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INVEST IMPACT GROW
Will I add value to my client’s portfolio by including global equity?
Eben Karsten | CEO Matrix Fund Managers
7 February 2020
2
• Diversification
• Inflation protection – stream of real cash flows
• Future growth in company earnings (PE ratio)
• Protection against ZAR depreciation
• Global risk premium vs. local asset classes
• FOMO
Global equityWhy do we buy it?
How much global equity is enough?
4
Growth mattersForeign flows vs South Africa GDP growth
Source: Bloomberg
0
10
20
30
40
50
-2
-1
0
1
2
3
4
5
6
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
SA GDP growth (%, LHS) Cumulative foreign FPI inflows into SA equities (US$bn, RHS)
5
DiversificationEquity market cap vs. GDP (%)
Source: Bloomberg as at end December 2019
0
50
100
150
200
250
300
SA
US
UK
Ca
nad
a
Au
str
alia
Jap
an
SK
India
EZ
Indo
nesia
Bra
zil
Russia
Chin
a
Me
xic
o
Tu
rke
y
6
Equities, expensive or cheap?PE | Local vs S&P
Source: Bloomberg
0.65
SWIX ex NPN, 0.58
0.50
0.60
0.70
0.80
0.90
1.00
1.10
Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19
SWIX/S&P500 Average +1SD -1SD
7
What did foreign deliver?20 year cumulative return
Source: Reuters Refinitive, Matrix Fund Managers
-200%
0%
200%
400%
600%
800%
1000%
1200%
1400%
Dec-99 Jun-01 Dec-02 Jun-04 Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14 Jun-16 Dec-17 Jun-19
ALSI TR CPI S&P TR ZAR ZAR
Period ALSI TR CPI S&P TR USD ZAR S&P TR ZAR
First 10Y 16.2% 6.1% -1.0% 1.9% 0.9%
Last 10Y 10.8% 5.1% 13.6% 6.6% 21.1%
20Y 13.4% 5.6% 6.1% 4.2% 10.5%
Last 5Y 6.0% 5.0% 11.7% 3.9% 16.0%
8
What did foreign deliver?Rolling 3 year returns
Source: Reuters Refinitive, Matrix Fund Managers
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Dec-02 Jun-04 Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14 Jun-16 Dec-17 Jun-19
ALSI TR CPI S&P TR ZAR
9
Decomposing the foreign returnRolling 3Y Returns
Source: Reuters Refinitive, Matrix Fund Managers
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
2003 2005 2007 2009 2011 2013 2015 2017 2019
S&P USD/ZAR S&P in ZAR
10
S&P500 returnsDriven by IT sector
Source: Bloomberg
-10
0
10
20
30
40
50
60
70
Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19
S&P500 ex IT IT
11
Hard currency earners on the JSENot only mining, platinum & gold
Source: Bloomberg
-30
-20
-10
0
10
20
30
Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
12m forward EPS (% chg in ZAR)
BAT Bidcorp Tiger Brands Truworths
12
Twelve month expected total returnProbability weighted
Source: Matrix Fund Managers
15%
13%
5%
5%
-4%
-15%
4%
4%
4%
-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
SA Equity Bull
SA Equity Base
SA Equity Bear
Earnings Rating change Dividend yield
Return Weight
24.2% 20.0%
12.9% 55.0%
-6.2% 25.0%
10.4% 100.0%
8.0%
5.0%
-5.0%
3.0%
-5.0%
-15.0%
1.6%
1.5%
1.4%
4.1%
1.4%
-4.4%
-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Foreign Equity Bull
Foreign Equity Base
Foreign Equity Bear
Earnings Rating change Dividend yield CCY
ZARReturn
Weight
16.7% 20.0%
2.9% 55.0%
-23.0% 25.0%
-0.8% 100.0%
13
Expected Returns12-month expected total return (%)
Source: Matrix Fund Managers
10.4
-0.8
6.6
10.4 9.0 7.6 9.0
1.6 2.5
7.54.7
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
SA Equity Foreign equity SA Property SA Bonds Bank Snr Fixed Bank Snr FRN ILBs US cash US bonds
12-month expected total return (%)Bull-bear range
Base case
Probability-weighted
SA Money Market
Expected CPI
14
Other opportunities
Source: Bloomberg, Matrix Fund Managers
-1
1
3
5
7
9
11
13
15
Sw
itze
rlan
dG
erm
an
yS
wed
en
Fra
nce
Jap
an
Ire
lan
dS
pain
Po
rtug
al
Un
ite
d K
ing
do
mT
aiw
an
Italy
Isra
el
Au
str
alia
New
Zea
land
Norw
ay
Czech
Rep
ublic
Gre
ece
Can
ad
aT
haila
nd
So
uth
Ko
rea
Unite
d S
tate
sH
un
ga
ryP
ola
nd
Chile
Chin
aM
ala
ysia
Pe
ruP
hili
pp
ines
India
Me
xic
oB
razil
Russia
Indo
nesia
So
uth
Afr
ica
Tu
rke
yN
igeri
a
10-year nominal government bond yields (%)
-3
-2
-1
0
1
2
3
4
5
6
Jan-10 Oct-11 Jul-13 Apr-15 Jan-17 Oct-18
SA 10-year real yield (%) Germany 10-year real yield (%)
15
The era of low real returnsPercentage of funds outperforming CPI+2% over rolling 3 years
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec-11 Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 Jun-16 Mar-17 Dec-17 Sep-18 Jun-19
