NAV on 2019/11/14
|NAV on 2019/11/13
|52 week high on 2019/10/31
|52 week low on 2018/12/31
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
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 - Jun 19
Global equity markets experienced another relatively good quarter, albeit with more modest performance than in the first quarter (Q1). Looking at the indices in US dollars – on a total return basis the S&P 500 Index gained 4.3%, the MSCI World Index gained 4.2% and the MSCI Emerging Markets Index, lagged again, closing 0.7% higher this quarter. The surprising decline in long dated developed market government bond yields, which started in Q1, did not subside. Yield on US 10 year maturity bonds declined from 2.4% at the end of Q1 to 2.0% at the end of Q2 and the yield on 10 year German bonds declined from -0.1% to -0.3%.
In late June, the Federal Reserve (the Fed) indicated that it might cut interest rates sooner than previously thought by cutting the word ‘patient’ out of its policy statement. It added that it would ‘act as appropriate’ to sustain economic expansion. President Trump has often taken to Twitter to share his exasperation with the Fed’s previous rate increases.
Prime Minister Theresa May announced that she would step down as leader of the ruling Conservative Party in the United Kingdom after successive failures to deliver an acceptable Brexit deal. Boris Johnson and Jeremy Hunt are in the race to replace May as leader. Both Johnson and Hunt have claimed that they can renegotiate the withdrawal deal with the European Union and get it through Parliament before the expiry date of 31 October 2019.
Solid outperformance for the fund in the energy, healthcare and information technology sectors could not offset the market’s negative view of the tobacco industry’s headwinds, which sent stocks in the latter tumbling. The fund’s exposure to these highly cash generative businesses was the overriding cause of underperformance against the MSCI World Index benchmark in the quarter.
The company-specific detractors were Imperial Brands which fell 30%, Altria which was down 17% and Philip Morris off by 10%. These tobacco company sell-offs appear to have been precipitated by sharper than expected volume declines in traditional cigarette sales volumes, possibly exacerbated by somewhat disappointing growth numbers for the so-called ‘next generation products’. Alarmingly, the former declines were reported by the market researcher Nielsen to be of the order of 8%-10%, which was worse than market expectations. However, Nielsen subsequently admitted that their sampling methodology was likely outdated and not accurate.
Another poor performer was Alibaba Group, which fell 7% despite excellent fiscal Q4 results. Market participants worried about the ongoing United States/China trade dispute, as well as a strategic decision by the company to delay ad feed monetisation in fiscal 2020, in order to capture market share in China’s lower-tier cities. Other laggards were Lions Gate Entertainment (-22%) and United Kingdom-based mortgage lender OneSavings Bank (-8%).
The major contributors to performance were United States homebuilder NVR, which rose 22% in the wake of better than expected first quarter numbers, equipment rentals business Ashtead Group (+19%), which reported solid full year results in mid- June and reiterated 15-20% earnings growth guidance for the 2020 fiscal year, and Microsoft, up 14% after their third quarter results printed substantially above expectations. This was on the back of continued strength in their cloud businesses as well as surprisingly good growth in their traditional on-premise revenues.
The fund endeavours to control risk in a rational manner by dampening hard-to-predict factor exposures and focusing its risk budget on proven bottom-up stock picking.
Based on current consensus expectations the fund offers a more attractive valuation than the overall market (fwd P/E: 12.5x vs. 15.6x and Div Yld: 3.0% vs. 2.4%), while producing a better return (ROE: 24% vs. 19%) and better profitability (operating margin: 25% vs. 20%). The fund has an Active Share of 90%.
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.