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0.3  /  0.31%

96.48

NAV on 2019/07/18
NAV on 2019/07/17 96.18
52 week high on 2019/07/18 96.48
52 week low on 2018/10/25 88.61
Total Expense Ratio on 2019/03/31 0.43
Total Expense Ratio (performance fee) on 2019/03/31 0
NAV Incl Dividends
1 month change 2.8% 2.8%
3 month change 3.34% 3.34%
6 month change 3.62% 8.17%
1 year change 1.68% 10.89%
5 year change 0% 0%
10 year change 0% 0%
Price data is updated once a day.
  • Sectoral allocations
Gilts 1104.51 100.07%
Liquid Assets -0.75 -0.07%
  • Top five holdings
  • Performance against peers
  • Fund data  
Management company:
Sygnia Collective Investments RF (Pty) Ltd
Formation date:
2015/02/20
ISIN code:
ZAE000201513
Short name:
U-SALLBON
Risk:
Unknown
Sector:
South African--Interest Bearing--Variable Term
Benchmark:
JSE All Bond Composite Index (ALBI).
Contact details

Email
info@sygnia.co.za

Website
www.SYGNIA.co.za

Telephone
021-446-4940

  • Fund management  
Iain Anderson


  • Fund manager's comment

Sygnia All Bond Index Fund - Mar 19

2019/06/07 00:00:00
Markets were driven higher over the first quarter thanks to improved support from central banks and governments despite the downward trajectory of economic growth. China has surprised to the upside with fiscal stimulus, while the Fed has stopped raising interest rates, reduced quantitative tightening and shifted its monetary policy towards an average inflation target. The ECB announced another round of quantitative easing, and emerging-market central banks are able to accommodate lower interest rates due to stronger currencies. The recovery in risky assets year-to-date reflects expectations of economic green shoots in the second half of the year thanks to this additional liquidity; however, bond markets are disagreeing with this view and are extrapolating current disappointing growth to the second half of the year. The US yield curve inverted, suggesting a recession is imminent, while the German 10- year Bund yield went negative for the first time in three years. Meanwhile, emerging market currencies are pricing another crisis, following the Turkish Lira's plunge.
Real gross fixed capital formation contracted for the fourth consecutive quarter in 2018 across all sectors which bodes poorly for future growth. The RMB/BER business confidence index (BCI) plunged to levels last seen during 2009's global recession. Confidence was further weakened as President Ramaphosa confirmed that the ANC will nationalise the South African Reserve Bank. Meanwhile, NERSA's tariff increases, the lack of tax relief in the budget, higher oil prices, and renewed stage four load shedding have all contributed to low consumer confidence. CPI remained lacklustre at 4.1% in March and the SARB kept rates on hold. Despite the higher tariffs, Eskom's liquidity position remains dire and it is the biggest risk to SA's economic growth and credit rating, although Moody's kept South Africa's rating outlook unchanged at stable. On the stock front, Aspen fell over 50% intraday after disappointing results with spiralling debt the main concern.
The Fed delivered a significantly more dovish outcome at its March meeting than expected, with the committee downgrading growth and inflation projections in line with recent data. US employment showed only slight growth, manufacturing slowed more than expected and consumer confidence dropped well below expectations. US consumer prices experienced the smallest increase in nearly two-and-ahalf years. As a result, the Fed effectively called an end to its hiking cycle with no hikes forecast this year. In addition, the committee announced that quantitative tightening will be lowered in May before being halted completely in October, effectively ending US quantitative tightening. The Fed is also willing to tolerate an overshoot of their inflation goal. However, despite this, the gap between the three-month treasury bill rate and the benchmark 10-year yield inverted for the first time since 2007. An inversion of that portion of the yield curve is seen as a reliable warning of a potential recession within the next year or two. The US trade deficit reached a 10-year high in 2018 on record imports from China, which continues to highlight the risks of the trade talks which are set to continue into April.
March's Eurozone manufacturing index fell to a near six-year low and investor confidence remained negative for the fourth consecutive month. The ECB downgraded growth and inflation forecasts and in recognition of the poor outlook, announced dovish policy changes. Rates are now expected to stay unchanged throughout 2019 and a third series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be implemented.
