NAV on 2019/11/11
|NAV on 2019/11/08
|52 week high on 2019/09/02
|52 week low on 2018/12/20
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
Sanlam Collective Investments
South African--Multi Asset--Low Equity
CPI for all urban areas plus 3% over 36 month rolling period
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Sage Wealth Management Proprietary Limited
Sage SCI Protection Solution FoF - Jun 19
The FoF is a combination of underlying managers all of whom have proven track records and the ability to generate significant outperformance over time. The look through asset allocation of the FoF (i.e. the split between equities and fixed interest, and South African and foreign assets) reflects the aggregate asset allocation decisions of the five underlying managers each of whom have the discretion to implement their best investment view.
The FoF has enjoyed a reasonable start to the year, and we remain optimistic for the FoF's prospects. The introduction of capital protection focused managers earlier this year reduced the look through equity allocation of the FoF to just over 30%, and the FoF continues to be less dependent on the performance of the (SA) equity market to deliver on its inflation objective. The FoF is overweight SA cash (at 32.3%) relative to SA bonds (at 24.0%) with a small allocation of 4.8% to SA property
Year-to-date, foreign equities (up 13.9%) have substantially outperformed SA equities (up 6.9%), while SA nominal bonds (up 7.7%) have outperformed both SA cash (up 3.4%) and SA inflation-linked bonds (up 3.3%). Within SA equities, SA resources (up 19.2%) have been the top-performing sector. The relative outperformance of SA resources has been driven by spot commodity prices remaining higher than expected (despite global economic growth continuing to decelerate). The strong performance of the underlying asset classes has contributed to the FoF achieving its inflation objective year-to-date.
For the quarter, SA equities (up 2.9%) outperformed foreign equities (up 1.3%), but underperformed SA nominal bonds (up 3.7%). Within SA equities, SA financials (up 7.0%) were the top-performing sector, with SA property (up 4.5%) re-rating somewhat in sympathy. SA inflation-linked bonds (up 2.8%) outperformed SA cash (up 1.7%), but underperformed SA nominal bonds. The rand strengthened against the US dollar over the quarter (up 2.2%) while SA inflation has remained relatively subdued around the mid-point of the 3% to 6% band.
The market now expects the South African Reserve Bank (SARB) to cut short-term interest rates twice this year. This reversal (the market previously was pricing in rate hikes) follows further dovish comments from the US Federal Reserve who is now expected to cut rates in 2019 (the market was previously pricing in four interest rate
Over the three-year investment horizon of the FoF, SA equities (up 2.8% p.a.) have materially underperformed foreign equities (up 10.2% p.a.) and our expectation for this asset class, while SA nominal bonds (up 9.9% p.a.) and SA cash (up 7.1% p.a.) have both delivered returns that comfortably exceeded CPI (up 4.8% p.a.). In contrast, SA inflation-linked bonds (up 2.0% p.a.) and foreign bonds (down -0.3% p.a.) both gave negative real returns (i.e. after SA inflation) over this period. The underperformance of the FoF relative to its CPI+3% p.a. objective has largely been driven by disappointing SA equity returns.
South African economic growth continues to surprise on the downside, and is vulnerable for further weakness. The global economic environment could also deteriorate, and the market has arguably been too aggressive in pricing in further interest rate cuts from the US Federal Reserve. Consequently, we remain convinced that a well-diversified strategy that combines managers with different approaches is the most sensible manner to consistently deliver of the return objective of the FoF.
The objective of the Sage Sanlam Collective Investments Protection Solution Fund of Funds is to protect capital and to offer a return of at least CPI plus 3% over a rolling three year period. The portfolio will aim never to have a negative return over a 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 3% will be achieved through the construction of a portfolio with a strategic asset allocation appropriate for a CPI plus 3% 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, 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 proportions 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 maximum 40% at all times, depending on the investment manager's investment strategy for a CPI plus 3% 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.