NAV on 2019/07/19
|NAV on 2019/07/18
|52 week high on 2018/09/03
|52 week low on 2018/12/18
|Total Expense Ratio on 2019/03/31
|Total Expense Ratio (performance fee) on 2019/03/31
Sanlam Collective Investments
South African--Multi Asset--Medium Equity
CPI for all urban areas plus 5% over 36 month rolling period
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Sage SCI Moderate Solution FoF - Mar 19
The FoF is a combination of underlying managers with diverse skill-sets from various ASISA categories to build an optimal medium equity portfolio. The combination of managers strikes a balance between the CPI+5% target of the FoF, and its objective not to lose money over 12 months.
The Sage Moderate FoF also makes use of lower-cost index funds to gain exposure to multiple asset classes, and utilises ABAX for its focus on taking advantage of asymmetrical opportunities and Allan Gray for its contrarian investment approach. Managers with a focus on capital protection include Matrix and Sasfin. These managers try not to lose capital over any twelve-month period, and help ensure the overall FoF remains within its maximum 60% equity limit.
Managers focused on capital growth with highly flexible mandates include Bateleur and PSG. These high conviction managers can implement their best investment view across all asset classes and have the discretion to hold up to 100% in equities if so inclined.
The FoF has enjoyed a strong start to the year, with ABAX being a particularly strong contributor to performance, and given the attractive valuations currently on offer, and the underlying managers' skill-sets, we remain optimistic for the FoF's prospects. The FoF remains relatively fully invested in equities with a look-through allocation of 56% close to the maximum 60% allowed by the category.
Foreign equities at a 15% allocation in the FoF was a material contributor to performance this quarter (developed market equities were up 12.8% in rands) while SA equities (up 3.9%) had a reasonable quarter but materially lagged emerging market equities (up 10.2%). SA nominal bonds (up 3.8%) continued to outperform inflation-linked bonds (up 0.5%) and SA property (up 1.5%) while global property (up 14.5%) the standout performer and significantly ahead of foreign bonds (up 2%).
The subdued performance of SA inflation-linked bonds has been on the back of an improving inflation outlook in SA, while the strong performance of global property has partly been fuelled by an increasingly dovish US Federal Reserve.
The US Federal Reserve left short-term rates unchanged at both their January and March meetings, and signalled their intention for no further interest rate increases in 2019. The pause in their tightening cycle reflects a softening of economic growth and subdued inflation in the US, and gave emerging markets some breathing room with the South African Reserve Bank (SARB) being able to leave interest rates unchanged at both its January and March meetings.
South African economic growth continues to disappoint with the SARB now expecting just 1.3% growth in 2019 (materially less the 1.9% the SARB expected for 2019 as recently as last November) while National Treasury (under slightly more optimistic growth assumptions) only expects SA government debt to stabilise in 2023/4 at 60.2%.
SA government debt is priced as if it was already sub-investment grade, and offer an attractive yield given contained inflation forecasts despite market concern around contingent State-Owned Enterprises (SOE) liabilities and potentially optimistic economic growth forecasts.
The Sage Moderate FoF remains well diversified across managers and strategies and suitably positioned to take advantage of market opportunities as they materialise. Important trades over the quarter were the introduction of low-cost tracker funds and the capital protection manager Sasfin into the portfolio, and the reduction of Allan Gray Balanced and sale of Coronation Balanced Plus.
The objective of Sage Sanlam Collective Investments Moderate Solution Fund of Funds is to secure steady growth of capital, and to offer a return of at least CPI plus 5% over a rolling three year period. The portfolio will aim never to have a negative return over any one year period.
The investment manager, Sage Wealth Management (Pty) Ltd follows the multi manager style of investing and will invest the portfolio in the participatory interests of various collective investment schemes managed by different specialist investment managers. The target of CPI plus 5% will be achieved through the construction of a portfolio with a strategic asset allocation appropriate for a CPI plus 5% return objective.
The objective will be achieved by investing in assets in liquid form, and participatory interests or any other form of participation in collective investment scheme portfolios or other similar collective investment schemes the Act may allow from time to time and managed by specialist investment managers. In line with the multi manager investment philosophy, the portfolio will be constructed to achieve diversification across different asset classes as well as different investment managers and investment processes. The philosophy therefore categorically excludes the possibility of the portfolio only investing in underlying collective investment schemes of just one manager. Key value propositions are the selection of multiple specialist investment managers as well as the combination of these managers into optimal portfolio structures in order to achieve the investment objective.
The strategic asset allocation will be achieved by combining participatory interests of collective investment scheme portfolios managed by specialist investment managers who use different and uncorrelated investment strategies.
The portfolio will be investing in participatory interests of portfolios which provide exposure to a flexible combination of equity, bonds, money market instruments, non-equity and property, as well as to various absolute return investment strategies.
The asset allocation will be actively managed by the multi-manager to reflect its view of the changing economic and market conditions. The portfolio will have an equity exposure of between 0% - 65%, depending on the investment manager's investment strategy for a CPI plus 5% return objective at the time. This portfolio is part of a range of risk profiled, multi managed fund of funds portfolios and the SMMI house view tactical asset allocation given specific market conditions will be applied uniformly to the range of portfolios. Therefore, should the house view be bullish on equities, the tactical allocation to equities will increase across the range of portfolios in line with their respective maximum equity exposure limitations, whilst equities exposure will decrease uniformly across all three portfolios should the house view be bearish on equities. Given the application of the SMMI house view exposure approach it is highly unlikely that these portfolios will ever have similar effective equity exposures.
The portfolio will obtain offshore exposure through investment in participatory interests of collective investment schemes approved in terms of the Act. This portfolio will comply with regulations governing pension funds.