NAV on 2019/01/18
|NAV on 2019/01/17
|52 week high on 2018/01/26
|52 week low on 2019/01/03
|Total Expense Ratio on 2013/12/31
|Total Expense Ratio (performance fee) on 2013/12/31
Sanlam Collective Investments
FTSE/JSE CAPI Index (J303T)
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Ampersand SCI Equity - Sep 18
Mark Twain’s observation of “History does not repeat, but it does rhyme” is an apt synopsis for what we experienced during the third quarter of 2018.
The trade tensions and threats of tariffs and protectionism between the US and its major trading partners have continued to upset the perceived calm and tranquillity across the globe, yet economic activity and growth have remained robust.
This robust economic performance provided support to developed equity markets yet the risk associated with higher tariffs and the rise of protectionist policies put pressure on emerging markets as many developed market investors decided to reduce overall risk exposure. This risk adjustment caused strife across most emerging markets as many EM currencies experienced significant losses with Argentina and Turkey being the most affected. However the events also scarred the local currency and stock market.
On the global front, tensions between the US and the rest of the world continue to dominate the narrative. This culminated in an open spat at the recently held G7 Summit in Canada in June 2018 but continued during many of Trump’s subsequent visits across the globe. This has again been evident in the negotiations around NAFTA where the United States has caused strained relations with both their closest neighbours and historic allies. It does appear that the changing of the guard in Mexico where a more conservative government has taken power has paved the way for a revised trade agreement between Mexico and the US, but the negotiations between the Trump administration and Canada has taken a distinctly different tone and seems likely to drag on.
On the local political front President Ramaphosa has dedicated a lot of energy to reviving the local economy and his strategy is focused on attracting foreign investment. He has already managed to convince various parties across the globe to keep supporting South Africa and we have seen public commitments from numerous countries and governments with the most significant coming from the Kingdom of Saudi Arabia, the UAE and China where the President has managed to secure funding of around $35billion. The bulk of this funding will go towards infrastructure and energy orientated project hence it does entrench a much needed longer term focus within the SA government which under the previous administration was more focused on self-enrichment and cadre politics.
The immediate economic growth and employment environment in South Africa however remains dire. The local economy entered a technical recession as the economy contracted for a second quarter in a row. This brought the annual growth rate to a meagre 0.4% yearon- year while the unemployment rate remained stubbornly high at 27.2%. The growth outlook for the local economy also does not appear very rosy as many sectors continue to struggle and it is likely that economic growth could continue to disappoint for the rest of 2018.
The US has continued to lead the global growth trajectory and the US economy has continued to surprise on the upside when it comes to growth and employment. Economic growth has hit a multi-year high, reaching 4.2% year-on-year as at the end of the second quarter of 2018. This culminated in strong US employment growth and the unemployment rate hitting a 49-year low of 3.7%. Expectations around growth remain positive and this has allowed the US Fed to continue with gradual interest rate increases which is expected to continue over the next 12 to 18 months.
Economic growth in the European Union has continued to recover and it finally appears as if the tide has turned. This is especially evident in some of the peripheral economies where the expected growth rates in some smaller economies (like Romania, Ireland, Poland and Bulgaria) are inching above 4% p.a. while the larger economies like Germany and France are slowly pushing above 2%. The one large risk to the region remains the possible negative impact of Brexit and the uncertainty relating to this. Hopefully the EU and the UK will come up with a workable solution but time is quickly running out as the cut-off date for the UK leaving the EU is 29 March 2019.
The Ampersand Sanlam Collective Investments Equity Fund gained 1.74% for the quarter against the JSE All Share TR Index losing -2.17%. The portfolio managed to generate reasonably robust performance considering the volatility which came from the entrenched diversification across different assets and geographies.
Position going forward
Our key positions across the portfolios have remained consistent for the majority of the past 12 to 18 months.
We retain a strong allocation to offshore assets and we also continue to hold a significant allocation to SA Listed Property. We will continue to monitor the position closely to effectively manage risks and embrace opportunities when they are presented. We remain concerned with market valuations and risk, however structurally we need to retain growth assets in the portfolio to ensure we achieve our longer term objectives.
Asset allocation and diversification therefore remain key to ensuring downside risk management while continuing to achieve our inflation-based returns. Our aim is to provide our investors with diverse exposure across various investment strategies, investment managers and assets. We feel strongly that the result of this diversification strategy should have a high probability of achieving our long term return objectives, while providing protection against short term swings and overall risk.
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.