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Satrix Momentum Index Fund

Those who support the momentum style of investing believe that rising shares tend to continue rising, and falling shares tend to continue falling. They seek to take advantage of these trends by quickly moving from one rising star to the next.

Quick Facts About The Fund*

Satrix Momentum Index Fund

Launch Date: October 2013
Fund Size: R261.5 million
Benchmark: Proprietary Satrix Momentum Index
Time Horizon: 5 years +
*As at 28 February 2018
Risk Profile: Aggressive
Fund Classification: SA - Equity - General
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 0.67%
Launch Date: October 2013
Fund Size: R261.5 million
Benchmark: Proprietary Satrix Momentum Index
Time Horizon: 5 years +
Risk Profile: Aggressive
Fund Classification: SA - Equity - General
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 0.67%
*As at 28 February 2018

Fund Strategy

Momentum is defined for the index in terms of a composite of price momentum and earnings momentum as measured by analyst revisions. The index is reviewed monthly with cognizance given to the liquidity of individual counters and the turnover of the benchmark as a whole. The benchmark is also moderated in terms of sector and stock specific risks. The universe for selection of stocks to be included in the Satrix Momentum Index is all stocks on the JSE that meet the applicable liquidity screening requirements referred to in the calculation methodology, excluding listed property stocks.


Illustrative Cumulative Growth of an investment of R100

Performance

Annualised Total Return on a rolling monthly basis
(as at 28 February 2018)
Retail Class Fund (%) Benchmark (%)
1 year 25.58 27.14
3 year 8.49 9.76
5 year N/A N/A
Since inception 12.987 14.49

Annualised return is the weighted average compound growth rate over the period measured
Highest and Lowest Annual Returns since inception
Highest Annual % 25.71
Lowest Annual % -1.43

Minimum Disclosure Document (Fund Fact Sheet)

Cumulative Growth Over Time

Satrix Momentum Index Fund
Proprietary Satrix Momentum 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- 25.11%
2. FirstRand / RMBH 8.09%
3. Stanbank 7.12%
4. BTI Group 4.49%
5. Compagnie Fin Richemont 4.04%
6. AVI 3.57%
7. Clicks Group Ltd 3.53%
8. Barloworld 3.44%
9. ARM 3.29%
10. Kumba 3.27%
Cash and Money Market Assets
Equity Financials
Equity Telecommunications
Equity Consumer Services
Equity Consumer Goods
Equity Industrials
Equity Basic Materials
Equity Health Care
1. Naspers -N- 25.11%
2. FirstRand / RMBH 8.09%
3. Stanbank 7.12%
4. BTI Group 4.49%
5. Compagnie Fin Richemont 4.04%
6. AVI 3.57%
7. Clicks Group Ltd 3.53%
8. Barloworld 3.44%
9. ARM 3.29%
10. Kumba 3.27%
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 0.51%
Total Expense Ratio (TER) 0.67%
Transaction Cost (TC) 0.50%

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 January 2017 to 31 December 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 fourth quarter (Q4) saw two Republican defeats in Senate contests spur House and Senate Republicans into action, resulting in the long-awaited tax reform bill. Markets rallied on the news with big permanent cuts for corporations as the centrepiece of the package. US equities were largely also supported by generally positive macroeconomic data, including better-than-expected third-quarter GDP growth of 3.0% (annualised) and stronger-than-expected non-farm payrolls. As had been widely anticipated, the US Federal Reserve (Fed) lifted interest rates by 25 basis points (bps) in December. The Fed also raised its growth forecasts for 2018 to 2.5% from 2.1%. The quarter also saw robust corporate earnings, particularly from the technology sector.

In the Eurozone, data showed the region’s economic recovery continuing. GDP grew by 0.6% in the third quarter, even though there was a slight slowdown from 0.7% in Q2. In October, the European Central Bank announced that quantitative easing would be extended to September 2018 but that the pace of purchases would be reduced from €60 billion per month currently to €30 billion. In Germany coalition talks collapsed, while in Spain Catalonia held a regional election, which failed to resolve the independence issue. In the UK, despite a sluggish economy, the Bank of England’s (BoE) monetary policy committee raised interest rates for the first time in 10 years as annual CPI reached 3.1% in November, breaching the BoE’s upper target. Furthermore, hopes rose around progress with Brexit negotiations, with an agreement struck to allow talks to proceed to the future of trade arrangements. Emerging markets experienced largely positive political developments. In South Africa pro-reform candidate, Cyril Ramaphosa, was elected as leader of the African National Congress. This development increased the prospect for a return to more orthodox policy after elections in 2019. In Greece, agreement was reached with international creditors over reforms, paving the way for the dispersal of further bailout funds, while India also announced plans for a major recapitalisation for statecontrolled banks.

