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

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.

The portfolio manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. This fund is also available via certain LISPS (Linked Investment Service Providers), which levy their own fees.

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

** The Satrix MSCI World Equity Index Feeder Fund invests in a share class of the underlying fund (Sanlam World Equity Tracker Fund Class I) which reinvests all income declared and received. As such, the Satrix MSCI World Equity Index Feeder Fund does not distribute. A Feeder Fund is a portfolio that, apart from assets in liquid form, consists solely of participatory interest in single portfolio of a collective investment scheme (Sanlam World Equity Tracker Fund I; fee 0.30%).

The Satrix MSCI World Equity Index Feeder Fund invests in the dollar based Sanlam World Equity Tracker Fund listed on the Irish Stock Exchange. The performance of the Satrix MSCI World Equity Index Feeder Fund relative to its benchmark may be affected on a day to day basis as a result of the differing timezones, pricing points, transactions and exchange rates, all which are associated with the daily price calculation of the Satrix MSCI World Equity Index Feeder Fund.

The price of the Satrix MSCI World Equity Index Feeder Fund for the current business day is based on the prevailing closing price of the Sanlam World Equity Tracker Fund (the underlying fund) of the previous business day. Transactions on the underlying Sanlam World Equity Tracker Fund is executed at the next pricing point (based on forward pricing) that may also affect the performance of the Satrix MSCI World Equity Index Feeder Fund relative to its benchmark on a trading day in addition to exchange rate conversions.

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.

Market review

For the first time on record, global equity markets rallied in all 12 months of a year. The MSCI World Index rallied 22.4% in 2017, which is one of the strongest years since 2009. Consistent with previous economic upturns, the US lagged the global index somewhat while Emerging Markets (EM) (+34.3%) and Asia Pacific ex Japan (+33.5%) led the pack. At the beginning of 2017, global macroeconomics and earnings were improving and the policy was accommodative and, analysing the current environment, it seems as if the same attractive set-up for equities exists at the start of 2018.

While tax reforms in the US should provide a big boost to 2018 earnings growth, there are several reasons to expect it to be a headwind in subsequent years, due to the fact that higher returns should incentivise additional competition, which then should have a negative impact on margins over time. The stronger growth could also result in more aggressive Fed tightening, which could eventually weigh on overall economic growth.

The yields on the US 10-year rose marginally from 2.33% to 2.40% over the quarter, but for a brief period when they touched 2.5%. However, the curve flattened aggressively as shorter maturities sold off in anticipation of the December rate hike and continued tightening of monetary policy by the Fed in 2018. Yields on German bonds rallied slightly from 0.46% to 0.42%.

Performance and portfolio actions

The MSCI World Index (Developed Markets) realised a net return of 5.51% in US dollar terms for the fourth quarter of 2017, which was worse than that of the MSCI Emerging Markets Index of 7.4%.

Our Feeder Fund buys and sells units in a ‘parent fund’ called the Satrix MSCI World Index fund, which tracks 23 developed countries with more than 1 600 shares included in the index. We do the tracking of this index through a process of optimisation with a tracking error varying between 15 and 18 basis points. The MSCI World Index (in rand terms) managed a return of about -3.27% over the last three months; this negative return was mainly due to the rand appreciating by about 9% against the US dollar.

Conclusion

Last year, the risks linked to Fed tapering and a China hard landing informed a lot of the cautious views on global equities. Cheap money found its way into alternative assets with cryptocurrencies being all the rage. This year, the risk of a China hard landing appears to have abated but there are continued concerns about the path of the US economy and future Fed actions. Emerging markets last year benefited from a buoyant global growth environment but valuations have now normalised.