Theresa May put forward a stripped-down version of her twice-defeated Brexit divorce deal to a vote in parliament, however, lawmakers rejected May's Brexit deal for a third time. May had announced she would resign if her deal went through. As a result, the EU's extension of the Article 50 period will only run until 12th April. Britain now needs to convince the EU it has an alternative path or exit without a deal, and the UK parliament's indicative votes process is set to start on the 1st of April.
The composite PMI rose to 53.8 indicating acceleration in activity. However, geopolitics remains a concern as tensions increased between India and Pakistan over the disputed Kashmir region, after an Indian MiG-21 fighter jet crashed near Pakistan. The pilot, who had safely ejected before the crash, was later paraded on Pakistani television. India heads for national elections in April.
Turkey entered its first recession in a decade at the end of last year and the Turkish central bank's net reserves slid $6.3 billion in the first two weeks of March to $28.5 billion, raising speculation that it was intervening to support the currency. As a result, the Lira sold off and the cost to borrow liras overnight rose above 1000% as Turkey's government attempted to support the currency. The Turkish lira fell after President Erdogan's ruling party lost control of key cities during the local elections on the 31st of March.
Core Machine Orders fell -5.4%, far below expectations, while output at Japanese manufacturers fell at the fastest pace in almost three years. The Bank of Japan held its monetary policy steady and predicted the economy is likely to continue its current moderate expansion.
China's industrial production grew at the slowest pace in nearly two decades in the first two months of the year and China's exports tumbled 20%, the biggest fall in three years. China lowered its official goal for economic growth in 2019 to a range of 6 - 6.5%, however, it announced several growth supportive measures, including US$298.31 billion in tax cuts. In addition, China said it will invest 800 billion yuan in railway construction and 1.8 trillion yuan to build roads and waterway projects. Fiscal policy is increasing steadily, including local bonds to the general public deficit, the total is a massive 6.5% of GDP. Initial March data indicates domestic demand is improving on the back of policy support.
Oil prices hit their highest levels of 2019 after OPEC committed itself to further output cuts and sanctions on Venezuela and Iran reduced supply.
FUND PERFORMANCE
The Sygnia All Bond Index Fund tracked the composition of the JSE All Bond Composite Index (ALBI) during the quarter, in line with its investment objective, and delivered a return of 3.40%. Foreigners reversed the 2018 selling trend of local bonds and bought approximately R11bn nominal worth of South African Government bonds in the first quarter (R71bn was sold in 2018). The modified duration of the fund increased slightly from the 7.18 level at the end of December 2018 to 7.27 at the end of March 2018, in line with the duration of the ALBI at 7.28. The yield on the R186 Government bond ended the quarter lower from 8.88% in December, to 8.60% at the end of March. There were no changes to the index constituents during the quarter, but the R213 bond moved from the 12 years and over sector to the 7 to 12 year sector. The biggest credit spread move came from the TN25 (Transnet SOC Ltd) bond which ended the quarter 20 basis points tighter, moving from a spread of 170 to 150 basis points over the R186 Government bond.
  • Fund focus and objective  
The composition of the Portfolio will be compared to the composition of the Index on a daily basis, taking into account any new investment contributions or withdrawals to and from the Portfolio, the receipt of any coupon payments for reinvestment, the effect of any corporate actions and its impact on the composition of the Portfolio relative to that of the Index. A tracking error minimising algorithm is used to determine the least number of transactions required to keep the Portfolio's returns aligned as closely as practically possible to the Index's returns while at the same time keeping the trading costs in the Portfolio to a minimum. The tracking error will never exceed 2% (two percent) on an annual basis. All cash movements and instrument events are taken into account daily in order to re-align the Portfolio to match the returns of the Index as closely as practically possible. The portfolio will invest in assets in liquid form, and in high yielding non-equity securities and interest bearing securities including but not limited to public, parastatel, municipal and corporate bonds, inflation linked bonds, loan stock, debentures, fixed deposits and money market instruments. When investing in derivatives, the Manager will adhere to prevailing derivative regulations. The portfolio manager will invest in derivatives for cash flow management purposes, as this is more cost effective, and to enable the investment manager to achieve the objective of tracking the Index more effectively.
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