Global and local market review

For the first time on record, global equity markets rallied in all 12 months of a year, advancing 5.8% in US dollars in Q4 and 24.6% over 2017, one of the strongest years since 2009. The S&P 500 ended a strong year with a fourth-quarter gain of 6.6%, buoyed by hopes of tax reform, while Eurozone equities declined amid some profit-taking and simmering political risk, although economic data remained positive. The UK’s FTSE All Share index also saw positive returns, supported by gains for resource stocks and progress on Brexit negotiations.

Emerging market equities (EM), however, outperformed their developed world counterparts, returning 7.5% during Q4 and 37.8% in 2017. Top performers in EM in Q4 2017 were South Africa (+21.5%), Greece (+13.6%) and India (+11.8%). MSCI South Africa rallied +36.8% in US dollar terms in 2017 broadly in line with EM, driven by Media (Naspers), a metals rally, while a Ramaphosa win buoyed SA domestic-demand sectors into year-end. However, MSCI SA ex Naspers was up only 16%.

In rand terms, South African equities (Capped SWIX) delivered a healthy 16.5% during 2017, outperforming Bonds (+10.2%) and Cash (+7.5%). Over the quarter, the Capped SWIX return was 8.4%, driven by Industrial Metals (+62.7%), Banks the Capped SWIX return was 8.4%, driven by Industrial Metals (+62.7%), Banks (+27.1%) and General Retail (+22.3%). Underperforming sectors over the quarter were Household Goods (-92.3%), Fixed Line Telcos (-18.8%) and Paper (-9.9%). In 2017, SA equities recorded outflows of $2.5bn, significantly lagging inflows into EM of $77.2bn. However, dissecting the flows, it appears that, excluding the outflows from dual-listed stocks and the Barclays and Vodacom sell-down, SA equities saw inflows of just more than R60bn in 2017.

Portfolio performance, attribution and strategy

Despite some rotation which started in November (which can largely be explained by usual year-end profit taking), globally the Momentum factor (particularly Price Momentum) has led factor performances for 2017. Factors such as Growth and Quality/Profitability have also been solid strategies to be exposed to last year, but Price Momentum has benefitted most from US tax reform and global synchronized growth.

In South Africa we’ve seen an alignment with global outcomes, as Price Momentum has been the strongest signal domestically for 2017 and the prior quarter. Earnings revisions (a sub-component of headline Momentum) on the other hand has not performed in line with Price Momentum, delivering only mildly positive outperformance, while defensive factors such as Return on Equity (ROE) and Dividend have been exceptionally strong during 2017, largely back-end loaded. In our view, the earnings revisions factor was not well rewarded given high levels of domestic economic and policy uncertainty flowing over to uncertain corporate earnings estimates. However, with the domestic policy environment seemingly improving at the margin, cyclical stocks with positive forward earnings momentum should perform well.

As an overall factor, however, the Momentum signal has translated into a top performing factor-based strategy relative to the SWIX in 2017, after a testing environment in 2016. Over the prior quarter, the strategy’s outperformance was attributed to exposure to a diverse range of sectors, with the largest contributors to relative performance generated from overweights in Kumba Iron Ore (KIO), Assore (ASS), Exxaro (EXX), Capitec (CPI) and Imperial (IPL). The underweight in Steinhoff (SNH) also significantly bolstered the strategy’s performance, after the share fell 92.3% over the quarter due to accounting irregularities. On the other hand the largest detractors were overweights in Richemont (CFR), Reinet (REI) and British America Tobacco (BTI), and underweights in Barclays (BGA), Truworths (TRU) and Mr Price (MRP).

At the last rebalance date (mid-December), we transitioned the portfolio based on the evaluation of new factor signals and the risk levels in the portfolio. Based on these signals, Steinhoff (SNH), Blue Label Telecoms (BLU) and Supergroup (SPG) was removed, and Discovery (DSY), Mr Price (MRP) and Northam (NHM) was added. Exposures in Bidcorp (BID) and Glencore (GLN) have also been reduced while exposures to Assore (ASR) and Richemont (CFR) added in line with the risk objective of the fund.

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.

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