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This fund aims to outperform the FTSE/JSE All Share Index through active stock selection across all sectors and market capitalisation on the JSE. The fund may at any time hold a maximum of 25% in offshore assets. This fund may also invest in derivatives for efficient portfolio management.
Illustrative Cumulative Growth of an investment of R100
Performance Fees FAQ
Cumulative Growth Over Time
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.
Head of Equity – Sanlam Investment Management
Chartered Accountant, Patrice has a BSc (Econ) in Monetary Economics with first class honours and an MSc (Econ), both from the London School of Economics. He also has an MBA with distinction from Manchester Business School, which he completed in 2003. Initially, he worked at PricewaterhouseCoopers in London and Johannesburg, then moved to Old Mutual Asset Managers where he won the Raging Bull and S&P award for top performance in 2004. Now, he is treasurer of the Association of Black Securities Professionals (ABSP) in the Western Cape and Head of Equity at Sanlam Investment Management. He managed the SIM Top Choice unit trust from the end of 2006 and in 2007 was promoted to voting member of the Model Portfolio Group, where he has a direct impact on the core house view equity portfolio.
Retail Class (%)
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.
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 TER’s.
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.
This is the percentage of the value of the Financial Product that was incurred as costs relating to the investment of the Financial Product.
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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.
The war of words between Donald Trump and China continued with Trump upping the ante threatening to impose an average 2.5% tariff on $100bn worth of Chinese imports (this would equate to 4% of total US imports or 0.6% of US GDP) with another $200bn of Chinese goods being threatened with 10% tariffs if the Chinese retaliate. Trump has indicated that he has a problem with the trade surplus that China and other nations have accumulated with the US, given that tariffs on global trade are at low single digits. It should be borne in mind that it was the imposition of 60% import tariffs that precipitated the world into the Great Depression in the 1930s. If Trump extends tariffs to auto imports and other goods totaling close to $1 trillion of imports then a third of US imports could be exposed to 7% tariffs and impact 4.5% of US GDP! Emerging markets wobbled this quarter, down some 8% in US Dollars, as the market got increasingly concerned that key industries would suffer from the trade war and future investment plans would be shelved, curtailing economic growth. But we should bear in mind that China’s global trade amounts to $4 trillion so tariffs will impact maybe $50-100bn of inputs and this is 3-5% of Chinese GDP. However, this effect will be magnified on certain companies. For instance, if new competitors are allowed directly into the Chinese markets, then local Chinese companies will suffer and lose market share.
Q1 GDP data at -2.2% was a negative surprise driven down by a huge pull-back in Agriculture and a refinery shut-down impacting manufacturing. The gross operating surplus turned down, which does not bode well for gross fixed capital formation. Economic growth for the year is now likely to be closer to 1.5% - well below the optimistic forecasts of 1.75-2% at the beginning of the year. Demand has been sluggish but the culprit has been the supply side, where production has slowed considerably. SA manufacturing activity has moderated in unison with the global trend with the latest number indicating contraction.
The quarter was characterised by a severe weakening of the Rand by some 14% against the greenback, as risk-off sentiment led to emerging market outflows. Complacent market participants were bamboozled by the China-US trade threats with the Shanghai composite entering bear market territory with a 13% decline this quarter. Brent Oil, up 22% this quarter, was driven up by the fact that Opec displayed uncharacteristic discipline and the further risk that Trump may impose sanctions on Iran after pulling out of the nuclear deal. European equity markets did reasonably well, up 4%, despite some panic amongst the banking sector, which was down 5% in the quarter. But despite all these negative stories, global equities had a positive quarter, up 2%, while the global bond index was down 3% in Dollars. Emerging market equities were pounded, down 8% in Dollars, while emerging market bonds did slightly worse (down 9%) - with the strong US Dollar contributing in large part to the negative return. Also, another favourite instrument of speculation, Bitcoin, tumbled by over 50% in Dollars this year while gold fared slightly better, down only 4% this year.
In Rand terms, the FTSE/JSE Shareholder Weighted Index was up 2% driven by the huge rally in resources stocks, up some 20% (but in Dollars the JSE underperformed emerging market equities, down 12%).
However, the “Ramaphoria rally” experienced in the first quarter unravelled. We saw General retailers down 19% and Banks down 8% this quarter. On the local bourse the more diversified, globally exposed large caps fared much better than the more SA focused mid and small caps this quarter. In addition, with the private sector on an investment strike and capital stock having dropped to a low 20% of GDP, our construction companies have been under severe pressure with Basil Read entering business rescue, Aveng having to undergo a dilutive rights issue at 10c with its market cap collapsing to R500m, reflecting the cash it raised and being subject to a bid from Murray & Roberts, and the Group 5 market cap collapsing to a mere R100m as it also considers an equity raise. Only Murray & Roberts was able to hold its own due to the hostile bid from German grouping Aton with the share price spiking from 950c to 1700c after the bid was announced.
The SIM Top Choice Fund had a solid quarter, up 4.6%, outperforming the FTSE/JSE Shareholder Weighted index, which was up a mere 2%.
Naspers, the largest position in the fund, contributed positively (up 20%). After realising $10bn from selling down 2% of their Tencent stake to 31% the previous quarter, the big news has been the sale of 11.2% of Flipkart (India) to Walmart (US) for some $2,2bn, which amounts to an internal rate of return (IRR) of approximately 32% pa.
Our large positions in resources stocks also helped the fund with Anglo American up 11%, Mondi up close to 18% and Sasol up 21%, driven by a 22% increase in the oil price.
Our second largest holding, British American Tobacco, was up just under 1%, underperforming the market. There are lingering concerns that the core cigarette business is under attack from nicotine regulation and by e-cigarettes globally. Our assessment is that British American Tobacco will adapt to the new trend by launching competing offerings and adjust their business model accordingly. The stock trades on a very attractive valuation and forward PE of under 13x.
On the downside, our overweight position to select financial stocks detracted from value. Old Mutual Plc unbundled its UK wealth business, Quilter, leaving behind a largely SA focused financial services group. The stock was sold off in the emerging market downdraft and despite the Quilter listing seeing sizeable demand locally, the Old Mutual Ltd stock is likely to see some flow back as UK investors divest due to the fact that Old Mutual is not part of UK indices. Also, Banks pulled back with Barclays Africa (-13%) and Standard Bank (-10%) detracting from performance after a strong run at the beginning of the year.
At the end of last year, positive sentiment swept through the JSE as elusive global flows found their way into South African equities, driving up the value of retailer and banking stocks. A lot was premised on the reforms that President Ramaphosa would institute. As contrarian investors, we had remained steadfast in our investment positioning and this quarter saw an unwind of most of the euphoric rally. It remains important to always take a long-term view when investing in stocks and avoid focusing on short-term news flow which can usually dissipate in an instant.
The fund reflects the best views of SIM’s equity unit trust portfolio managers and holds approximately 20 stocks. It is not benchmark-cognisant and owns no offshore stocks. We believe that this portfolio provides the best of both worlds in terms of representing our investment ideas aggressively, while providing adequate diversification. The fund’s largest holdings are companies of which valuations are below our estimate of fair value.
Patrice Rassou, fund manager of the SIM Top Choice Equity Fund, reveals where his best ideas come from.
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