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Sanlam Investments Management Balanced Fund Sanlam Investments Management Balanced Fund

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Sanlam Investment Management
Balanced Fund

You’ve heard it before: when it comes to investing, never put your shares in one basket. But how do you choose between different shares, listed properties, bonds and offshore assets? Wouldn’t it be great if a professional could choose the most promising assets for you?

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Quick Facts About The Fund

Sanlam Investment Management (SIM) Balanced Fund

Launch Date: 01 Feb 1995
Fund Size: R13 653.5 million
Benchmark: Mean of the ASISA SA Multi Asset High Equity Category
Time Horizon: 3 – 5 years
Risk Profile: Moderate
Fund Classification: SA - Multi Asset - High Equity
Min Investment Amount: Lump sum: R5 000 | Monthly: R200
Total Expense Ratio (TER): 1.25%
Launch Date: 01 Feb 1995
Fund Size: R13 653.5 million
Benchmark: Mean of the ASISA SA Multi Asset High Equity Category
Time Horizon: 3 – 5 years
Risk Profile: Moderate
Fund Classification: SA - Multi Asset - High Equity
Min Investment Amount: Lump sum: R5 000 | Monthly: R200
Total Expense Ratio (TER): 1.25%

Fund Strategy

Typically this fund will hold a large weighting in JSE shares with a maximum equity exposure of 75%. Capital exposure will also include investments in money market instruments, bonds, listed property and up to 25% in offshore assets. Fund risk is lower than that of a pure equity fund. This portfolio may also invest in participatory interests of underlying unit trust portfolios.


Illustrative Annualised Investment Performance

Performance

Annualised as at 30 Jun 2016 on a rolling monthly basis
Retail Class Fund (%) Benchmark (%)
1 year 5.42 5.26
3 year 10.79 10.54
5 year 11.96 11.46
10 year 10.96 10.13

Annualised return is the weighted average compound growth rate over the period measured
Actual highest and lowest annual figures for rolling 10 years
Highest Annual % 33.65
Lowest Annual % 10.27

Minimum Disclosure Document (Fund Fact Sheet)

Illustrative Annualised Investment Performance

Sanlam Investment Management (SIM) Balanced
Sanlam Investment Management (SIM) Balanced          Benchmark

Source of graph : Morningstar

This graph illustrates how an investment of R100 would have grown had you invested in 2010 until 2016. Like everything in life, all investments can change and come with some degree of risk. That’s why we need this disclaimer, to tell you that past performances are not necessarily a guide to future performances, and that the value of investments/units/unit trusts may go down as well as up. The performance shown in the table above is a graphical representation of your selection (of the benchmark’s past performance of the fund you selected) – including your investment objective, risk profile and fund choice – and is based on the past performance of the fund in relation to your investment. This performance is indicative and not guaranteed. The graph is for illustrative purposes only and investment performance is calculated by taking into account initial fees and all ongoing fees that you have to pay and the income reinvested on the reinvestment date. The actual fund performance can be viewed on the Minimum Disclosure Document. The Manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate

1. Sanlam World Eq 9.61%
2. SIM Enhanced Yield 8.03%
3. Naspers -N- 5.85%
4. Sanlam World Equity Tracker 5.61%
5. SIM Property 3.52%
6. BTI Group 2.81%
7. MTN 2.59%
8. Stanbank 2.09%
9. Sasol 2.08%
10. Sanlam Europe (ex UK) Equity Tracker 1.97%
1. Sanlam World Eq 9.61%
2. SIM Enhanced Yield 8.03%
3. Naspers -N- 5.85%
4. Sanlam World Equity Tracker 5.61%
5. SIM Property 3.52%
6. BTI Group 2.81%
7. MTN 2.59%
8. Stanbank 2.09%
9. Sasol 2.08%
10. Sanlam Europe (ex UK) Equity Tracker 1.97%
Cash And Money Market Assets
International Assets
Equities
Bonds 3 - 7 Years
Bonds 0 - 3 Years
Bonds 12+ Years
Inflation Linked Bonds
Property
Bonds 7 - 12 Years
Preference Shares

Patrice Rassou

Head of Equity - Sanlam Investment Management

Chartered Accountant, Patrice has a BSc (Econ) in Monetary Economics with first class honours and an MSc (Econ), both from the London School of Economics. He also has an MBA with distinction from Manchester Business School, which he completed in 2003.

Initially, he worked at PricewaterhouseCoopers in London and Johannesburg, then moved to Old Mutual Asset Managers where he won the Raging Bull and S&P award for top performance in 2004. Now, he is treasurer of the Association of Black Securities Professionals (ABSP) in the Western Cape and Head of Equity at Sanlam Investment Management. He managed the SIM Top Choice unit trust from the end of 2006 and in 2007 was promoted to voting member of the Model Portfolio Group, where he has a direct impact on the core house view equity portfolio.

