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 adviser. An annual advice fee negotiated is paid via a repurchase of units from the investor.

Total Expense Ratio (TER)

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.

Transaction Cost (TC)

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 even 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.

Market comments Global equities rebounded in June as the US-China trade war ebbed and Trump backed off on some of his threats. Global growth data remained negative with further declines in PMIs. Although the 19 June Federal Open Market Committee meeting saw no rate change, it delivered a strong statement virtually promising a rate cut at the 31 July meeting. During the second quarter of 2019, the MSCI World Index realised a gross return of just more than 4%, outperforming the MSCI Emerging Markets Index, which managed a very modest return of 0.6% over the same period. Global bond yields continued to rally with US 10-year yields down to 2.01% and trading sub-2% for the first time since late 2016. US 10-year yields are down more than 125 basis points since November 2018. In the first half of 2019, the MSCI World Index delivered a total return of 17.4%, outperforming Emerging Markets (+10.8%). Within the MSCI World, North America was the best performing region with a return of 18.9%, followed by Europe’s 16.5% and the Pacific region’s 11.3%. In South Africa weak economic data dominated the post-election headlines with firstquarter GDP falling 3.2% quarter on quarter, worse than the -1.6% Bloomberg consensus. The President’s State of the Nation Address promised little more than further Eskom bailouts and progress on spectrum auctions with few details/deadlines. During the second quarter of 2019, the FTSE/JSE All Share Index (ALSI) posted a total return of 3.9% versus the 8% for the first three months of 2019. SA Financials was the best performer, returning 5.4%, followed by SA Industrials with a total return of 4%. SA Resources only managed a gain of 2.4% in the second quarter after the large 17.8% total return in the previous quarter. The FTSE/JSE All Bond Index (ALBI) returned 3.7% after posting a similar return of 3.8% in the first quarter. SA Property managed to outperform bonds, posting a total return of 4.5%. Among the other important indices, the FTSE/JSE Shareholder Weighted Index (SWIX) (+2.86%) performed in line with the FTSE/JSE Capped Shareholder Weighted All Share Index (Capped SWIX) (+2.90%). In the first half of 2019, SA Equities was the best performing asset class, with the ALSI delivering a total return of 12.2%. SA Bonds gained 7.7%, whilst SA Property was the worst performing asset class with a total return of 6%. Cash posted a total return of 3.6%.

Portfolio performance, attribution and strategy Globally, factor performance has reflected investor risk aversion but not in such a clear way that sectors have, as style volatility has increased masking trends in performance. Putting aside Growth, which has clearly been a consistent performer across markets, the poor performance year to date of both Value and Low Risk has been curious. Value is typically seen as the pro-risk/cyclical style, while Low Risk is the opposite and indeed, over the past six months, they have been negatively correlated. However, what we have seen is more rotation in these two styles as investor risk aversion has changed, but they have both been trending down. On a short-term basis, exposure in both styles has provided diversification but over the longer term this has been more problematic. The negative performance trend in these styles mirrors the general risk-on positioning of markets of the past six months. Domestically, the Momentum signal continues to show a strong recovery since December 2018 along with general market sentiment, which has begun to entrench a trend after a period of rotating market leadership. As such, Price Momentum is now positive over a 12-month period for the first time since the second quarter of last year, illustrating the aggregative nature of its recovery. Earnings Revisions has shown more cyclicality than expected, however, over the prior quarter its behaviour is more in line with its traditional defensive role within the broad Momentum strategy - offering a more scaled-back cyclical exposure than its Price Momentum cousin. Over 12 months, however, the strategy is still underperforming due to the significant underperformance over the fourth quarter of 2018. The portfolio strategy has similarly added positive excess returns over the quarter to the tune of c3.2% over the Capped SWIX benchmark. The strategy’s positive contributions to performance was largely attributed to high-scoring momentum stocks such as Sasol (SOL), Telkom (TKG), Sibayne Gold (SGL), Impala Platinum (IMP) and Anglo American Platinum (AMS). In terms of underperformance contributors, these included overweight positions in AngloGold (ANG), PSG Group (PSG) and Capitec (CPI) and underweight positions in ABSA (ABG) and Gold Fields (GFI). At the last rebalance date (mid-June), we transitioned the portfolio based on the evaluation of new factor signals and the risk levels in the portfolio. Based on these signals, exposure to Naspers (NPN) was increased and MMI (MMI) and Quilter (QLT) were added to the portfolio, and this was funded by dropping PSG Konsult (KST), Netcare (NTC) and Reunert (RLO). 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.