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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?

Quick Facts About The Fund

Sanlam Investment Management (SIM) Balanced Fund

Launch Date: 01 February 1995
Fund Size: R16 453.7 million
Benchmark: Mean of the ASISA SA Multi Asset High Equity Category
Time Horizon: 3 – 5 years
Risk Profile: Moderate
Fund Classification: SA - Multi Asset - High Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 1.67%
Launch Date: 01 February 1995
Fund Size: R16 453.7 million
Benchmark: Mean of the ASISA SA Multi Asset High Equity Category
Time Horizon: 3 – 5 years
Risk Profile: Moderate
Fund Classification: SA - Multi Asset - High Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 1.67%

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 Annualised Investment Performance

Performance

Annualised as at 31 July 2017 on a rolling monthly basis
Retail Class Fund (%) Benchmark (%)
1 year 5.59 4.01
3 year 5.83 5.49
5 year 11.01 10.06
10 year 8.71 8.17

Annualised return is the weighted average compound growth rate over the period measured
Actual highest and lowest annual figures for rolling 10 years
Highest Annual % 19.81
Lowest Annual % -4.23

Minimum Disclosure Document (Fund Fact Sheet)

Performance Fees FAQ

Illustrative Annualised Investment Performance

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

Source of graph : Morningstar

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 in the table above is a graphical representation of your selection (of the benchmark's past performance of the fund you selected) – including your investment objective, risk profile and fund choice – and is based on the past performance of the fund in relation to your investment. This performance is indicative and not guaranteed. The graph is for illustrative purposes only and investment performance is calculated by taking into account initial fees and all ongoing fees that you have to pay and the income reinvested on the reinvestment date.

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. The fund is exposed to equities, which means prices will go up and down.

1. Sanlam World Eq 13.22%
2. Naspers -N- 9.16%
3. SIM Property Fund 7.08%
4. SIM Enhanced Yield Fund Class B3 (D) 6.55%
5. Sanlam World Equity Tracker Fund Class I USD 3.77%
6. BTI Group 2.86%
7. Steinhoff Int Hldgs N.v 1.95%
8. Sasol 1.94%
9. Sanlam Europe (ex UK) Equity Tracker Fund Class I 1.88%
10. MTN 1.76%
Cash And Money Market Assets
International Assets
Equities
Bonds 3 - 7 Years
Bonds 0 - 3 Years
Bonds 12+ Years
Inflation Linked Bonds
Property
Bonds 7 - 12 Years
Preference Shares
Exchange Traded Funds
1. Sanlam World Eq 13.22%
2. Naspers -N- 9.16%
3. SIM Property Fund 7.08%
4. SIM Enhanced Yield Fund Class B3 (D) 6.55%
5. Sanlam World Equity Tracker Fund Class I USD 3.77%
6. BTI Group 2.86%
7. Steinhoff Int Hldgs N.v 1.95%
8. Sasol 1.94%
9. Sanlam Europe (ex UK) Equity Tracker Fund Class I 1.88%
10. MTN 1.76%

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.) 3.42%
Manager initial fee N/A
Advice annual fee (max.) 1.14%
Manager annual fee 1.25%
Total Expense Ratio (TER) 1.67%

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.

Obtain a personalised cost estimate before investing by visiting www.sanlamunittrustsmdd.co.za and using our Effective Annual Cost (EAC) calculator. Alternatively, contact us at 0860 100 266.

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. This fund is also available via certain LISPS (Linked Investment Service Providers), which levy their own fees. Sanlam Reality members may qualify for a discount on the Manager annual fee.

Total Expense Ratio (TER) | PERIOD: 1 April 2014 to 31 March 2017
Total Expense Ratio (TER) | 1.67% 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 1.67%, 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) | 0.17% 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) | 1.84% 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 FAQ is available on www.sanlamunittrustsmdd.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%

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.

Despite the fact that global political uncertainty has increased, global equity markets have continued to deliver positive returns. Low prospective returns from fixed interest assets, which do not only offer unattractive current yields, but also the risk of rising yields which could further reduce returns from these assets, have contributed to push pricing levels on global risky assets to levels higher than those investors were historically used to. Equity markets have not reacted negatively to political uncertainty, but rather to the positive developments in earnings expectations, which have continued to improve in recent times. Global economic developments have on the margin been positive, which support these expectations. As long as global interest rates remain very low or rise very slowly and earnings don't contract sharply, the current pricing levels of equities could be maintained and equities should deliver superior returns to fixed interest assets. For this reason we have retained a moderately high exposure to equities.

