NAV on 2019/05/20
|NAV on 2019/05/17
|52 week high on 2018/09/06
|52 week low on 2019/01/02
|Total Expense Ratio on 2018/12/31
|Total Expense Ratio (performance fee) on 2018/12/31
Sanlam Collective Investments
South African--Multi Asset--Low Equity
CPI + 4% p.a.
No email address listed.
No website listed.
* 1998: Completed articles at Grant Thornton Kessel Feinstein
* Joined Franklin Asset Management (senior research analyst)
* Joined SIM in 1999 on the industrial team as an equity analyst
* 2002 - 2006: Head of small caps at Sanlam Investment Management
* Current: Head of unconstrained equities
Claude van Cuyck
Claude completed his B.Com degree at Rhodes University and B.Com Honours degree from UNISA. He is also a CFA. He joined Karlein Independent Investment Consultancy (KIIC) in 1993 as a trainee portfolio manager. He subsequently joined SIM (then Gensec Asset Management) as senior analyst: equities.
* Joined Sanlam Asset Management in 1994 as an equity analyst.
* In 1998 joined Gryphon Asset Management as a portfolio manager and analyst (running unit trusts and pension fund portfolios as well as retaining research responsibilities).
* Returned to SIM in 2002.
* Head of equities at Sanlam Investment Management.
* Has researched a number of sectors across the JSE in the 14 years that he has been an analyst/ portfolio manager.
* Currently runs the Sanlam General Equity unit trust, after managing the Industrial unit trust for a number of years.
* Member of SIM's model portfolio group that sets the equity house view and the asset allocation house view.
Denker SCI Stable Fund - Dec18
South African market overview
The market volatility continued in December with the MSCI World markets falling by 7.6% in US dollar terms. The MSCI Emerging Markets index fell by 2.6%. Fears of the US - China trade wars continued to fuel the negative sentiment, while the “shutdown” in the US economy over December together with fears of a slowdown in the US economy into 2019 played havoc with global markets. The negative returns were broad based with all sectors within the MSCI World Index posting negative returns.
I’m sure that most will agree that 2018 was a year to forget. In 2018, the MSCI EM index lost 14.2% in dollar terms, while the MSCI World Index lost 8.2%, the worst annual performance since 2008. Asia was down 15.2%.
The rand depreciated by 1.6% against the dollar in Q4. In 2018, it depreciated by 13.9% making it the fifth worst performing currency within the Emerging Market universe.
Turning to South African equities, December proved to be more positive with the FTSE/ JSE Capped Swix Index rising by 2.6% (in ZAR). However, for 2018, the Index was down 10.9%. This was the worst annual loss since 2008. Large caps lost 8.2%, mid-caps were down 9.7%, while the small cap sector declined by 14.6%. From a sector perspective, SA Resources outperformed with a total return of 15.5%, while Financials declined by 8.8% and Industrials fell by 17.5%.
Notwithstanding the tough performance in 2018, the portfolio was able to outperform its benchmark by a wide margin. The alpha generated this year has also been broad based with the stock picking being positive within Resources, Financials and Industrials. In addition, our stock picking within the small cap sector has been good in 2018, contributing to the positive alpha. Some of the small cap shares that performed well in the portfolio in 2018 were: Stefanutti Stocks (up 59%), Altron (up 52%), Grand Parade Investments (up 36%) and Adcorp (up 9%). This remains a differentiating factor for our strategy relative to our Peers.
We have increased the pace of shareholder activism this year. This is in our clients’ best interests and is demonstrated by the positive returns across the shares where we have taken an active stance to improve shareholder value. We have played an active role, together with other like-minded shareholders, in improving returns within Altron, Grand Parade Investments and Adcorp.
The recent correction in local and global markets is, in our opinion, healthy. Valuations have now come back to levels that we regard as more reasonable from a long term value creation perspective. We have also seen good quality companies that we previously regarded as too expensive now looking very attractive. This improves the breadth of the market opportunities and allows us to improve the overall quality of the portfolio at attractive long term valuations.
Last year (2018) was the worst year for equities since the Global Financial Crisis in 2008. In times of increasing pessimism, our experience has proven that opportunities arise to buy great businesses at bargain basement prices.
As we have mentioned in the past, with global interest rates moving firmly upwards, it will be the most expensive stocks (highest PE) that are hit the hardest and as managers who seek out mispriced opportunities, this should play to our strengths.
The Price to Earnings ratio (PE) of the FTSE/ JSE All Share Index has contracted by 23% from a PE of 21.2 times (in 2017) to its current level of 16.4 times. Although market consensus earnings forecasts of 15% in 2019 may be a bit too optimistic (although the base is low), the forward PE ratio of 12.3 times is more reflective of fair value. The one year forward Dividend Yield is a more respectable 4.2%. A few additional statistics are interesting to note: of the 123 stocks on the JSE that we actively research (this makes up more than 95% of the market capitalisation of the JSE), the median one year forward PE ratio is 10.4 times. A total of 45% of the number of companies are trading on one year forward PE ratios less than 10 times. The probability of generating real long term returns from South African Equities has increased dramatically.
For the first time in a number of years we are identifying good quality businesses trading at attractive long term intrinsic valuations. This excites us as active managers. The valuation metrics are, undoubtedly, more attractive. The only caveat is an uncertain economic and political environment in the short term as we build up to the elections in South Africa. A more stable political environment with market friendly economic policies would certainly ignite a period of attractive returns for South African investors. In light of a slightly stronger Rand, lower oil prices and stable inflation it is likely that the SARB could pause on interest rate hikes. These factors should underpin an improved level of consumer confidence. Although global growth is likely to slow in 2019 (in particular the US and China), we have seen 8 interest rate hikes in the US since December 2015. It is likely that we’re coming to the end of the interest rate hiking cycle in the US with possibly one more hike in 2019.
The portfolio will invest in a combination of asset classes, both locally and internationally, including assets in liquid form, money market instruments, bonds, debentures, corporate debt, equity securities, property securities, preference shares, convertible equities, non-equity securities and any other listed and unlisted securities which are considered to be consistent with the portfolio's primary objective and the Act or the Registrar may allow all to be acquired at fair value. The manager may also include unlisted forward currency, interest rate and exchange rate swap transactions for efficient portfolio purposes. The portfolio will be actively managed with exposure to various asset classes being varied to reflect changing economic and market circumstances, in order to maximise returns for the investors. The portfolio shall adhere to the multi asset: low equity classification requirements as set out by the Asisa standard: fund classification for South African regulated collective investment scheme portfolios.