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Sanlam Investment Management
Balanced Fund

You’ve heard it before: when it comes to investing, never put your shares in one basket. But how do you choose between different shares, listed properties, bonds and offshore assets? Wouldn’t it be great if a professional could choose the most promising assets for you?

Fund Summary*

Sanlam Investment Management (SIM) Balanced Fund

Launch Date: 01 July 2004
Fund Size: R17 064.8 million
Benchmark: Mean of the ASISA SA Multi Asset High Equity Category
Time Horizon: 3 – 5 years
Quick Facts: Download
*As at 30 April 2018
Risk Profile: Moderate
Fund Classification: SA - Multi Asset - High Equity
Min Investment Amount: Lump sum: R10 000
Monthly: R500
Total Expense Ratio (TER): 1.68%
Fees: View Fees
Launch Date: 01 July 2004
Fund Size: R17 064.8 million
Benchmark: Mean of the ASISA SA Multi Asset High Equity Category
Time Horizon: 3 – 5 years
Quick Facts: Download
Risk Profile: Moderate
Fund Classification: SA - Multi Asset - High Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 1.68%
Fees: View Fees
*As at 30 April 2018

Fund Strategy

Typically this fund will hold a large weighting in JSE shares with a maximum equity exposure of 75%. Capital exposure will also include investments in money market instruments, bonds, listed property and up to 25% in offshore assets. Fund risk is lower than that of a pure equity fund. This portfolio may also invest in participatory interests of underlying unit trust portfolios.


Illustrative Cumulative Growth of an investment of R100

Performance

Annualised Total Return on a rolling monthly basis
(as at 30 April 2018)
Retail Class Fund (%) Benchmark (%)
1 year 3.85 5.24
3 year 4.17 3.8
5 year 8.6 8.31
10 year 8.98 8.18

Annualised return is the weighted average compound growth rate over the period measured
Highest and Lowest Annual Returns over 10 years
Highest Annual % 28.2
Lowest Annual % -14.49

Minimum Disclosure Document (Fund Fact Sheet)

Performance Fees FAQ

Illustrative Cumulative Growth of an investment of R100

Sanlam Investment Management (SIM)
Balanced Fund
(ASISA) South African Multi Asset High Equity

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. Sanlam World Eq11.57%
2. Naspers -N-9.95%
3. SIM Enhanced Yield Fund Class B3 (D)9.40%
4. SIM Property Fund5.93%
5. Sanlam World Equity Tracker Fund Class I USD3.59%
6. Stanbank2.52%
7. BTI Group2.31%
8. FirstRand / RMBH2.27%
9. Sasol2.10%
10. Old Mutual2.01%
Cash And Money Market Assets
International Assets
Equities
Bonds 3 - 7 Years
Bonds 0 - 3 Years
Bonds 12+ Years
Property
Bonds 7 - 12 Years
Preference Shares
Exchange Traded Funds
1. Sanlam World Eq11.57%
2. Naspers -N-9.95%
3. SIM Enhanced Yield Fund Class B3 (D)9.40%
4. SIM Property Fund5.93%
5. Sanlam World Equity Tracker Fund Class I USD3.59%
6. Stanbank2.52%
7. BTI Group2.31%
8. FirstRand / RMBH2.27%
9. Sasol2.10%
10. Old Mutual2.01%

Frederick White

Head - Balanced Funds

Over and above managing the SIM Balanced Fund, Fred has been the Head of Asset Allocation and Macro Research at Sanlam Investments since 2008. Up until then, he was Head of Resources, Strategy, and Process and Research. Fred holds an M.Eng from Stellenbosch University, is a qualified charted financial analyst (CFA) and obtained an MBA from Stanford University in 1996. Prior to joining Sanlam Investments, Fred held various roles at Investec Asset Management, including the Head of Resources.

Ralph Thomas

Ralph was appointed to his current role as portfolio manager in Balanced Funds in 2016. Ralph has more than 12 years of financial services experience specialising in multi-asset structuring. Before joining the Sanlam Group, Ralph was a director at Deutsche Bank AG (South Africa) and a senior manager at Standard Bank. Through prior roles, Ralph has gained extensive experience in trading, structuring, research and analysis across asset classes within global financial markets

Ralph holds a B.Business Science from the University of Cape Town, and obtained an MBA (cum laude) from University of Cape Town (GSB) in 2014.

Frederick White

Head - Balanced Funds

Over and above managing the SIM Balanced Fund, Fred has been the Head of Asset Allocation and Macro Research at Sanlam Investments since 2008. Up until then, he was Head of Resources, Strategy, and Process and Research. Fred holds an M.Eng from Stellenbosch University, is a qualified charted financial analyst (CFA) and obtained an MBA from Stanford University in 1996. Prior to joining Sanlam Investments, Fred held various roles at Investec Asset Management, including the Head of Resources.