From a pricing perspective, local equities seem reasonably priced. On an index basis one might get a different impression - the SA market dividend yield is well below and earnings multiples well above their respective long-term averages. However, these index-wide metrics are significantly influenced by Naspers, which has grown to a component weight of almost 20% of the index. Excluding Naspers, equity valuations on most metrics seem much more palatable, especially in a global context of higher priced equities. Naspers, which despite its recent performance still offers further upside, should not be measured on the same value metrics as the broader market. Furthermore, companies which primarily derive their earnings from South Africa have become cheap.

Since equity exposure comes with re-pricing risk, we have protected a significant portion of equity exposure (roughly 40% in recent times) through the use of derivative structures. These structures are used solely for protection and not for speculative purposes. The key objective of our derivative strategy is to firstly protect our investors against a portion of any significant contraction in equity markets (greater than an approximate 20% move) and secondly to not give up those gains when markets recover. This should in the long run enhance the returns of our clients’ portfolios, while also contributing to lower volatility of returns.

In South Africa, the cabinet reshuffle at the end of March resulting in the change of SA’s minister and deputy minister of finance has increased local policy uncertainty. Given statements by the new minister of finance and his adviser it seems that there is an increased probability of the implementation of less market-friendly policies. These issues contributed to both S&P and Fitch downgrading South Africa’s foreign credit rating to sub-investment grade. We believe that the risk of investing in SA assets has increased consequently; a higher risk premium should be used when pricing local assets.

Up until now we were of the opinion that conventional ten-year bonds are fairly priced if a prospective real return of 2% was on offer. Given the political uncertainty in the country, we believe this number should now be higher. This is not due to an increased risk of default, as governments are always able to service their own currency debt (i.e. they are in control of the printing presses). However, mismanagement of an economy can manifest itself in rising inflation, which could be made worse through an accompanying weakening currency. Given the policy uncertainty, SA’s inflation risk premium has risen.

With this as a backdrop, South African conventional bonds, offering a real yield of near 3%, seem fairly priced and do continue to offer attractive yields compared to domestic bonds of similarly rated countries. But in the light of current and future political uncertainty (in the run up to the ANC elective conference later in the year), bond yields are more likely to continue trading in the range seen thus far this year, than to move materially lower. Furthermore, upward spikes in yields are more likely to occur (due to new unfavourable political developments and/or further downgrades), than downward spikes. Given that shorter-dated credit instruments offer returns that are similar to longer-dated government bonds but with much lower volatility, we have deemed it prudent to rather redeploy a portion of our bond exposure to shorter-dated exposure which includes credit.

Ten-year inflation-linked bonds currently offer a real yield of 2.50%. This is an attractive real yield. However, other local fixed interest yields (local property) are even more attractive. Furthermore, local property has derated the most out of all asset classes over the last two and a half years - a period during which returns from all local assets classes have been remarkably similar. This has occurred despite property's resilient growth in dividends, which has kept pace with inflation and was much stronger than dividend growth from equities. Furthermore, approximately 35% of JSE listed property companies’ earnings are now from outside South Africa, with a skew towards euro exposure - a currency that seems very cheap against the rand on a purchasing power parity basis. Consequently we have reduced exposure to inflation-linked bonds and redeployed the funds to listed property.

On a purchasing power parity basis, the trade-weighted rand is back to about fair value. Against the euro and British pound, the rand remains overvalued while it continues to be undervalued versus the US dollar. Offshore exposure in our portfolios is skewed towards the cheaper currencies, including local property exposure, foreign property exposure and our foreign equity exposure.

We continue to avoid global sovereign bonds. We would require a premium above long-run global inflation assumptions of 2% before considering investing in developed market government bonds.

We continue to retain exposure to a select basket of developed market REITs. This is due to a lack of attractively priced alternative investment opportunities. Currently the properties we own have an average dividend yield of 5.5%. This is fair if a real return of about 4% is required. (All else equal, the dividends of property companies grow at less than inflation, because part of the rental income is needed for refurbishment). Similar to local properties, global properties have also derated over the last two years and arguably now offer better value relative to global fixed interest assets.

Real yields have dropped substantially after the 2008 financial crisis. We remain unsure whether this is a temporary phenomenon due to central bank policies of quantitative easing, or whether this is more permanent due to globalisation and demographic changes. If temporary, there is uncertainty regarding the rate of normalisation.

Assets are currently priced as if real yields are going to remain low for a prolonged period and we can express a rationale for such based on global debt levels. On a relative basis, risky assets are priced to continue giving similar outperformance (over fixed interest assets) to what they have historically given, hence our earlier mentioned healthy exposure to risky assets. The risk lies in a more rapid normalisation of pricing levels (to historical average values) that would detract from risky assets' relative returns, which ties in with the high level of protection introduced into our portfolios.

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