Patrice Rassou

Head of Equity - Sanlam Investment Management

Chartered Accountant, Patrice has a BSc (Econ) in Monetary Economics with first class honours and an MSc (Econ), both from the London School of Economics. He also has an MBA with distinction from Manchester Business School, which he completed in 2003.

Initially, he worked at PricewaterhouseCoopers in London and Johannesburg, then moved to Old Mutual Asset Managers where he won the Raging Bull and S&P award for top performance in 2004. Now, he is treasurer of the Association of Black Securities Professionals (ABSP) in the Western Cape and Head of Equity at Sanlam Investment Management. He managed the SIM Top Choice unit trust from the end of 2006 and in 2007 was promoted to voting member of the Model Portfolio Group, where he has a direct impact on the core house view equity portfolio.

Traditional Investing (When you invest via a Financial Adviser or other)

  • Retail Class (%)
  • Advice initial fee (max.) 3.42
  • Manager initial fee 2.28
  • Advice annual fee (max.) 1.14
  • Manager annual fee 1.25
  • Total Expense Ratio (TER) 1.58

Advice fee | Any advice fee is negotiable between the client and their financial advisor. An annual advice fee negotiated is paid via a repurchase of units from the investor.

The portfolio manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. This fund is also available via certain LISPS (Linked Investment Service Providers), which levy their own fees.

Sanlam Reality members may qualify for a discount on the Manager annual fee.

Total Expense Ratio (TER) | PERIOD: 1 April 2013 to 31 March 2016
Total Expense Ratio (TER) | 1.58% of the value of the Financial Product was incurred as expenses relating to the administration of the Financial Product. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER may not necessarily be an accurate indication of future TER’s. Inclusive of the TER of 1.58%, a performance fee of 0.20% of the net asset value of the class of participatory interest of the portfolio was recovered.

Transaction Cost (TC) | 0.14% of the value of the Financial Product was incurred as costs relating to the buying and selling of the assets underlying the Financial Product. Transaction Costs are a necessary cost in administering the Financial Product and impacts Financial Product returns. It should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of Financial Product, the investment decisions of the investment manager and the TER. Total Investment Charges (TER + TC) | 1.72% of the value of the Financial Product was incurred as costs relating to the investment of the Financial Product.

Manager annual fee | Performance Fees: Minimum fee: 1.25% p.a. (incl. VAT), maximum fee: 2.85% (incl. VAT) and sharing rate: 20%. Performance fees will only be charged once the performance benchmark is outperformed, irrespective of whether the fund performance is positive or negative. If the fund performs in line with or below the benchmark, then the minimum fee of 1.25% p.a. (incl. VAT) is charged. The performance fee is accrued daily, based on daily performance and paid to the manager monthly

When you invest online

Traditionally, investment advice come with a fee of up to 1%. But our smart online system is working to make investing cheaper and more profitable for you. The management fee you do pay is based on the fund selected and calculated on your total contributions, and then applied to the overall value of your portfolio.

YOUR INVESTMENT WILL NOT CHARGE THE FOLLOWING FEES

  • No initial account set-up fees – usually charged at 1.14%.
  • No switching fees
  • No exit fees
  • No account changes fees
  • No rebalancing fees
  • No commissions
  • No debit order fees
  • No fund manager rebates

SO YOU’RE ONLY CHARGED THE RELEVANT FUND-MANAGEMENT FEE

  • Total Annual Fee: 1.0%

Sanlam Investment Management (SIM) is the local active asset management house within Sanlam Investments. When choosing a fund managed by us, you have on your side one of SA’s largest and most reputable, risk conscious investment teams, consistently meeting or exceeding our benchmarks. Sanlam Collective Investments has appointed SIM as the asset manager for its unit trust funds, catering for the full spectrum of risk profiles.

Equities

The second quarter of 2016 was not short of surprises.

In South Africa, the quarter kicked off with the President unexpectedly addressing the nation to apologise for his handling of the Nkandla ruling by the Public Protector.

A month later the Minister of Finance released a media statement to address the rumours that his arrest was imminent. Unemployment edged to 26.7%, the highest since 2008, and SA business confidence fell to a new all-time low, hurt by poor performances in sectors such as manufacturing and retail. Still, SA narrowly avoided a downgrade to junk status by Standard & Poor's, but the agency maintained its negative outlook. Days later data showed that SA GDP contracted by an annualised 1.2% in the first quarter of 2016, keeping the country tip-toeing in front of ratings agencies.

