NAV on 2018/10/19
|NAV on 2018/10/18
|52 week high on 2017/11/21
|52 week low on 2018/10/11
|Total Expense Ratio on 2018/06/30
|Total Expense Ratio (performance fee) on 2018/06/30
Sanlam Collective Investments
FTSE/JSE Industrial index
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Started at Liberty Asset Management (now Stanlib) as a junior equity analyst in June 1996. He left the company in January 1999. His responsibilities included analysing various industrial shares on the JSE (specialising on the consumer side) and he also worked as an assistant portfolio manager.
Joined Gensec Asset Management (now Sanlam Investment Management) in January 1999 and have been researching industrial shares since. Areas of specialisation include: retail, construction, tobacco, luxury goods, transport and diversified industrials and telecoms.
SIM Industrial comment - Mar 16
Market review The first quarter of 2016 was a volatile one with January's stock exchange performance in particular being one of the worst since 2008 from both a local and a global perspective. Some recovery was, however, evident during the remainder of the quarter although volatility prevailed. Global economic conditions remain fragile. The ongoing slowdown in growth was evident in China and while the US continues to show some growth, this remains tepid at best. This was confirmed somewhat by Janet Yellen's comments with regard to US interest rates, which now look to be on hold after initially increasing last year. Europe's recovery remains cautious with the focus on the growing immigration problems. An attack in Brussels again heightened concerns in Europe and more stringent cross-border controls are likely.
Despite modest improvements in conditions globally there was some recovery in emerging markets, assisted somewhat by rising commodity prices after a protracted period of weak performance, particularly in 2015. The gold price, however, rose significantly in the quarter and greatly assisted the performance of gold shares even though the rand strengthened slightly against most developed currencies. The rebound in commodity prices, oil and emerging market currencies was off a depressed base and a further recovery off the now modestly recovered base is less assured. The recovery signals are uneven. In developed markets bond yields declined as growth remains a concern and a number of countries implemented negative interest rates for holding cash. Globally the MSCI World Index was down slightly for the quarter, assisted by a particularly weak Japanese market, whereas the MSCI Emerging Market Index was up over 5% for the quarter. Surprisingly, the euro remained relatively strong after a weak 2015. The pound was one of the weakest currencies in the quarter amongst developed economies as concern remains of a pending exit from the EU. In this regard the UK has set a date in June to vote on this controversial issue. This could have significant implications for global companies operating in the UK.
In South Africa political news dominated the headlines. Any recovery in the economy looks some time off and the implications of the political ructions late in 2015 still continue to play out in the real economy. The weakness in the rand in 2015 is starting to filter through with rising inflation despite the fact that the rand strengthened slightly against the dollar in the quarter to March 2016. In this weak and fragile environment the Reserve Bank governor increased the repo rate by a combined 75 bps during the quarter. With the increased risk of SA being downgraded to junk status by some of the credit rating agencies, it was therefore surprising that bond yields in fact strengthened in the quarter. Perhaps this is an indication that the recently appointed finance minister is doing the right things but it could also be linked to the broader recovery in commodities and emerging markets. In this volatile environment the JSE managed to perform reasonably well for the quarter.
In summary, for the quarter the FTSE/JSE All Share Index was up 3.1%. Resources were the best performing sector with the RESI20 up 12.7%, assisted by a very strong run in gold shares but also recovering off a depressed base. The industrials performed worst with the INDI25 down 1.3%, which was reasonable in the circumstances, considering the volatility and the fact that the rand strengthened against the dollar. (All returns exclude the additional return from dividends)
SIM action The fund was not very active in the quarter. We added to Advanced Health at attractive levels and re-introduced SABMiller to the portfolio. SAB is considered convertible into ABI shares once the deal with ABI is concluded and in the meantime represents quasi-cash, with the probability of the deal being concluded being very high. A separate holding in ABI was introduced on the listing of the share on the JSE. In time ABI will be included in the industrial index and is considered defensive and reasonably valued in what we expect to remain a difficult and volatile market. On the selling side we sold the fund's holding in Truworths and Aspen and trimmed our exposure to MTN, Choppies and Curro Holdings.
Performance attribution The fund had a poor quarter underperforming its peers and the industrial benchmark. The weak quarter from a performance point of view should be seen against a particularly strong performance in 2015 and some retracement was inevitable. The weak performance was compounded by some retracement of the international shares in the portfolio. We remain convicted on our views within the portfolio and expect some recovery in the medium term. Investors should always have a long-term perspective when investing. It is encouraging that the market weakness is creating some good long-term opportunities in the industrial area of the market.
SIM strategy The industrial sector as represented by the JSE is composed of a significant number of diverse investment choices that have both varied geographic and industry exposure. Within this choice there are areas that look expensive and those that offer value. As always, it is our job to uncover the best opportunities within this universe using our extensive experience and broad research capability centered on our pragmatic value philosophy. It is within this framework that we aim to deliver the best performance we are able to. As always we would encourage investors to diversify their investments.
The fund seeks capital growth by investing in selected shares in the industrial sector.
This fund is suited for clients requiring larger exposure to industrial shares, with the associated capital growth this sector is able to offer.