NAV on 2020/05/29
|NAV on 2020/05/28
|52 week high on 2019/12/31
|52 week low on 2020/04/06
|Total Expense Ratio on 2019/09/30
|Total Expense Ratio (performance fee) on 2019/09/30
Sanlam Collective Investments
South African--Multi Asset--Income
Stefi Call Rate
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Ampersand SCI Income Fund - Mar 19
'The time to buy is when there’s blood in the streets, even if the blood is your own' - Victor Rothschilds, 3rd - Baron Rothschild.
Even the most seasoned and optimistic long-term investors felt the anxiety and distress experienced in the last quarter of 2018. As examined and explained in our previous newsletter regarding the last quarter of last year, investors relived some of the most dramatic drops seen over the past 100 years. The drop was eclipsed only by the losses suffered during the Great Depression in the late 1920’s. There were pundits and market commentators, both locally and abroad, pushing the narrative that this was the 'beginning of the end' and perhaps the 'start of the great unwind'. Most of these pundits based their predictions on recent information and volatility, extrapolating the experience of the last quarter of 2018 forward into perpetuity. Although they could have been proven correct 'if all else remained equal', the market adjusted to new information and resulted in a marked change in the exact opposite direction that many of these bearish pundits predicted.
The most obvious change that occurred related to the US Fed which has turned decidedly dovish, removing any concerns around interest rates moving up too quickly. This dovish tone encouraged risk taking and resulted in a material recovery across all growth assets.
As we stressed during our last communiqué, short-term volatility will present patient investors with opportunities across a number of different sectors, assets and geographies. In spite of risks and uncertainties which might impact these investments negatively over the next few months, we believe the long-term entrenched growth opportunity justifies increasing or at least maintaining an allocation to growth assets, both locally and abroad.
Position going forward
Our key positions across the portfolios remain biased toward growth assets in both the local and global environment although our lower risk and more constrained portfolios do have significant exposure to local fixed income assets. The two largest absolute and peer relative positions remain our allocation to offshore assets and our allocation to local listed property.
Whilst remaining cognisant with market valuations and exogenous risks, we need to retain growth assets in the portfolio to ensure we achieve our longer-term real return objectives. As highlighted above, we have also seen a significant revaluation over the last 3 months as volatility has subsided after the carnage seen in the last quarter of 2018, resulting in many growth assets recovering most if not all of the losses seen in that quarter. This resulted in the valuation of many growth assets moving closer to earnings and market fundamentals, although some disconnect remains which presents further near-term opportunities. We believe premium valuations in certain growth sectors could experience normalisation, yet the general valuation across many sectors present interesting, albeit select, opportunities, especially if the monetary environment remains accommodative.
Asset allocation and diversification therefore remain key to ensuring downside risk management while entrenching long term inflation protection and real returns. Our aim is to provide our investors with diverse exposure across various investment strategies, investment managers and assets while continuing to focus our attention on consistently applying our philosophy and process. The result is a rigorous blend of exposures that should have a high probability of achieving our long-term return objectives (a time horizon of at least 3 years, and longer for the more risk-orientated portfolios) while providing protection against short term swings and negative surprises, and reducing the overall risk our investors face.
We urge investors to remain patient and committed to their chosen investment strategy even though negative surprises are possible. We are continuously looking for ways to increase the certainty of cash flow while remaining cognisant of our longer term capital preservation objectives.
Our belief in and commitment to our investment approach remains firm and resolute as we have weathered comparable and even worse challenges over the past 11 years. With the commitment from our clients, we remain confident that our philosophy will again result in positive outcomes and ensure safe passage through turbulent markets.
The portfolio will invest in a combination of fixed income generating assets. The major contributor to log term out-performance should come from active duration management. To achieve a greater return than a conventional money market fund, the portfolio will invest in multi assets such as cash, government and corporate bonds, inflation-linked bonds, listed property and equities, both in South Africa and internationally. The portfolio will have a maximum exposure to equities of 10% and a maximum exposure of 25% to property. The portfolio will also invest in listed and unlisted financial instruments (derivatives) as allowed by the Act from time to time.