NAV on 2019/01/16
|NAV on 2019/01/15
|52 week high on 2018/01/17
|52 week low on 2019/01/02
|Total Expense Ratio on 2018/09/30
|Total Expense Ratio (performance fee) on 2018/09/30
Satrix Managers (Pty) Ltd.
South African--Real Estate--General
FTSE/JSE SA Listed Property Index (J253)
Johann has 24 years investment experience of which 14 years was spent as an equity analyst. The last 10 years were spent as a portfolio manager.
He was one of the founder members of the large cap team and played a role in designing the large cap investment process.
He is currently a member of the equity selection group at Sanlam Investment Management.
Jenny joined Sanlam Investment Management in the client services department (1998 - 2002). In January 2003 she joined the SIM's Investment Professional Development Program (IPDP) and was permanently appointed to the SIM quant team during 2004. Her responsibilities include index fund management, quantitative analysis and portfolio construction.
Satrix Investment Team
Fund Manager Comment - Sep 18
The SA Listed Property Index (SAPY) returned a total of -1% in the third quarter of 2018, actually outperforming equities (-3.3%) but still lagging cash, which still delivers positive nominal returns even as risk assets have declined in absolute terms. Year to date (YTD), the SAPY has materially underperformed all other domestic asset classes, returning -22.2% YTD versus -8% for general equities and about 5% for cash.
The best performing shares in the SAPY for the quarter included Echo Polska (18%); Equites (13.6%), Fortress A (10%) and MAS Real Estate (9%). In contrast, the worst performers were Accelerate (-16%), Growthpoint (-13%), Rebosis (-13%) and Hyprop (-10%). However, some of the negative moves in the worst performers were exacerbated by them paying out dividends in the quarter.
Contributing to the negative returns for these shares were a number of SA-focused mid- and smaller caps reporting weak distribution growth and even weaker (declining in some cases) forecast distributions, such as Accelerate, Rebosis and SA Corporate, while even larger caps like Growthpoint and Hyprop reported and are targeting low single-digit growth rates.
Performance and actions
The current quarter was again very quiet on the corporate action front.
With the September 2018 FTSE/JSE SAPY rebalance Greenbay Properties was replaced by Stenprop and the weightings of Fortress A, EPP N.V and Equities Property increased while Vukile decreased in the SAPY index. The one-way turnover was somewhat higher than usual at 3.4%.
Your fund performed in line with the SAPY benchmark. The fund experienced some positive cash drag year to date, due to the index being in the red over the last nine months.
Following the weak YTD returns, the SAPY has derated from a 6.8% clean forward yield at end of 2017 to an attractive 8.6% trailing income yield and a clean forward yield of about 9%. The forward yield is at a slight premium to the SA long-bond yield of 9.1%, which itself derated this year as Ramaphoria faded and amid general emerging market weakness on account of an impending trade war.
We consider these levels, in absolute terms, to be in buying territory again, and certainly relative to SA cash. The income yield alone is over 3% higher than inflation expectations, and over 1% higher than cash rates. With the SAPY also likely giving growth in dividends (unlike cash and bonds) of CPI in the long run (4% to 6% p.a.), buying at the current price levels may make for a total medium- to long-term (three to to five-year horizon) expected return of 13% to 15% p.a.
There are also some fundamental headwinds that could take time for the abovementioned expected return to be realised. Some of the smaller REITS have cut their distribution outlooks, in some cases to negative growth. In terms of how this weaker outlook for property distributions may have materialised, even supermarkets like Shoprite are struggling to grow earnings (earnings down 3%), highlighting a tough SA economy.
However, the sharp derating to the high-income yields of 9% to 10% for SA-focused shares hopefully provides an adequate cushion for the above considerations.
The Satrix Property Index Fund is a specialist portfolio. In selecting securities for this portfolio, the investment manager shall seek an investment medium for investors which shall have as its main objective the provision of a total compounded annual return of capital and income which substantially matches the notional performance of the FTSE/JSE SA Listed Property Index (J253), after taking into consideration all costs and regulatory compliance requirements.In order to achieve these objectives, the securities normally to be acquired in the Sanlam Investment Management Property Index Fund portfolio shall consist of those shares, at fair market prices, which substantially make up the FTSE/JSE SA Listed Property Index (J253) with due regard to the weightings defined therein. Other securities (derivatives) and assets in liquid form may be included from time to time to account for liquidity and index fluctuations. Apart from the above, the portfolio may also invest in participatory interests of portfolios of collective investment schemes registered in the Republic of South Africa or of participatory interest 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 for investor protection which is at least equivalent to that in South Africa. The underlying CIS portfolios will always be property tracker portfolios.