NAV on 2019/05/20
|NAV on 2019/05/17
|52 week high on 2018/08/29
|52 week low on 2019/01/03
|Total Expense Ratio on 2018/12/31
|Total Expense Ratio (performance fee) on 2018/12/31
Sanlam Collective Investments
FTSE/JSE CAPI Index (J303T)
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Ampersand SCI Equity - Dec 18
Economic Market Overview
2018 turned out to be a disappointing and difficult year for growth asset investors, both locally and globally. We believe structural drivers and long-term fundamentals should reward growth assets and by default risk-seeking investors over the longer term, yet this was however not what investors experienced over the last 12 months.
Global economic growth appeared strong and coordinated in the first 9 months of 2018 leading into the last quarter. Market sentiment remained positive and risk appetite appeared strong which in turn made most market pundits reasonably optimistic on market prospects going into quarter 4. What transpired tested the resolve of even the boldest risk seeking investors.
While some volatility has been clearly evident across most growth assets over the entire year, the last quarter was particularly negative with the pullback seen in the price of Brent Crude oil, probably being one of the best illustrations of the change in economic conditions and outlook.
The price of oil reached a 4 year high in October 2018 – breaking $86 per barrel on the back of strong demand and supply concerns out of the Middle East. Unfortunately, the demand conditions changed quickly as a growing number of market participants struggled to determine the medium to long term effects of trade tensions between the US and China. Another contributing factor to the significant price drop was the possibility of even greater tightening of global monetary conditions on the back of continued interest rate increases being pushed through by the US Fed. These and other factors resulted in the price dropping to a low of $50 per barrel on 24 December 2018. The price did recover some of the losses ending the year at $54 per barrel or negative move of almost 35%!
Market participants started to doubt the narrative around synchronised global growth while concerns around the possible impact of tighter Global Central Bank monetary policies impacted investor confidence and analyst expectations. This in turn resulted in growth assets losing their allure forcing down medium-term expectations and causing significant pain across most equity markets.
Short-term volatility continues to present patient investors with opportunities across a number of different sectors, assets and geographies yet there are numerous risks and uncertainties which might impact these investments negatively over the next few months.
The Ampersand Sanlam Collective Investments Equity Fund lost -4.07% for the quarter against the JSE All Share TR Index performance of -4.97%. The underperformance of the fund is due to our South African Listed Property exposure which has been under significant pressure as well as our offshore component.
Position going forward
Our key positions across the portfolios have remained consistent for the majority of the past 12 months.
Over the past 18 to 24 months we continued to increase the effective diversification while reducing the overall risk within all our portfolios, as we were not completely comfortable with the dominant narrative in the broader market. Unfortunately, this coincided with a significant increase in volatility across most assets but specifically growth assets which impacted all of our portfolios.
During certain market cycles these strategies have added significant value and resulted in significant outperformance and protection. Unfortunately, over the past 12 months this has not been the case as our strategy to diversify the portfolios away from local fixed income assets detracted significantly from performance due to the continued decrease in global risk appetite and increased risk aversion.
The Ampersand Momentum Equity Fund is an equity portfolio that seeks to sustain high long-term capital growth. The portfolio's investment universe consists of financially sound equity securities, preference shares, convertible bonds, property shares and property related securities listed on exchanges and assets in liquid form. The portfolio's equity exposure will always exceed 80% of its net asset value. The manager may also invest in participatory interests or any other form of participation in portfolios of collective investment schemes or other similar collective schemes as the Act may allow from time to time, and which are consistent with the portfolio's investment policy. Where the aforementioned schemes are operated in territories other than South Africa, participatory interests or any other form of participation in portfolios of these schemes will be included in the portfolio only where the regulatory environment is, to the satisfaction of the manager and the trustee, of sufficient standard to provide investor protection at least equal to that in South Africa. The portfolio may from time to time invest in financial instruments, in accordance with the provisions of the Act, and the Regulations thereto, as amended from time to time, in order to achieve the portfolio's investment objective. The manager may also include unlisted forward currency, interest rate and exchange rate swap transactions for efficient portfolio management purposes. Nothing in this Supplemental Deed shall preclude the manager from varying the ratios of securities or assets in liquid form in changing economic environment or market conditions, or to meet the requirements in terms of legislation and from retaining cash or placing cash on deposit in terms of the Deed and this Supplemental Deed.