NAV on 2019/11/11
|NAV on 2019/11/08
|52 week high on 2019/04/25
|52 week low on 2018/12/18
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
Sanlam Collective Investments
South African--Multi Asset--Flexible
ASISA SA Multi Asset Flexible Category average
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Sanlam Select Flexible Equity comment - Sep 19
September was a risk-on month globally driven primarily by easing monetary policy conditions. During the course of the month the US Federal Reserve (Fed) decided to cut rates by 25 basis points. Although the Fed did cut rates there were once again divergent views with two members voting for no cut and one voting for a 50- basis point cut. In Europe, the European Central Bank (ECB) cut interest rates by 10 basis points to -0.5%. In order to mitigate the effect of negative interest rates on an already struggling banking system, a tier system for reserves with the central bank was also introduced. The ECB also announced that from November there would be a bond purchase programme of €20 billion per month although they did not provide a time horizon. On the back of monetary policy easing the MSCI World Index delivered 1.94% (in US Dollars) and the MSCI Emerging Markets (EM) Index delivered 1.55% (in Dollars). Due to lower global bond yields the search for yield continued with emerging market bonds as measured by the JP Morgan EM Bond Index delivering 0.18% (in Dollars), while developed market bonds lost 1.30% (in Dollars). Global property continues to benefit from the low global interest rates, delivering 2.46% (in Dollars).
The fear of a recession eased somewhat after the market was on edge following Donald Trump’s China tariff decisions the previous month. After inverting briefly in August, the US 2-year/10-year yield curve steepened back to positive territory; it does, however, remain very flat. The duality in the global economy continued with the manufacturing sector remaining in contractionary territory, while the services sector continues to expand. Germany is the country that continues to be particularly impacted by the trade war.
In the Middle East, geopolitical tension was momentarily elevated after a drone attack on Saudi Arabia’s oil fields. The attack resulted in an estimated 5% of global crude supply being disrupted. Oil prices spiked initially due to uncertainty surrounding the event but these fears eased as it was communicated by the head of Saudi Aramco that production would be online sooner than expected. Early indications from the attack were that Iran was involved.
Locally, the South African Reserve Bank decided to keep interest rates unchanged. They stated their medium-term outlook remains unchanged with inflation as per their Quarterly Projection Model to average 4.2% (down from 4.4%) in 2019, 5.1% for 2020 and 4.7% (up from 4.6%) for 2021. However, they continued to be concerned about trade tensions and the high financing requirements for the public sector. This is continuing to put pressure on the local currency and pushing our local bond yields higher relative to peers.
As expected, GDP for the second quarter came in positive, increasing 3.1% quarter-on-quarter annualised. This was driven by growth in the primary sector and mining, which increased 9.7% and 14.4% respectively. Business investment over the previous 12 months was flat to slightly negative. This remains a concern. The headwinds facing the South African economy were confirmed when the RMB/BER Business Confidence Index fell to a 20-year low. The South African Chamber of Commerce and Industry declined to 89.1 – the lowest since April 1985. On the back of this, South African equities had a muted month, delivering 0.19% (in Rands). The Top 40 was flat, while small caps delivered a stellar 2.21% (in Rands). Although foreigners were net sellers of local bonds over the month, they delivered 0.51% (in Rands), underperforming cash slightly, which delivered 0.57% (in Rands). Local property delivered 0.3% (in Rands) and inflation-linked bonds delivered 0.39% (in Rands).
The Fund will have a large exposure to equity instruments and will look for companies where strong earnings growth is expected over the short to medium term, based on a top-down macro view. When investment ideas in the equity market are limited the Manager will look to diversify across other asset classes to protect from potential market downturns. The investment manager will also be allowed to invest in derivatives as allowed by the Act from time to time in order to achieve its investment objective.