We believe that the benchmark choice and resulting returns form the most important elements of an equity strategy – by investing in a passive vehicle the returns to investment strategies are known. By applying a full replication strategy there is no risk of deviation from the chosen benchmark.
Illustrative Cumulative Growth of an investment of R1000
Cumulative Growth Over Time
Source of graph: Morningstar Direct
This graph illustrates how an investment of R1000 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 performance is not necessarily a guide to future performance, 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 therefore not guaranteed to happen again in the future. 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 Fund 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 fund factsheet. Annualised return is the weighted average compound growth rate over the period measured.
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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 R90 billion.
Retail Class (%)
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.
This is the percentage of the value of the financial product that 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 TERs.
This is the percentage of the value of the financial product that 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.
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.
In the US, consumer confidence remained strong and retail sales data suggested a rebound in consumption from a softer Q1. The unemployment rate also reached an 18-year low of 3.8%, accompanied by robust wage growth. As expected, the Federal Reserve (Fed) raised the target for the federal funds rate by 0.25% and marginally increased its 2018 forecasts for growth and inflation. The positive economic data were, however, balanced by moves from the Trump administration to impose tariffs on Chinese imports and withdraw from the Iran nuclear accord.
In the Eurozone, the quarter was marked by the return of political risk. There were concerns that Italy could need fresh elections following the inconclusive outcome of the March vote, while Spain also saw a change of government, although this was largely greeted with calm by markets. German Chancellor Angela Merkel clashed with sister party the CSU over immigration policy. Economic data pointed to steady growth but at a slower pace than last year, as GDP growth for Q1 was 0.4%, down from 0.7% in Q4 2017. However, the flash Eurozone composite purchasing managers’ index for June came in at 54.8, an improvement on the 18-month low of 54.1 seen in May. The European Central Bank (ECB) announced that it expects to end its quantitative easing programme in December 2018.
Emerging markets (EM) saw an escalation in global trade tensions which also contributed to risk aversion as US-China trade talks failed to deliver a sustainable agreement. Brazil experienced a truck driver strike which paralysed the economy and amplified political uncertainty. Turkey saw currency weakness which forced the central bank to implement an emergency rate hike in May. China observed concerns over growth which contributed to Yuan weakness. Signs of slowing momentum in the domestic economy were exacerbated by deterioration in the outlook for global trade.
Global developed market equities made gains in a volatile Q2, as resilient economic and earnings data vied with an unsettling geopolitical backdrop to establish the market’s direction. The MSCI World Index posted a positive Dollar total return of 1.9% (-1.2% for Q1), outperforming the MSCI EM Index (-7.9% in Q2 vs +1.5% in Q1). In the US, equities advanced in Q2 with the S&P 500 gaining 3.4% in Dollars, with positive earnings momentum and supportive economic data ultimately outshining escalating US-China trade posturing. Eurozone equities also posted positive returns in Q2. In EMs, equities recorded a sharp fall with US Dollar strength a significant headwind. Worst performing countries were Brazil (-26.4%), Turkey (- 25.7%) and Hungary (-14.4%), while the only countries to post positive returns were Colombia (+6.8%) and Qatar (+3.5%).
The SA equity market started June on a strong note, reaching a month-to-date total return of 4.2% by 14 June before reversing this to post a loss of 1.5% by 26 June. The FTSE/JSE All Share Index recovered on the last day of trade to record a June total return of 2.8%. Large caps returned 3.8%, while mid-caps and small caps lost 2.1% and 3.3% respectively. On a sector level, SA Resources was the best performer returning a solid 19.6% (Q1: -3.8%). SA Industrials returned 4% (Q1: -8%) while SA Financials lost 6% (Q1: -3.6%).
After two consecutive very poor quarters, deep Value factors such as Price to Book rekindled its 2016 performance where cyclical value was favoured. To some extent the unwinding of Momentum has benefited these cyclical value measures in the short term, however, should macro uncertainty continue and deepen, we may see a shift towards more defensive Value or Quality strategies. Price to Book remains the worst performing strategy over 12 months. Dividend Yield, on the other hand, has experienced mixed fortunes, as the environment tussled between flight to safety and pro-risk. Over the previous year, however, investors continued to show a preference towards yield as opposed to more deep value.
The conundrum, however, has been that during Q2, this Yield signal has been overwhelmed by sector and Rand risk in the portfolio. These impacts have significantly outweighed the Value and Yield premium embedded in the portfolio.
Top contributors to performance predominantly originated within the Resource sectors, where the fund held overweight positions in South32 (S32), BHP Billiton (BIL), Exxaro (EXX), African Rainbow Minerals (ARI) and Mondi (MND). Despite this sector impact, the largest drawdowns were generated by Rand-sensitive Financial and Industrial counters, including holdings in MMI Holdings (MMI), Coronation Fund Managers (CML), Truworths (TRU) and Foschini (FOS). In terms of stock selection, the largest underperformance over the quarter came from not holding Naspers (NPN), which has a substantial weight in the benchmark. This stock-specific risk has been significant, as any relative performance in Naspers has a meaningful impact on the portfolio regardless of the Quality characteristic. There were no changes to the FTSE/JSE Dividend Plus Index over the prior quarter.
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