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Satrix Balanced Index Fund

You are saving for the long term and looking for a well-diversified portfolio – some shares, some listed property and some fixed interest assets. You are comfortable with fluctuations in your capital value over the short term.

This fund is suitable for long-term retirement savings and offers diversified exposure to all the key local and international asset classes, with a smart SA equity (shares) core. The fund tracks a composite index, with a long-term strategic asset allocation. This fund is best suited to investors with at least a medium-term investment horizon (3-5 years). For more information contact your financial adviser or broker.

Quick Facts About The Fund*

Satrix Balanced Index Fund

Launch Date: October 2013
Fund Size: R1 800.0 million
Benchmark: Proprietary Satrix Balanced Index
Time Horizon: 5 years
*As at 30 September 2017
Risk Profile: Moderate Aggressive
Fund Classification: SA - Multi-Asset - High Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 0.76%

*As at 30 September 2017

Launch Date: October 2013
Fund Size: R1 800.0 million
Benchmark: Proprietary Satrix Balanced Index
Time Horizon: 5 years
Risk Profile: Moderate Aggressive
Fund Classification: SA - Multi-Asset - High Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 0.76%
*As at 30 September 2017

Fund Strategy

The composite benchmark of the fund comprises the following asset class building blocks:

Asset class Index exposures

Smart SA equity core (55%) 25% Proprietary Satrix Stable Dividend Index
25% S&P Quality Index
50% Proprietary Satrix Momentum Index
SA bonds (8%) FTSE/JSE All Bond Index
SA property (6%) FTSE/JSE SA Listed Property Index
SA inflation-linked bonds (6%) Barclays SA Gov Inflation-Linked Bond Index
SA cash (5%) SA Nominal Cash
International equities (15%) MSCI World Equity Index
International bonds (5%) Barclays Global Treasury Index

The asset composition of the index aims to target a CPI+5.5% return over the long term.

Illustrative Cumulative Growth of an investment of R100

Performance

Annualised Total Return on a rolling monthly basis
(as at 30 September 2017)
Retail Class Fund (%) Benchmark (%)
1 year 8.32 9.55
3 year 7.06 8.46
5 year N/A N/A
Since inception 7.83 9.16

Annualised return is the weighted average compound growth rate over the period measured
Highest and Lowest Annual Returns since inception
Highest Annual % 8.32
Lowest Annual % 5.63

Minimum Disclosure Document (Fund Fact Sheet)

Cumulative Growth Over Time

Satrix Balanced Index Fund A1
Proprietary Satrix Balanced Index

Source of graph: Morningstar Direct

This graph illustrates how an investment of R100 would have grown had you invested for the time period displayed. 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 by this graph happened in the past and is not guaranteed. The performance is calculated by taking into account initial and ongoing fund manager fees and assumes that you reinvested all the income earned by the fund over this period.

The other line on the graph is for the performance of the designated benchmark of the fund – normally either an index or other funds in the industry that are comparable to the fund you’ve chosen.

The Manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. The actual fund performance can be viewed on the Minimum Disclosure Document. Annualised return is the weighted average compound growth rate over the period measured.

1. Naspers -N- 6.65%
2. FirstRand / RMBH 3.26%
3. Stanbank 3.10%
4. AVI 2.47%
5. Capitec 2.27%
6. Clicks Group Ltd 2.12%
7. Mr Price Group Limited 2.11%
8. Sanlam 2.10%
9. Exxaro 2.05%
10. Bidvest 1.91%
Cash And Money Market Assets
Inflation Linked Bonds
International Assets
Equities
Property
Bonds
1. Naspers -N- 6.65%
2. FirstRand / RMBH 3.26%
3. Stanbank 3.10%
4. AVI 2.37%
5. Capitec 2.27%
6. Clicks Group Ltd 2.12%
7. Mr Price Group Limited 2.11%
8. Sanlam 2.10%
9. Exxaro 2.05%
10. Bidvest 1.91%
Application form: Satrix Individual Investors (new investors only) ENG
Application form: Satrix Tax-Free Unit Trusts (new investors only) ENG

View more Satrix forms

All portfolios are managed and monitored by the Satrix investment team, a group of individuals highly skilled in portfolio management, quantitative research, risk management and portfolio solutions. The Satrix team offers unparalleled experience in efficiently managing index-tracking portfolios. Under leadership of CIO Kingsley Williams and its head of Portfolio Management, Johann Hugo, the team manages index tracking assets in excess of R70 billion.

