NAV on 2019/09/13
|NAV on 2019/09/12
|52 week high on 2018/09/17
|52 week low on 2019/01/07
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
Sanlam Collective Investments
MSCI World Index
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Sam has been appointed head of the Unconstrained Strategies team at Momentum Asset Management and brings 16 years' of domestic and global investment experience to the firm. Sam was at Investec Asset Management until September 2011, where he held the positions of director, head of South African equities and portfolio manager in the Global Contrarian team. He started his career in the investment management industry at Allan Gray and moved to Abvest (now ABSA Asset Management), where he fulfilled the roles of portfolio manager, chief investment officer and, ultimately, chief executive officer, before leaving to join Investec Asset Management in early 2006. He headed a team of investment professionals responsible for well over R100 billion in equities across the full spectrum of portfolios, from pure equity to multiasset mandates. He was the lead portfolio manager and key decision maker for close on R40 billion in client assets, including the Investec Global Franchise Fund and Investec Cautious Managed Fund. He also managed the Discovery Equity Fund from its inception in November 2007.
Counterpoint SCI* Global Equity FF -Jun 19
The second quarter of 2019 maintained the positive trend of the previous quarter, albeit with increased volatility on an intra-quarter basis. The US and Developed markets rebounded strongly while emerging markets nudged up slightly after a stellar first quarter.
Global risk markets experienced a brief correction in May, but the rebound has been swift and characterised by a synchronised and correlated upsurge. The US Fed has continued to signal a remarkable reversal in policy stance. The Fed’s pivot in January ushered in a ‘risk-on’ rally and a return to a regime of favouring the search for yield. The US Fed now appears to be on course to reducing interest rates in July. In 2019, central banks have adopted an abrupt turnaround from Quantitative Tightening to a potential resumption of Quantitative Easing. Market participants are actively repositioning, as financial markets are currently in the throes of navigating this change in regime.
As a consequence, the CBOE Volatility Index (VIX) spiked in May and has stabilised at a relatively higher level. For the moment, the market appears willing to disregard the deep drawdown in December 2018 and the recent spike in volatility. In June 2019, investor complacency and related euphoria returned, as trade-war fears ebbed and central bank dovishness became the prevailing narrative. US equities have rebounded so strongly that we are once again close to all-time highs.
An additional feature of the quarter was the continued recovery in emerging market debt securities. The combination of low valuations, high yields and a supportive Fed policy has buoyed EM financial markets.
Global Bonds advanced by 3.4% as market participants started to price in the Fed’s change in policy stance and synchronised Central Bank dovishness. Emerging market bonds advanced in line with the rally in US Bond yields. It remains unclear whether US Bonds are signalling a return to QE or an upcoming recession.
For the quarter, most major asset classes advanced, with relatively few laggards. Gold surged by 9.0% as the US Dollar weakened slightly on the back of worsening yield considerations and declining growth prospects.
The MSCI World Index advanced by 4.2%. MSCI Emerging Market Index appreciated by a paltry 0.7% over the quarter.
Global property, as measured by the iShares Developed Market Property Yield ETF which tracks the FTSE EPRA / NAREIT Developed Index advanced by 0.7% over the quarter. Global Property was relatively resilient during the market drawdown in late 2018 and had an exceptional first quarter rebound. The second quarter has seen a rare divergence in the returns of global listed property and bonds.
The Fund lagged the World Index (in $) for the quarter, with a 0.61% advance. The MSCI World Index experienced a 4.00% return over the quarter.
Global Equities rebounded strongly in line with risk markets, as less restrictive monetary policy and lower fears of a hostile trade war appeared more likely.
Fund performance has lagged the recent advance due to stock selection and cash drag. Market leadership has been very narrow and sector specific. Our lack of exposure to the winning sectors explain most of the performance lag. Our defensive positioning protected capital in down markets but has struggled to keep pace in the recent recovery.
Stock selection has been a contributor while sector selection has been a significant detractor. Dollar weakness continued and provided a mild tailwind to non-US listed stocks. The fund has lower direct EM exposure, which added value in the second quarter.
At the sector level, lower exposure to Financials, Technology and Materials were the biggest detractors. Higher exposure to selected Real Estate stocks, was the most significant detractor. On the other hand, our significant underweight position in Utilities and Healthcare contributed at the margin.
The Fund is focused on stock-picking and accordingly, stock selection will always be the primary driver of returns. Over the quarter, Tobacco stock selection detracted, after adding the most value in the previous quarter.
The Fund has maintained above-average liquidity, since mid-year 2017. As a consequence, cash drag has been a perennial feature of our return profile. In Q2, the drag from cash was an additional reason the fund lagged the broader market.
We are patient and the Fund positioning remains virtually unchanged. The recent advance has enabled us to reposition our exposure but the overall slant of the portfolio remains intact. We continue to hold high quality businesses, with resilient earnings prospects, solid balance sheets and valuations. We remain ready to swiftly deploy liquidity as market opportunities unfold.
The portfolio will apart from assets in liquid form, invest solely in the participatory interests of the Counterpoint Global Equity Fund established under the Sanlam Global Funds PLC scheme. This portfolio invests in participatory interests of underlying portfolios that provide exposure to investments across a broad range of asset classes, currencies and market sectors, operated in territories with a regulatory environment which is to the satisfaction of the Manager and Trustee of a sufficient standard to provide investor protection at least equivalent to that in South Africa.