Ralph Thomas

Ralph was appointed to his current role as portfolio manager in Balanced Funds in 2016. Ralph has more than 12 years of financial services experience specialising in multi-asset structuring. Before joining the Sanlam Group, Ralph was a director at Deutsche Bank AG (South Africa) and a senior manager at Standard Bank. Through prior roles, Ralph has gained extensive experience in trading, structuring, research and analysis across asset classes within global financial markets

Ralph holds a B.Business Science from the University of Cape Town, and obtained an MBA (cum laude) from University of Cape Town (GSB) in 2014.

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

Retail Class (%)

Advice initial fee (max.) 3.45%
Manager initial fee N/A
Advice annual fee (max.) 1.15%
Manager annual fee 1.26%
Total Expense Ratio (TER) 1.68%

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.

This fund is also available via certain LISPS (Linked Investment Service Providers), which levy their own fees.

The portfolio manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down.

Sanlam Reality members may qualify for a discount on the Manager annual fee.

Total Expense Ratio (TER) | PERIOD: 01 January 2015 to 31 December 2017

Total Expense Ratio (TER) | 1.68% of the value of the Financial Product 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 TER’s. Inclusive of the TER of 1.68%, a performance fee of 0.29% of the net asset value of the class of participatory interest of the portfolio was recovered. Transaction Cost (TC) | 0.15% of the value of the Financial Product 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.

Total Investment Charges (TER + TC) | 1.83% of the value of the Financial Product was incurred as costs relating to the investment of the Financial Product.

Manager Performance Fee (incl. VAT) | Performance Fee Benchmark: Mean of the ASISA SA Multi Asset High Equity Category, Base Fee: 1.25%, Fee at Benchmark: 1.25%, Fee hurdle: Mean of the ASISA SA Multi Asset High Equity Category, Sharing ratio: 20%, Minimum fee: 1.25%, Maximum fee: 2.85%, Fee example: 1.25% p.a. if the fund performs in line with its Performance Fee benchmark being Mean of the ASISA SA Multi Asset High Equity Category.

The performance fee is accrued daily, based on performance over a rolling one year period with payment to the manager being made monthly. Performance fees will only be charged once the performance fee benchmark is outperformed and only if the fund performance is positive. A copy of the Performance fee Frequently Asked Questions can be obtained from our website www.sanlamunittrustsmdd.co.za.

When you invest online

Our smart online system is working to make investing more profitable for you. The management fee you 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%.
  • 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

Sanlam Investment Management (SIM) is the local active asset management house within Sanlam Investments. When choosing a fund managed by us, you have on your side one of SA’s largest and most reputable, risk conscious investment teams, consistently meeting or exceeding our benchmarks. Sanlam Collective Investments has appointed SIM as the asset manager for its unit trust funds, catering for the full spectrum of risk profiles.

Overview and Asset Allocation

It has been just about a decade since the global financial crisis - a decade that included stimulus previously unheard of, yet that for a long time did not seem to have much impact on economic growth and rather had as its biggest consequence significant repricing of most asset classes. The first quarter of 2018 was characterised by much nervousness about the sustainability of this repricing, the speed of reversal of the stimulus and the effect that this reversal might have on asset (de)pricing.

As mentioned last quarter, economic indicators continue to indicate synchronised global growth. At last the long period of disconnect between growth and stimulus seems to be fading. And as labour markets start to tighten, especially in the US, the potential for an uptick in inflation was one of the main flames fuelling the nerves. An upside surprise in inflation could accelerate the pace at which policy rates are increased and with it accelerate a potential derating of most asset markets.

The result of the nervousness could be seen in the volatility that characterised the first quarter. In the end equity markets, in dollar terms, ended the quarter (only) marginally lower, but not before twice declining rapidly and losing about 10% from peak to trough. The initial decline was, however, followed by a recovery, as the fear of accelerated interest rate rises subsided again and equity markets continued to receive support from a solid earnings outlook on the back of the synchronised economic growth. The net result of the two declines was to reverse the excessively buoyant rise in equity markets in the first three weeks of the quarter.

It is most unfortunate that this period of market nervousness, fuelled by economic forces, has coincided with a period of unprecedented (at least in recent decades) political nervousness, fuelled by Trump’s unusual and unpredictable approach to just about everything, a dangerous ‘mine-is-bigger-than-yours’ (nuclear) game with North Korea, a US/China trade war and Brexit. In most cases, such political developments tend to be noise rather than fundamental drivers of financial markets’ returns. However, at the moment they are adding fuel to fire with regards to the volatility that global financial markets are already experiencing.

