will i add value to my client’s portfolio by including ...€¦ · will i add value to my...

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


-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


-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 (%)


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?


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.

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