Internationally, the biggest surprise was British voters’ decision - with a 52% majority - to leave the European Union and Cameron simultaneously leaving his post at 10 Downing Street. This immediately created a knee-jerk sell-off in international markets. Germany’s highest court decided an ECB scheme to buy troubled states’ bonds in secondary markets is constitutional, causing 30-year German bond rates to fall to their lowest level on record. In the Middle East, Saudi Arabia appointed a new Energy Minister to stabilise its oil policies and Brent crude broke through the $50/barrel mark for the first time this year. (The oil price remains an important indicator of the strength of the global economy.) And in the US, in the absence of signals that the US economy is heating up, the Federal Reserve indicated that it’s keeping rates steady for now.

Market returns were predominantly positive for the quarter. The FTSE/JSE All Share Index gained 0.45% on a total return basis. Disguising much volatility during the quarter, the rand ended the 3-month period only 0.3% stronger against the dollar, but 8.1% stronger against the pound sterling, boosted by the Brexit vote. The All Bond Index (ALBI) returned 4.4% this quarter. Cash returned 1.78%. On the global front, the MSCI World Index and MSCI Emerging Markets Index posted 1.2% and 0.8% respectively for the quarter on a total return basis (USD). Source: Statistics SA, Deutsche Bank | Three-month total returns up to 30 June 2016

Our strategy

The rating agencies have recently confirmed South Africa’s investment grade rating. Their ratings are a reflection of the ability of the country to service its foreign debt. Even so, the yield difference (spread) between the South African 10-year USD sovereign bonds and the USA 10-year sovereign bond is still at about 3%, which is 0.5% higher than where it traded on average in 2014 and 2015, before the surprise dismissal of the Minister of Finance by the President in December 2015. This 3% spread is also high relative to other investment grade countries and is a reflection of the increased sovereign risk premium attached to South Africa by foreign investors, despite the views of the rating agencies.

When we make asset allocation decisions we consider the real return on offer from assets relative to their own long-run historical real returns. In addition to this we have to overlay the medium-term macro-economic framework and make suitable adjustments. For example, the world is currently still recovering from the 2008 financial crises and the developed world’s central banks have all engaged in quantitative easing.

We similarly consider the real returns available from South African assets relative to their own history. However, it is also useful to view these real returns relative to assets in similar commodity based emerging markets. With several of these countries, such as Brazil and Russia, there are similar concerns with regards to the political stability in the countries.

Local investments:

Local equities

We retained our underweight position in South African equities. Even though South African equities are fairly priced using a bottom-up valuation of the individual companies, we do continue to prefer global developed market equities ahead of local equities. South African equities continue to trade at a substantial premium to other emerging markets on both a price-to-earnings and a price-to-book basis.

Local bonds

We increased our overweight position in South African bonds in January when the 10-year bond yield traded at 9.6%. South African long bonds were and are still offering among the highest local currency real yields in emerging markets. Since January this year our long bonds have rallied, with the 10-year yield dropping to 8.85% on 23 June and we therefore reduced the size of our overweight position. This move was also partly motivated by a decision to reduce risk in the portfolio in light of the upcoming Brexit vote.

At current yields and a 3% to 6% inflation target the real yield on offer, relative to other asset classes, remains attractive. This is true especially in the light of global developed market 10-year sovereign bond yields, which are currently at record low levels.

Inflation-linked bonds

We retain our overweight position in inflation-linked bonds, which we implemented immediately after the dismissal of the Minister of Finance in December 2015. Tenyear inflation-linked bonds then traded at real yields of 2.3%. We consider the default risk on inflation-linked bonds to be low as the government is in control of the rand printing presses. These bonds have now strengthened to 1.75%, but they still trade above our current long-run assumption of fair value, which is 1.5%.

Local listed property

We retained our neutral holding in listed property. We prefer international listed property companies, which we believe are cheaper.

Global investments:

Even though the rand has recovered from its weakest levels it remains one of the weakest emerging market currencies relative to purchasing power parity. The rand remains more than two standard deviations cheap against the USD and one standard deviation cheap versus the GBP and EUR. We believe that purchasing power parity holds over the long run. This has been the case for the rand in 2001/2002 and 2008 when it was cheap versus developed market currencies. In both cases the rand recovered to purchasing power parity.

For this reason our portfolios retained their underweight position with respect to their total offshore exposure.

Global equities

We retained an overweight position in global equities. We are of the opinion that, on a relative basis, global equities remains an attractive asset class and has become even more attractive after Brexit. The dividend yield of developed market equities is at 2.8%. This is higher than the average dividend yield of the past thirty years. Only in 2008 were dividend yields substantially higher than current levels.

We have preferred Europe and the UK equity markets to the rest of the developed world as the European companies traded at a lower price-to-book valuation and higher dividend yields than most other developed markets. We believe these markets have fallen considerably more than warranted given the issues surrounding Brexit. We therefore retain this overweight. Global bonds

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