NAV on 2019/07/22
|NAV on 2019/07/19
|52 week high on 2018/09/03
|52 week low on 2019/07/02
|Total Expense Ratio on 2019/03/31
|Total Expense Ratio (performance fee) on 2019/03/31
Sanlam Collective Investments
South African--Multi Asset--Low Equity
Composite index: 30% FTSE/JSE All Share and 70% STeFI Index
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MFS SCI Cautious Fund of funds - Mar 19
Economic Market Overview
'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.
Position going forward
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. 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.
Investments to be included in the portfolio will, apart from assets in liquid form, consist solely of participatory interests in portfolios of collective investment schemes registered in the Republic of South Africa or of participatory interests in collective investment schemes or other similar schemes operated in territories with a regulatory environment which is to the satisfaction of the manager and the trustee of a sufficient standard to provide investor protection which is at least equivalent to that in South Africa . The portfolio will consist of a mix of collective investment scheme portfolios investing in equity, bond and property markets and money market instruments. The equity limits will be aligned with that of the Asisa Fund Classification: Multi Asset Low Equity, which are currently between 0% and 40%. The portfolio will be managed in accordance with regulations governing pension funds. The portfolio will also be allowed to invest in listed and unlisted financial instruments (derivatives) as allowed by the Act from time to time. The Manager shall be permitted to invest on behalf of the portfolio in offshore investments as legislation permits. For the purpose of this portfolio, the Manager shall reserve the right to close the portfolio to new investors on a date determined by the Manager. This will be done in order to be able to manage the portfolio in accordance with its mandate. The Manager may, once a portfolio has been closed, open that portfolio again to new investors on a date determined by the Manager. The Trustee shall ensure that the investment policy set out in the preceding clauses are adhered to; provided that nothing contained in this clause shall preclude the Manager from varying the proportions of securities in terms of changing economic factors or market conditions or from retaining cash in the portfolio and/or placing cash on deposit.