Low Equity Percentage Medium High General
Since Q3 2016
95% of Funds
underperform
16
Amplify SCI* Defensive BalancedSince Inception vs CPI
Performance from 1 June 2014 – 31 December 2019Source: Morningstar, Matrix | *Sanlam Collective Investments
-5%
0%
5%
10%
15%
20%
25%
30%
90
100
110
120
130
140
150
160
31-05-14 30-11-14 31-05-15 30-11-15 31-05-16 30-11-16 31-05-17 30-11-17 31-05-18 30-11-18 31-05-19
Drawdown (RHS) Amplify SCI Defensive Balanced A1 CPI CPI+3%
Achieving CPI+ 3.3%Worst Drawdown -2.7%
17
Glacier MA Low Equity Shopping ListSince Inception Risk vs Return
Performance from 1 June 2014 – 31 December 2019Source: Morningstar, Matrix | *Sanlam Collective Investments
Amplify SCI Defensive Balanced A1
Fund 1
Fund 2
Fund 3
Fund 4
Fund 5
Average of Category
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
An
nu
alis
ed
Retu
rn
Volatility
*
18
Current asset allocationMulti-asset funds as at end December 2019
Source: Matrix Fund Managers | *Sanlam Collective Investments
Amplify SCI* Defensive Balanced Fund Amplify SCI* Absolute Fund
22.9%
7.1%
7.4%
3.4%
0.0%
12.6%
28.0%
18.7%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Local Equity
Foreign Equity
Foreign Cash
Property
Bank Snr Fixed
Bank Snr Floater
SA Govt Bonds
NCD & Cash
34.0%
7.5%
5.4%
3.3%
3.2%
4.0%
22.2%
20.4%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Local Equity
Foreign Equity
Foreign Cash
Property
Bank Snr Fixed
Bank Snr Floater
SA Govt Bonds
NCD & Cash
19
How much offshore is enough?
Source: Matrix Fund Managers
0%
5%
10%
15%
20%
25%
30%
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Foreign Equity Foreign Cash
Our businessManager profile
• Founded in 2006, R10billion AUM at present
• Majority employee owned
• Compelling performance across Hedge- and Traditional Funds
• Robust investment process, strong experienced team
• Pragmatic mentality
• Investment objective and risk focus
• Tactical asset allocation
Thank you
22
Amplify Investment Partners (Pty) Ltd is an authorised Financial Services Provider. Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment
Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial
Partners (Pty) Ltd (“GFP”), Satrix Investments (Pty) Ltd, Amplify Investment Partners (Pty) Ltd, Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Private Wealth (Pty) Ltd (“SPW”), Sanlam
Credit Fund Advisor Proprietary Limited, Sanlam Africa Real Estate Advisor Proprietary Limited and Sanlam Employee Benefits (“SEB”), a division of Sanlam Life Insurance Limited and
Simeka Wealth (Pty) Ltd; and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”)
and Satrix Managers (RF) (Pty) Ltd (“Satrix”). Sanlam Collective Investments (RF) (Pty) Ltd is a registered and approved Manager in terms of the Collective Investment Schemes Control Act.
A schedule of fees can be obtained from the Manager.
Abax Investments is a licenced financial services provider (FSP no: 856)
Matrix Fund Managers is a licenced financial services provider (FSP no: 44663)
Sentio Capital Management is a licenced financial services provider (FSP no: 33483)
Terebinth Capital is a licenced financial services provider (FSP no: 47909)
Truffle Asset Management is a licenced financial services provider (FSP no: 36584)
Laurium Capital is a licenced financial services provider (FSP no: 856)
Collective investment schemes are generally medium- to long-term investments. Past performance is not necessarily a guide to future performance,
and the value of investments/units /unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager on request. Collective
investments are traded at ruling prices and can engage in borrowing and scrip lending. The Manager does not provide any guarantee with respect to either the capital or the return of a
portfolio. The manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Income funds derive their income primarily
from interest-bearing instruments. The yield is current and is calculated on a daily basis. If the fund holds assets in foreign countries it could be exposed to the following risks regarding
potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange.
Disclaimer
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