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Sanlam Investments Management General Equity Fund Sanlam Investments Management General Equity Fund

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Sanlam Investment Management
General Equity Fund

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Quick Facts About The Fund

Sanlam Investment Management (SIM) General Equity Fund

Launch Date: 26 Jun 1967
Fund Size: R7 557.9 million
Benchmark: FTSE/JSE All Share Index
Time Horizon: 3 – 5 years
Risk Profile: Aggressive
Fund Classification: SA - Equity - General
Min Investment Amount: Lump sum: R5 000 | Monthly: R200
Total Expense Ratio (TER): 1.25%
Launch Date: 26 Jun 1967
Fund Size: R7 557.9 million
Benchmark: FTSE/JSE All Share Index
Time Horizon: 3 – 5 years
Risk Profile: Aggressive
Fund Classification: SA - Equity - General
Min Investment Amount: Lump sum: R5 000 | Monthly: R200
Total Expense Ratio (TER): 1.25%

Fund Strategy

This fund aims to outperform the FTSE/JSE All Share Index through active stock selection across all sectors and market capitalisation on the JSE. The fund may at any time hold a maximum of 25% in offshore assets. This fund may also invest in derivatives for efficient portfolio management.


Illustrative Annualised Investment Performance

Performance

Annualised as at 30 Jun 2016 on a rolling monthly basis
Retail Class Fund (%) Benchmark (%)
1 year 0.15 3.83
3 year 12.51 13.03
5 year 13.76 13.81
10 year 13.67 12.62

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 % 47.03
Lowest Annual % 9.72

Minimum Disclosure Document (Fund Fact Sheet)

Illustrative Annualised Investment Performance

Sanlam Investment Management (SIM) General Equity
Sanlam Investment Management (SIM) General Equity          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. Naspers N 12.83%
2. BTI Group 8.59%
3. Steinhoff Int Hldgs N.v 6.91%
4. Old Mutual 4.55%
5. Sasol 4.19%
6. MTN 4.17%
7. FirstRand / RMBH 3.27%
8. Mondi 2.81%
9. Remgro 2.7%
10. Stanbank 2.68%
1. Naspers N 12.83%
2. BTI Group 8.59%
3. Steinhoff Int Hldgs N.v 6.91%
4. Old Mutual 4.55%
5. Sasol 4.19%
6. MTN 4.17%
7. FirstRand / RMBH 3.27%
8. Mondi 2.81%
9. Remgro 2.7%
10. Stanbank 2.68%
Cash And Money Market Assets
International Assets
Exchange Traded Funds
Equity Technology
Equity Financials
Equity Telecommunications
Equity Consumer Services
Property
Equity Health Care
Equity Consumer Goods
Equity Industrials
Equity Basic Materials

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) 1.79

Advice fee | Any advice fee is negotiable between the client and their financial adviser. 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. This fund is also available via certain LISPS (Linked Investment Service Providers), which levy their own fees. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down.

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) | 1.79% 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 1.79%, a performance fee of 0.51% of the net asset value of the class of participatory interest of the portfolio was recovered.

Transaction Cost (TC) | 0.18% 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) | 1.97% 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:
3.42% (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.

The markets fixated on two key events this quarter. One was the S&P sovereign rating decision for South Africa and the other was the EU referendum in the UK. In a perverse twist of fate the UK lost its triple A rating while a stay of execution was provided by S&P to South Africa! Brexit took the markets by surprise with $3 trillion being wiped off the value of equities globally in two days, reminiscent of panic selling during the Global Financial Crisis. The pound sterling to dollar exchange rate, which had climbed to one-year highs, plunged some 10% to 30-year lows as the prognosis for the UK economy going solo after over four decades in the EU spooked financial markets. With a changing of the guard in Downing Street came heightened political risk and the prospect of slower growth in the UK. The UK 10-year gilt fell below 1% for the first time on record as investors fled into safe haven assets. The only clue from history for this unexpected turn of events is the campaign by Henry VIII in the 1530s to distance Britain from Rome after struggling to get his marriage annulled by the Pope with similar Brexit undertones! Back then, Britain benefited from the confiscation of Church assets by the king and an influx of Protestants. Now, the saving on EU contributions the UK can expect will be small and ramifications for trade with the EU grim!

In the broader EU context, an existential question remains as the remaining 27 countries start enquiring whether they should also exit, with Italy potentially entering the eye of the storm next. European politics has become a key driver of volatility and South Africa is exposed given the fact that we have the highest exposure to duallisted UK stocks on our bourse. Beyond the EU, the outcome of US presidential elections and the local elections in South Africa will provide further high-tension events for already jittery financial markets. With risk being off, central banks will once again be on the back foot and the Fed rate hikes effectively on hold for longer while the South African Reserve Bank is more likely to pause, given negative economic growth and inflation on the wane locally.

