NAV on 2020/02/25
|NAV on 2020/02/24
|52 week high on 2019/06/20
|52 week low on 2019/08/27
|Total Expense Ratio on 2019/12/31
|Total Expense Ratio (performance fee) on 2019/12/31
Satrix Managers (Pty) Ltd.
South African--Equity--Large Cap
FTSE/JSE Equally Weighted Top 40 Index (J110) (gross of fees)
Satrix Investment Team
Satrix Equally Weighted Top 40 Index Fund - Sep 19
In Quarter 3, the MSCI EMEA index (which includes South Africa) fell 7.02%, which was worse than the returns of that of the MSCI Emerging Markets (EM) at -4.25% and far behind the MSCI World’s 0.53%. Year to date, the picture does not change much with the MSCI EMEA at 5.13%, relative to the MSCI EM return of 5.89% and way behind the 17.61% for the MSCI World. The Federal Reserve and the European Central Bank both eased policies to offset signs of weaker global growth. The US economy has weakened but is not in a recession mainly due to fiscal support offsetting the adverse impact of the trade war. The inversion of the US yield curve is perceived as tolling the bell for a near-term global recession whilst Draghi also added to the call for fiscal easing.
Adding to that, commodity prices took a dive with key iron ore benchmark prices plunging some 20% in a matter of weeks and the key industrial metal, copper, hitting two-year lows. The key global manufacturing indices have also dived and are at fiveyear lows - but was at least stable over the last two months.
In the UK, Eurosceptic Boris Johnson has become the prime minister after being elected as leader of the Tories. There appears a greater likelihood of a no-deal Brexit or, at the very least, yet another postponement of the October decision deadline. The market has discounted this in large part with a weaker Sterling. As business decisions get postponed, the UK could dip into a technical recession.
In South Africa the SA Reserve Bank held the policy rate unchanged at 6.5% at its September meeting, but its statement was more dovish than in July when it did cut. For Quarter 2 of 2019, GDP was 3.1% quarter-on-quarter, above the consensus of 2.4% and reversing the first three months’ contraction. SA headline CPI accelerated from 4.0% in January to 4.5% in March and then settled around 4.3% in August 2019. Forward rate agreements are now pricing in a 25bp rate cut in the next six months.
From a SA asset allocation perspective, cash (STEFI: +1.8%) outperformed SA bonds (ALBI: +0.8%) and the FTSE/JSE All Share Index returned -4.2% (Capped SWIX: -5.1%) in the third quarter of 2019. In Dollars, the MSCI SA (-12.60%) continued to underperform the MSCI EM (-4.25%) mainly due to a weak Rand (- 6.9%). SA equities and SA bonds saw outflows of $5.7bn and $2.4bn respectively year-to-date. Properties, after stabilising somewhat over the first half of 2019, experienced a tough three months, losing about -4.4%.
On the corporate side the most important news was the Naspers spin-off of Prosus, which listed on 11 September 2019. Prosus is now the largest listed EU consumer internet company.
Portfolio performance and changes
In the third quarter of 2019, the FTSE/JSE Equally Weighted Top 40 Index realised a return of -6.12%, underperforming the FTSE/JSE Top 40 Index returns of -5.22% by about 90 basis points.
The major detractor from the relative underperformance for the quarter was mainly attributable to the underweight positions in large market capitalisation shares such as Naspers (NPN). Overweight positions in Sappi (Sappi) and Exxaro Resources (EXX) also detracted from performance.
During the September quarterly index rebalance Impala Platinum (IMP) and Sibanye Gold (SGL) were added to the index while Aspen (APN), PSG Group (PSG) and Sappi SAP) were deleted from the index and on top of that all the shares in the index were rebalanced to an equal weighting of 2.5%. The one-way churn in the index was about 10.09%.
The investment objective of this index tracker portfolio will be to focus on capital growth and achieving a compound annual return which will equate to the total compound annual return of the FTSE/JSE Equally Weighted Top 40 Index (J110) as adjusted to take into account transactions and other costs, and to comply with statutory requirements. Income generation will not be an objective of this portfolio.
The Manager shall seek to achieve this objective by investing in assets in liquid form and securities that will consist of a selection of financially sound ordinary shares, to be acquired at fair market price, as included in the FTSE/JSE Equally Weighted Top 40 Index at proportions so determined as to best replicate the performance of the FTSE/JSE Equally Weighted Top 40 Index. This portfolio will be fully invested in equities subject to statutory investment limitations.The combination of shares will enable the investment manager to track the performance of the FTSE/JSE Equally Weighted Top 40 Index. This index comprises 40 shares in equal weightings of 2,5% each. When investing in derivatives, the Manager will adhere to prevailing derivative regulations. The Manager will be permitted to hold offshore investments as legislation permits. This will be applicable in cases where the portfolio is exposed to a corporate event resulting in a share being inward listed where such share forms part of the FTSE/JSE Equally Weighted Top 40 Index.