Over the past few months we have also added to selected domestic equities which should benefit from lower bond yields. These include The Foschini Group, Capitec and the Rhodes Food Group, all of which have contributed positively to the fund's performance since we bought them. The fund continues to benefit from relatively low exposure to resource equities, particularly miners.
While we expect future returns to be lower than past returns, we believe our integrated approach to fund management will continue to deliver real returns in line with the fund's mandate.