All portfolios are managed and monitored by the Satrix investment team, a group of individuals highly skilled in portfolio management, quantitative research, risk management and portfolio solutions. The Satrix team offers unparalleled experience in efficiently managing index-tracking portfolios. Under leadership of CIO Kingsley Williams and its head of Portfolio Management, Johann Hugo, the team manages index tracking assets in excess of R70 billion.

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

A1-Class (%)

Advice initial fee (max.) N/A
Manager initial fee N/A
Advice annual fee (max.) 1.14
Manager annual fee 0.68
Total Expense Ratio (TER) 0.76
Transaction Cost (TC) 0.27

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.

Where this fund invests into other unit trusts, it does so into zero fee classes except for offshore equity (0.30%) and offshore bonds (0.12%).

Total Expense Ratio (TER) | The Total Expense Ratio (TER) is the charges incurred by the portfolio, for the payment of services rendered in the administration of the CIS. The TER is expressed as a percentage of the daily NAV of the CIS and calculated over a period of 1 year.

The TER is calculated since inception from 1 July 2016 to 30 June 2017. A higher TER does not imply a poor return nor does a low TER imply a good return.

The Transaction Cost (TC) is the cost incurred by the portfolio in the buying and selling of underlying assets. This is expressed as a percentage of the daily NAV of the CIS and calculated over a period of 1 year. Obtain the costs of an investment prior to investing by using the EAC calculator provided at www.satrix.co.za.

Satrix is a South African ETF pioneer and caused a shake-up in the SA investment space when it introduced the country to ETFs in 2000 by launching the first ETF listed on the JSE. The Satrix TOP 40 ETF needs no introduction and serves as the go-to broad market exposure investment option for professional and amateur investors alike. So transformative have the Satrix product set and access options been to South Africans that people often (erroneously) refer to all index trackers as Satrix.

Since 2000 Satrix has listed 12 more ETFs. In fact, in 2017 alone it added a property ETF, an inflation-linked bond ETF, a Quality factor ETF and three offshore ETFs to its range. You can now build a completely diversified portfolio of local asset classes using only low-cost Satrix ETFs.

To make investing ever easier and cheaper (and online) we started working with the ground-breaking team at EasyEquities. The low-cost, no-minimum, online platform they had developed, which allowed fractional share trading, is perfect for our clients too. In no time at all we had our very own www.SatrixNOW.co.za platform up and running, which allows you to do everything online with no annual fees and extremely low trading costs. With SatrixNOW there really are no excuses as you can invest as little as R10.

Macro review

In the US, the third quarter saw increased political uncertainty amid rising tensions between the US and North Korea and the ongoing failure of the Trump administration to implement its policy goals. These tensions were a key factor behind the temporary rotation into lower-risk assets in August. In the wake of hurricanes Harvey and Irma, economic data and activity indicators deteriorated towards the period end. However, capital markets discounted the potential negative impact on growth as minimal, as did the US Federal Reserve (Fed) in its statement following the latest Federal Open Market Committee meeting. At this meeting, the Fed kept interest rates steady but confirmed that measures to reduce its balance sheet would begin in October, despite persistently weak inflation.

