NAV on 2019/05/24
|NAV on 2019/05/23
|52 week high on 2018/09/05
|52 week low on 2018/12/31
|Total Expense Ratio on 2018/12/31
|Total Expense Ratio (performance fee) on 2018/12/31
Sanlam Collective Investments
MSCI World Equities index - (rand based)
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Douw joined Old Mutual Investments in 1991 as an equity analyst, where he spent the next fifteen years. During this time his responsibilities included that of head of industrial sector research and the management of a variety of equity portfolios. During his last five years with Old Mutual, Douw was responsible for the management of all of its value style mandates, including the Old Mutual Value Fund and the Old Mutual High Yield Opportunity Fund. Douw joined Orthogonal Investments as one of its founding shareholders upon its inception in 2007.
Denker SCI Global Equity Feeder Fund - Sep 18
At one point towards the end of the quarter, the MSCI World Index had just about made up all of the gains of the January 2018 high (~7% in US dollars) which were given back subsequently. A minor correction in the last days of the quarter trimmed returns back to just better than 5%, with the fund slightly behind this figure.
The standout sector in the period was healthcare, which bounced 12% after lagging the index substantially in the previous two quarters of 2018. This was on the back of belligerent remarks from the White House about the high cost structure of the industry and renewed fears about a broad swathe of patent expiries. The fund benefited somewhat from this rebound with Medtronic up 16%, Novartis up 14% and Roche up 10%.
The fund’s best sector contribution came from information technology where Apple (+22%), Oracle (+17%), Microsoft (+16%), Cisco (+14%) and the fund’s overweight stance compared to the benchmark helped to boost performance. Other performance benefits in the period came from the fund’s lack of exposure to the materials sector which had negative returns, as well as good stock picking in the energy space such as owning Total (+8%) and avoiding US oil services businesses such as Halliburton (-10%).
Performance detractors came from the consumer discretionary area, where homebuilder (and 2017 best performer) NVR Inc. sank 17% on softer US housing data, while Amazon, which the fund does not hold, continued its inexorable rise (+18%). The fund’s UK-based homebuilder Taylor Wimpey also fell 5% in the three months. Fortunately we sold online retail trading platform IG Holdings in mid-August, prior to a sharp drop in the company’s share price in September which was caused by a disappointing trading update and the surprise departure of its CEO.
From a geographic perspective, the US has been the best performing market of size this year by far. Despite a valuation-driven consensus preference at the start of 2018 for European equity assets over US ones, the latter has steamed ahead in the nine months to date by 11% compared to -2% for MSCI Europe. The US economy has remained in rebound mode, with tax-driven tailwinds. For the quarter, MSCI US returned 7%, while the fund’s holdings in the US produced just under 10% - benefiting from good stock picking (mostly via the technology holdings included above, but also from strong rebounds in the fund’s previously unfairly maligned mortgage insurers Essent Group and MGIC Investment Corporation which both rose 24%). Much of this benefit, however, was neutralised by the fund’s UK-based investments which did poorly (-1.5%), along with most UK domestic equities suffering from rising Brexit fears and uncertainty (MSCI UK: -1.8%). This is starkly illustrated by Howden Joinery which retreated 14% in the quarter and which, despite solid fundamentals, is now trading close to its panic-driven rating low in the immediate post-Brexit period of late 2016.
Based on current consensus expectations the fund offers a more attractive valuation than the overall market (forward PE: 12.9x vs. 15.5x and dividend yield: 2.6% vs. 2.3%), while producing a better return (ROE: 23% vs. 18%) and better profitability (operating margin: 23% vs. 19%). The fund has an active share of 88%.
The portfolio will primarily invest in participatory interests of the FSB approved Sanlam Global Best Ideas Fund, a sub-fund of the Irish domiciled Sanlam Universal Funds plc. The portfolio may also hold ancillary liquid assets, including cash and/or money market instruments.