NAV on 2019/07/19
|NAV on 2019/07/18
|52 week high on 2019/04/23
|52 week low on 2019/01/07
|Total Expense Ratio on 2019/03/31
|Total Expense Ratio (performance fee) on 2019/03/31
Sanlam Collective Investments
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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 Value Fund - Mar 19
Market overview SA equities experienced a strong quarter, in line with global equity markets and reduced risk aversion, after a dismal final quarter of 2018.
In the first quarter, the primary driver of equity returns was increasing risk appetite in response to less restrictive monetary policy and a reduction in fears of a hostile trade war.
In South Africa, market leadership remained narrow, led by Resources stocks and selected sectors within the Industrial complex. Financials struggled with a modest decline of 0.40%.
The All Share Index advanced by 8.0% to reverse the impact of the previous quarter's losses. The advance was not uniform and in terms of broad sectors, SA Financials lagged the most with a modest decline. Small-Caps fell by 3.4% while Mid-Caps bucked the trend with a positive 2.8% over the quarter. In terms of Equity sectors, the top performers were Platinum +49.7%, Tobacco +29.5% and General Mining +22.4%. The worst performers were Pharma -12.7% and Industrials -3.9%.
The quarter was dominated by a positive reversal in sentiment towards risk assets in general and equities more specifically. At the end of November 2018, domestic equity valuations had reverted to more reasonable levels and the sustained recovery over the last four months, augurs well for the rest of 2019.
Domestic Policymakers and leadership have demonstrated a resolve to address the structural impediments in the fiscus and critical institutions. The process is underway and will take time. At the end of the quarter, Moody's provided a welcome reprieve and additional time for policymakers to set the country on the road to fiscal recovery.
The decline in domestic equity valuations has led to less euphoric expectations and represents an opportunity for investors to participate in the recovery on a more rational basis.
The MSCI World Index advanced by 12.6% in US$ terms. MSCI Emerging Market Index appreciated by 10.0% in US$, over the quarter. Global equity markets surged upward in a synchronised and correlated fashion as the US Fed surprised the markets with an abrupt reversal in policy stance. The Fed's pivot ushered in a 'risk-on' rally and a return to a regime of favouring the search for yield. The abrupt turnaround from Quantitative Tightening to a potential resumption of Quantitative Easing is truly unprecedented and financial markets are currently in the throes of navigating this change in regime. As a consequence, the CBOE Volatility Index (VIX) declined significantly. Volatility has returned to the relatively stable pattern of 2017. The spike in volatility and deep drawdown in December 2018, is now a distant memory. Investor complacency and related euphoria have returned. Developed market equities have rebounded so strongly that we are close to all-time highs.
An additional feature of the quarter was the continued recovery in emerging market securities. The combination of low valuations, high yields and a supportive Fed policy has buoyed EM equities.
Domestic Equity valuations remain attractive relative to long term growth prospects. The Rand is likely to remain range bound and could strengthen steadily, as US bond yields decline and the US Fed continues the current monetary policy path. SA Inc equities are once again offering pockets of value. We continue to believe that we are entering a prolonged period that will suit stock-pickers and active managers. The probability is high that domestic equities, as an asset class, will muddle through provided that the risk of global contagion remains benign. For that reason, we remain cautiously optimistic and confident in our stock selection approach and ability.
Portfolio overview The Fund advanced by 9.46% in the first quarter. Performance was well ahead of both theAll Share Index and the average fund. Fund performance has experienced a positive turnaround in the last 22 months, as a change in market leadership has benefited our active, value conscious approach. In relative terms, the Fund has achieved first quartile performance over periods ranging from 3 months to 2 years. Market conditions have not been ideal for our value style but the fund has mitigated this headwind with astute stock selection, conservatism and complete avoidance of value traps. Stock and residual sector selection contributed strongly. In the first instance, the Fund's low exposure to Healthcare, General Financials and industrial stocks dogged by controversy or declining earnings added value. Avoiding calamity has enabled the fund to add value in recent months and the first quarter of 2019 was no exception. In addition, our overweight in Tobacco, Platinum and Global Equities contributed significantly. Detractors were few but had an impact on performance. Low exposure to Naspers was a massive detractor to relative returns. In addition, selected positions in healthcare, general financials and consumer industrials detracted value. Cash drag also provided a mild detraction.
Portfolio positioning The fund positioning and strategy remains virtually unchanged. We remain relatively concentrated and meaningfully different to both the index and the average fund. The market's advance and increased disparity in sector valuations, presented an opportunity for marginal changes in our positioning over the quarter. The most significant changes include an increase in healthcare stocks, domestically oriented holding companies and financial holding companies. We are steadily increasing our allocation to domestic consumer, mobile telecoms and healthcare. The direct and indirect off-shore exposure remains high but the extent of our off-shore positioning has been reduced in response to the weakening of the rand. Our recent changes represent exceptional value and are contrarian in nature because certain stocks are currently out of favour. Cash weighting remains above average. As always, we remain vigilant and ready to deploy cash as opportunities unfold.
The portfolio will be a specialist equity portfolio with a 'value' bias and will consist of financially sound equity securities listed on exchanges and assets in liquid form. The portfolio may invest in listed and unlisted financial instruments that will only be limited by the statutory limitations placed on the inclusion of financial instruments in portfolios. At all times at least 80% of the portfolio's investments will be in listed equity securities. The manager may from time to time invest in participatory interests in portfolios of collective investment schemes registered in the Republic of South Africa and which are consistent with the portfolio's primary objective.