The JSE took a hammering at the end of the quarter as the shock Brexit vote sent European markets into freefall. The JSE index ended the quarter 0.4% higher with Resources continuing to extend their lead over the rest of the market. Financials once again were pummelled this quarter - down 4.3% - with UK dual-listed shares bearing the brunt of the punishment. Industrial stocks were mixed, up 0.5%. One common theme amongst several underperforming stocks has been the negative impact of Brexit and adverse sentiment as this is most visible on the following stocks exposed to the UK with Listed Property, Financials, Retail and Healthcare stocks having the largest exposure:

  • Capital & Counties - London Property developer -17%
  • Intu - UK based listed commercial property owner -11.8%
  • Investec - UK listed financial services group -17.3%
  • Netcare - Largest operator of private UK hospitals -13.6%

Amongst the gainers, several stocks which had languished in 2015 are in the process of restructuring and disposing of non-core assets, with the market being more positive about their future prospects with the following stocks being notable examples:

  • Anglo American - Asset Disposal programme ongoing +22.1%
  • Altron +17% with the group simplifying its structure
  • Bidvest - Split of food service from local industrial operations +21%
  • Pick n Pay Holdings - Collapse of controlling structure +3.7%

In both the above cases, forecast risk is eminently high. While the outcome of the EU referendum was a surprise, not all group restructurings will yield the value uplift that could be anticipated and the final outcome will depend on whether management enhances returns by running a more efficient operation and drives returns adequately over the long term.

What did we do last quarter?

The FTSE/JSE All Share Index (ALSI) returned 0.4% for the quarter, with the resources sector gain of 6.4% leading the way up. During the period, the fund performed marginally behind its benchmark but the excellent long-term track record of the fund remains intact. The fact that the fund ranks amongst the best-performing equity funds over the last 10 years means that it is ideally placed to create wealth for investors over the long term and often short-term volatility provides the opportunity to accumulate quality assets at a discounted price.

What added to, and what detracted from performance?

British American Tobacco plc, was up 8.6% as the company continues to gain share in its traditional markets with decent volume growth and continued pricing power. Next generation products are also gaining momentum. In the short term, weakness in emerging market currencies has been a headwind which has squeezed margins. However, after closer scrutiny and excluding the foreign currency effects, the underlying margins continue to expand with the business being fanatical about squeezing out cost efficiencies. The Rothmans-Lorillard transaction in the US also provides another growth vector and combined these could contribute to a fifth of earnings long term. At a forward yield of 4% in sterling, the stock continues to remain a key dividend compounder in the portfolio.

Our largest holding, Naspers, delivered a solid 8.7% during the quarter. The share price performance was delivered by a solid performance in its Chinese associate Tencent. Tencent delivered excellent quarterly numbers with revenues growing at over 40% and profits at over 30%, justifying the high rating of the company and the company has successfully built a mobile gaming platform, with mobile advertising being the latest growth area. Tencent’s latest strategic move has been to acquire a stake in the European maker of Clash of Clans for $8 billion! This further extends Tencent’s foray into owning the content that it provides to its users. With the market largely ignoring the non-Tencent assets of Naspers, ie pay tv and ecommerce, we believe that the stock remains undervalued.

Amongst the top holdings, Steinhoff International delivered a disappointing -13% return for the quarter after being caught in the Brexit downdraft. The company is using its offshore listing and access to cheaper European debt funding to launch acquisitions for weaker retail rivals in Europe. So far, the market has been disappointed that they have pulled out of two high profile bidding wars but we believe that this demonstrates capital allocation discipline and they are, in fact, eyeing further acquisitions in the UK. Over time the vertical integration model is likely to continue adding value as more volumes are added and the company’s footprint expands across Europe.

Our strategy

The sharp Brexit-induced, market sell-off means that there are now pockets of value in the local equity market. Last quarter, we warned that the market rebound was perilous but it is clear now that investors should expect an extended period of volatility where politics rather than economics - especially from abroad - drive financial markets. Financial markets are often buffeted by emotion - fear and greed magnifying events occurring far from our shores. The vote for a Brexit fuelled a panic attack for financial markets as it was not an outcome that was seen as likely by the pundits or opinion polls. In this environment, we believe that managing the portfolio with a long-term value creation mind-set will pay dividends to investors. It is impossible to foresee every air pocket on the road to wealth creation but with adequate risk management and diversification, investors should ride through shortterm unexpected events. The decade-long performance of the fund bears testimony to the efficiency of our approach. Maintaining the discipline associated with our value investing philosophy is of paramount importance. We will continue to invest in stocks which offer both a discount to our estimate of fair value and the required margin of safety.

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