All of that said, the low prospective returns from foreign fixed-interest assets continue to support valuations of foreign growth assets and as long as global interest rates don’t accelerate upwards (and as a base case they should not) and earnings don't contract (which they should not, given synchronised global growth), global equities are likely to continue delivering superior returns relative to fixed-interest assets. We hence continue to hold the bulk of our foreign exposure in foreign equities. Within this, we continued to add some exposure to emerging markets, which are slightly cheaper than developed markets and should continue to gain from the synchronised global growth taking place.

In the end the quarter saw -1.3% returns from global equities and +1.4% from global bonds. The biggest loser was property which returned -4.5% when it derated together with the initial rise in bond yields, but not fully recovered when bond yields stabilised and even pulled back a bit again. We continue to avoid global fixed-interest assets, since it is difficult to find a scenario where these provide any form of real return in the foreseeable future. Developed market bonds are offering low or negative prospective real yields. In addition, their yields are more likely to rise than fall, due to the quantitative easing policies of central banks coming to an end.

We also continue to hold a small position in a select basket of developed market REITs. This is due to a lack of attractively priced alternative investment opportunities. The properties we own typically have an average dividend yield of around 6%. This is fair if a real return of about 4% is required. We have, however, reduced our exposure to this basket and reinvested the funds in a more diversified portfolio of attractively priced real assets (some property, some renewable energy, some utilities) where long-term contracts are in place for income to rise with inflation.

On the local side the last few years were characterised by a lot of country-specific issues, which culminated in a series of events that all seemed to be binary in nature - with the potential to swing markets (especially fixed-interest markets) significantly in either direction. The past quarter seemed to mark the end of that era, when the first post-Zuma budget was reasonably well received and a Moody’s downgrade to junk status was (at last) avoided. For the time being, the price developments of local asset markets are likely to be driven by ‘normal’ market factors such as economic developments, cyclical forces and asset pricing compared to investment alternatives or competing markets. The first wave of this renewed ‘normal’ market behaviour (albeit amid a nervous global marketplace) saw local bonds being repriced relative to other emerging market bonds and delivering a very solid quarter in the process. The FTSE/JSE All Bond Index (ALBI) ended the quarter the best performer among major local asset classes, up 8.1%.

Given the continued binary nature of events that could determine the path of local bond markets, combined with the high forecast risks of the outcomes of these events, we continued to hold only a moderate position in local bonds. We did, however, supplement our bond exposure with another derivative structure that would provide additional exposure to bonds in the case of a bond rally, which resulted in additional exposure to bonds when the stronger bond yields did materialise. These structures ended the quarter well in the money and should bond yields remain at current levels, the remaining time value in these structures will accrue to the portfolio over the course of the next few months. From the quarter-end levels for bond yields, we expect bonds to give decent real returns, but not to outperform our expected return from the asset class and consequently we continue to hold only a moderate exposure to local bonds.

Growth assets, on the other hand. had a tough quarter. Equities faced the volatility experienced by global equity markets and on top of that had to contend with a material pullback in the index-dominating Naspers. In the end, the FTSE/JSE Shareholder Weighted Index (Swix) ended the quarter down 6.8%, while in US dollar terms it underperformed the MSCI Emerging Markets Index by almost 4%. We have not made any material changes to our local equity positioning. We have hedges in place, covering about 15% of our equities, to provide partial protection in the case of a fall in equity markets. By far the toughest experience of the quarter was to be found in the property sector, where the FTSE/JSE SA Listed Property Index (SAPY) was down almost 20% for the quarter.

This index was rocked by both the global decline in properties, as well as (most significantly) big falls in the Resilient group of companies on concerns of Steinhoff-type overvaluation. It was most fortuitous that the previous quarter’s additions to our local property position was obtained by virtue of a basket of the three largest SA REITs (Growthpoint, Redefine and Hyprop), as discussed last quarter. These shares avoided the decline that the broader index experienced and (as a collective) ended the quarter with a positive performance in excess of 3%, compared with the said 20% loss in the reference index. However, since we still had sizeable exposure to the broader index as well, the weak quarter for properties did materially detract from performance for the quarter. As an asset class property offers an attractive yield (both the index and the group of large SA REITs) and, barring any further derating, it requires very little distribution growth in order to outperform local fixed-interest assets. We therefore continue to hold meaningful exposure to local property.

Last quarter we observed the rand strengthening significantly as SA-specific risks subsided. This quarter the rand further consolidated gains. On a purchasing power parity basis, the trade-weighted rand is on the strong side. Against the euro and British pound, the rand remains overvalued while the strong move during recent times also saw it become marginally overvalued against the US dollar. Based on currency valuation alone, one would at these levels contemplate starting to add to your position in foreign investments. However, this is not a straightforward decision, given the higher valuation levels of foreign asset markets compared to local assets. We’ll increase foreign exposure as and when we can justify additional investments based on valuation.

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