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

A1-Class (%)

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.

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 from 01 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.

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 from 01 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.

When you invest online

Traditionally, investment advice come with a fee of up to 1.14%. But our smart online system is working to make investing cheaper and more profitable for you and hence no initial or annual advice fees will be charged. 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 2.28%.
• 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: 1.14%

Satrix, pioneers in the passive management space are now fully owned by Sanlam. It was the first to market with a passive solution and recently launched SA’s first smart beta multi-asset fund. The Satrix range is Sanlam’s answer to the growing demand for low-cost investments with a predictable index-linked outcome.

Sanlam Collective Investments (RF) (Pty) Ltd and Satrix Managers (RF) (Pty) Ltd, a registered and approved Manager in Collective Investment Schemes in Securities. Collective investment schemes are generally medium- to long-term investments. 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.

A schedule of fees and charges and maximum commissions is available from the Manager on request. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio.

Annualised Total Returns Annualised return is the weighted average compound growth rate over the period measured.

Macro review

Political uncertainty remained an important feature globally, as US President Donald Trump dismissed FBI director James Comey, which raised doubts over the ability of the administration to push its fiscally expansive policies. In Europe, French and Italian political uncertainty faded, as the moderate Emmanuel Macron won the French presidential and later parliamentary elections convincingly, while the possibility of an early election in Italy was ruled out.

South Africa started the last quarter on the wrong foot with the unexpected Cabinet reshuffle at the end of March. This markedly increased political uncertainty, and coupled with credit downgrades, weighed heavily on domestic confidence and subsequent consumer sentiment. As such, a business cycle recovery will likely be protracted until such time that confidence recovers. To add insult to injury, firstquarter GDP posted a dismal -0.7%, plunging the economy into a technical recession. Growth expectations for 2017 is seen at 0.75% (down from about 1.5% at the start of the year), with a recovery to 1.25% in 2018, mostly driven by a rebound in household demand.

Global and local market review

Global equity markets advanced in the second quarter of 2017 with the MSCI World Index returning 4.2% in US dollars, and 12% year-to-date. A strong corporate earnings season and generally positive economic data supported gains, while political risk eased in Europe. Emerging market (EM) equities, however, outperformed their developed world counterparts, returning 18.2% during the first half of 2017. This streak of outperformance is now six months long, as this region continues to benefit from a supportive global backdrop. Top performers in EM were Poland (+33%), Turkey (+29%) and South Korea (+28%), while Russia experienced a sharp decline (-15%) amid a fall in Brent crude prices. In terms of global style performance, Growth (+7.0%), Quality (+5.1%) and Price Momentum (+5.5%) have been the clear outperformers since the start of the year.

Year to date, South African equities (SWIX) delivered a mild 3.3%, slightly underperforming bonds (+4.0%) and cash (+3.7%) as expectations of a delayed economic recovery and political uncertainty weighed on equities. Within equities we saw divergent sector performances, as Industrials added 9.0%, while Resources fell 4.6% and Financials added 1.1% over the first half of 2017.

Over the last three months, the SWIX return was flat. In terms of major contributions to this return, Media (Naspers) was the star performer, as Tencent continued to improve its competitive position and market share, although June saw profit-taking in the global tech sector. Some noticeable contributions also came from Steinhoff (+4.5%), which outperformed as it announced the proposed listing of its SA retail assets. Aspen (+4.5%) also bounced back, driven by a rally in the euro/US dollar exchange rate. Materials (-6.7%) detracted the most, given weaker precious metal prices, exacerbated by the introduction of the new Mining Charter. This was followed by Discretionary Retailers (-9.3%), out of favour, as business/consumer confidence nosedived. Telecoms also contributed negatively, as MTN (-6.5%) fell again, partly driven by oil prices declining (Nigeria) over the quarter.

Portfolio performance, attribution and strategy

Despite the constructive performance of Momentum (particularly Price Momentum) strategies globally this year, the South African market has seen a very tepid recovery in this factor’s performance year-to-date. We recall that price momentum and earnings revision factors were sternly tested in the 2016 calendar year given extraordinarily high levels of economic and policy uncertainty. While globally the economic recovery tracking is well and policy uncertainty fading, our domestic economic recovery remains protracted, thus creating a challenging environment for a domestic Momentum strategy, and explaining the divergent experience relative to global Momentum. Notwithstanding the testing environment, our Momentum offering has steadily improved its rolling 12-month 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 negative relative performance over this quarter, namely Assore (ASR), Kumba Iron Ore (KIO), Sappi (SAP) and Exxaro (EXX), which were the largest detractors. On the other hand, Capitec (CPI), Clicks (CLS), Anglo American (AGL) and Naspers (NPN) lent steady support, contributing positively to the relative performance.

As we closed the quarter, we transitioned the portfolio based on the evaluation of new factor signals and the risk levels in the portfolio. Based on these signals, Spar (SPP) was removed, and Bidcorp (BID), Gold Fields (GFI), Nampak (NPK) and PSG Group (PSG) were added. Exposures in MTN Group (MTN) and Sappi (SAP) have also been reduced in line with the risk objective of the fund. The biggest fundamental change in the portfolio’s positioning over the course of 2016 has been the rotation into the hard commodity stocks whose price and earnings revision signals remain strongest in our domestic universe.

We remain convinced of the factor’s medium- to long-term significance and the premium it offers in the South African capital market and remain disciplined in our implementation and extraction of the factor.