In the Eurozone region, economic data remained robust over the prior three months. GDP growth was confirmed at 0.6% in the second quarter, up from 0.5% in the first quarter. Economic sentiment rose to its highest level since July 2007, while unemployment in the Eurozone remained at 9.1% in August, which was stable compared to July, and the lowest rate since February 2009. The possibility that the European Central Bank could reduce its stimulus measures continued to be a focus for the market, as the committee kept policy rates unchanged in September. Also noteworthy was Angela Merkel winning a fourth term as the Chancellor of Germany in September. For the UK, the economy showed clear signs of slowing down, while inflation picked up, reaching 2.9% in August. During the quarter the Bank of England struck a more hawkish note with Governor Carney and a number of members of the Monetary Policy Committee openly discussing rate rises.

Emerging markets saw a positive economic backdrop of steady global growth, modest inflation, US dollar weakness and a continued momentum in the Chinese economy through a pickup in commodity prices. In China, Industrial profits rose 20% year-on-year in August vs. 16.5% year-on-year in July, driven by a rebound in industrial prices. In South Africa, the South African Reserve Bank (SARB) lowered the repo rate by 25 basis points in July, yet surprised markets by keeping the policy rate steady at 6.75% in September. GDP growth momentum recovered in the second quarter to lift by 2.5% %q/q saar after a brief technical recession in the first quarter.

Global and local market review

Global equity markets advanced in the third quarter with the MSCI World Index returning 5.0% in US dollars, and 16.5% year to date (YTD). This advance was largely driven by stable economic growth, benign inflation and positive earnings releases. Emerging market equities, however, outperformed their developed world counterparts, returning 8.0% during the third quarter and 28.1% YTD, in dollars. This streak of outperformance ended in September after eight months of positive relative performance. Top performers in emerging markets in the third quarter were Brazil (+23%), Russia (+18%) and Chile (+17%), while Pakistan (-16%), Greece (-12%) and Qatar (-7%) were the laggards. Brazil saw some reform progress and central bank easing, while Russian equities rallied as crude prices picked up and lower inflation opened the door for further interest rate cuts. In contrast, Pakistan’s market was weighed by their Supreme Court’s disqualification of the prime minister, while Greece declined amid a sell-off in banking stocks.

Bond yields oscillated over the quarter and, with the exception of the UK, which sold off sharply in September, were ultimately little changed against a largely unchanged global economic backdrop. While the late-June sell-off initially continued in July, it came to a halt as growing expectations of a hawkish shift among central banks were reined in. Yields moved lower in August, precipitated by safe-haven buying, before reversing course once more in September as risk appetite returned.

The Bloomberg Commodities Index rose in the third quarter. The energy component generated the strongest return, with Brent crude rallying 20.1% over the quarter. It was supported by a faster-than-expected fall in US crude inventories and increased expectation for an extension of production cuts amid rising global demand. Industrial metals also recorded a robust return as economic momentum in China remained firm. Iron ore was up 14.9% while zinc (+15.5%) and copper (+9.5%) both posted sizeable gains. In contrast, the agricultural component lost value. Wheat and corn prices fell sharply amid record global supplies. In precious metals, gold was up 3.2%, in part given an uptick in geopolitical concerns.

US 10-year yields began the period at 2.31% and finished at 2.33% with bund 10-year yields virtually unchanged from 0.47% to 0.46%. Ten-year UK gilt yields rose 10 basis points (bps) to 1.36%. The move reflected higher inflation and more hawkish central bank rhetoric. Corporate bonds made positive returns, outperforming government bonds. Global investment grade (IG) 2 credit rose 1.14% and high yield (HY) by 2.16%. The US led the way with IG gaining 1.37% and HY 2.04%.

Year to date, South African equities (Swix) delivered a healthy 10.6%, underperforming bonds (+4.0%) and cash (+3.7%) as commodity prices rallied and rate expectations buoyed equity markets during the third quarter. Over the quarter, the Swix returned 7.0%, driven by Materials (+17.8%), while Industrials (+7.4%) and Financials (+5.1%) also rallied. Within Industrials, Naspers (15.0%) continued to outperform on the back of a strong performance in Tencent. Interest rate-sensitive sectors such as Retail and Banks also bounced early in the third quarter, around the first rate-cut in July, although the SARB surprised markets in September by keeping the policy rate steady at 6.75%. MTN (+11.2%) also drove the equity market as MTN’s new management conveyed its aspirational growth potential, while Aspen (+5.7%) rallied after announcing the AstraZeneca (AZN) deal.

SA bonds (+3.7%) outperformed cash (+1.8%), yet underperformed SA equities (Capped Swix Index +5.9%) in the third quarter. The benchmark SA 10-year bond yield declined from 8.77% at the end of June 2017 to 8.55% at the end of September this year, supported by SA's high real yields, expectations of deceleration in inflation into year-end, and the global backdrop.

The FTSE/JSE SA Listed Property Index (SAPY) returned a total of 5.7% in the third quarter and 8.2% YTD. From January 2017 the SAPY has outperformed bonds and cash, but it has meaningfully underperformed the FTSE/JSE All Share Index (Alsi) (12.5%). The best performing shares in the SAPY for the quarter included shares with a high foreign exposure such as MAS Real Estate, NEPI Rockcastle as well as Greenbay Properties, which only recently entered the SAPY Index. This was driven by good fundamental earnings growth, which was partly driven by rand weakness.

Conversely, shares with more pure-play SA exposure were some of the underperformers, such as Hyprop Investments, which derated substantially from well under a 6% dividend yield (DY) to over a 6.5% DY in the course of the quarter.

The year ahead

The main question facing investors, as in the third quarter of 2017, is whether valuations and positioning point to a tactical pullback from risk. We think the general market view currently is that it would probably not. This year’s equity rally has been driven by earnings growth, not multiple expansion; while the pace of this growth might slow, stocks should still out-earn bonds. It is difficult to see a plausible catalyst that could upset valuations in risky assets for the rest of 2017.

If we contrast the fortunes of overseas markets to our local one, it is clear that investor confidence is an important behavioural factor driving investment markets.

Companies which have delivered results below expectation are being marked down heavily and a number of former darling stocks have suddenly been found wanting.

Momentum: Globally, the Momentum factor (particularly Price Momentum) continues to lead the race among factor performances YTD, followed closely by Quality/Profitability and Growth. In South Africa, we are starting to see an alignment with global outcomes, as Price Momentum’s strong recovery in the third quarter of 2017 has seen this factor among the leading factors in the domestic market YTD.

This, after a particularly poor 2016 calendar year, has seen the Momentum factor redeem itself somewhat and recoup much of the losses it experienced last year.

Earnings revisions, however, has not seen the same recovery, and continues to be tepid during 2017, given still high levels of domestic economic and policy uncertainty flowing over to uncertain corporate earnings estimates. Notwithstanding the testing environment, our Momentum offering (which combines Price Momentum and Earnings revisions) has steadily improved its year-to-date performance relative to the Swix. Given that most of the stocks enjoying the highest earnings revision characters are hard commodities, the higher beta nature of these counters will likely influence the portfolio’s factors over the coming months.

Stock selection within the resource sector was the primary driver of positive relative performance over this quarter, where names such as Kumba Iron Ore (KIO), Exxaro (EXX), Assore (ASR), and Glencore (GLN) were the largest contributors from overweight positions. Industrial counters such as Barloworld (BAW), Naspers (NPN), both overweights, and Remgro (REM), an underweight, also lent support to outperformance. On the other hand, the largest detractors were underweights in Anglo American (AGL) and BHP Billiton (BIL), and overweights in British American Tobacco (BTI) and Sappi (SAP).

At last rebalance date, we transitioned the portfolio based on the evaluation of new factor signals and the risk levels in the portfolio. Based on these signals, Sappi (SAP), Old Mutual (OML) and Curro (COH) were removed, and African Rainbow

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