Sentio Sanlam Collective Investments Hikma Shariah Balanced Fund Report - April 2021

Transcription

1. Sentio Sanlam Collective Investments Hikma Shariah Balanced Fund Minimum Disclosure Document As of 2021 /04/30 MDD Issue Date: Fund Objective The objective of the Sentio Sanlam Collective Investments HIKMA Shariah Balanced Fund will be to provide long term capital growth while preserving capital with a reasonable level of income that complies with Shariah (Islamic Law) and the standards prescribed by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Fund Strategy The manager invests in an actively managed balanced portfolio, with an equity exposure (including international equity) between 0% and 75% at all times. The investment policy followed by the manager will focus on achieving this by investing in a wide variety of asset classes such as equity securities, non-equity securities, listed property, money market instruments and assets in liquid form, both domestically and internationally, that have been approved for investment by the Shariah Supervisory Board (SSB) or Shariah Advisory Committee (SAC) from time to time. The portfolio shall invest in Shariah compliant domestic and global equities, domestic and global property companies, listed commodity ETF's, Sukuks, Shariah compliant instruments and listed equity capital protection instruments, that have been approved for investment by the SSB from time to time. The portfolio will be predominantly invested in domestic assets, but may also invest internationally, within the statutory investment limitations and prudential investment requirements. The fund may at any time hold a maximum of 25% in offshore assets. The portfolio may also invest in participatory interests of underlying unit trust portfolios. The portfolio is compliant with regulation 28 of the Pension Funds Act. Top Ten Holdings (%) Islamic Term Deposit 4,18 Impala Platinum Holdings Ltd 4,07 BHP Billiton Plc 3,76 Anglo American Plc 3,70 Islamic Term Deposit 3,66 Sibanye Stillwater Ltd 3,27 Islamic Term Deposit 3,24 MTN Group Ltd 3,24 Bidvest Group Ltd 2,96 Compagnie Financiere Richmont SA 2,54 Asset Allocation Portfolio Date: 2021/03/31 % SA Cash 29,19 Non-SA Cash Why Choose This Fund? You should choose that fund if you are looking for a fund that generates capital growth with a reasonable income in a Shari'ah compliant way, benefiting from a detailed bottomup stock picking integrated in a robust risk- anagement framework. 50,51 Non-SA Equity 14,83 Non-SA Bond 1,58 Total Fund Information Portfolio Manager ASISA Fund Classification 0,87 SA Equity SA Property Ticker 2021/05/21 3,03 100,00 SHB1 Imtiaz Suliman & Sanveer Hariparsad South African - Multi Asset - High Equity Risk Profile Moderate Benchmark ASISA Category Avg: SA - Multi Asset - High Equity Annualised Performance (%) Fund Benchmark Portfolio Launch Date* 2016/06/01 1 Year 20,24 20,84 Fee Class Launch Date* 2016/06/01 3 Years 6,89 6,60 Since Inception 4,29 5,32 Fund Benchmark 20,24 22,14 22,92 20,84 21,13 29,02 Fund Size Minimum Lump Sum Investment Minimum Monthly Investment Income Declaration Date Income Payment Date R 201 602 710 R 10 000 R 500 June & December Portfolio Valuation Time 15:00 Transaction Cut Off Time 15:00 Daily Price Information Local media & www.sanlamunittrusts.co.za Repurchase Period 2-3 business days Fees (Incl. VAT) B1-Class (%) Maximum Initial Advice Fee — Maximum Annual Advice Fee — Manager Annual Fee 0,75 Total Expense Ratio 0,95 Transaction Cost 0,19 Total Investment Charges 1,14 Performance Fee TER Measurement Period Cumulative Performance (%) 1st business day of July & January — 01 January 2018 - 31 December 2020 1 Year 3 Years Since Inception Highest and Lowest Annual Returns Time Period: Since Inception to 2020/12/31 Highest Annual % 5,40 Lowest Annual % 0,58 Risk Statistics (3 Year Rolling) Standard Deviation 9,69 Sharpe Ratio 0,11 Information Ratio 0,07 Total Expense Ratio (TER) is the percentage value of the Financial Product that was incurred as expenses relating to the administration of the Financial Product. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER may not necessarily be an accurate indication of future TER’s. Maximum Drawdown Transaction Cost (TC) is the percentage value of the Financial Product that was incurred as costs relating to the buying and selling of the assets underlying the Financial Product. Transaction Costs are a necessary cost in administering the Financial Product and impacts Financial Product returns. It should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of Financial Product, the investment decisions of the investment manager and the TER. 2020/12/31 9.14 cpu 2020/06/30 14.59 cpu 2019/12/31 16.15 cpu 2019/06/30 19.40 cpu -10,42 Distribution History (Cents Per Unit) Total Investment Charges (TER + TC) is the total percentage value of the Financial Product that was incurred as costs relating to the investment of the Financial Product. Administered by
2. Sentio Sanlam Collective Investments Hikma Shariah Balanced Fund Minimum Disclosure Document As of 2021 /04/30 Risk Profile Additional Information Moderate This is a medium-risk portfolio that aims to deliver income and capital growth over the medium term. This portfolio is designed to minimise volatility and aims to cultivate as smooth a ride as possible. There is some exposure to risky asset classes (such as equities) necessary to grow capital over the medium to long term. This portfolio has a medium to long-term investment horizon. The portfolio is diversified across all major asset classes with an average exposure to equities, and offers real (after inflation) returns but with lower volatility. All reasonable steps have been taken to ensure the information on this MDD is accurate. The information to follow does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Services Act. Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision. The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily a guide to future performances, and that 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 on request from the Manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved Manager in Collective Investment Schemes in Securities. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained on request from the Manager, free of charge. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actualinvestment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Lump sum investment performances are quoted. The portfolio may invest in participatory interests of other unit trust portfolios. These underlying funds levy their own fees, and may result in a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”). The Manager may borrow up to 10% the market value of the portfolio to bridge insufficient liquidity. The fund may from time to time invest in foreign countries and therefore it may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information.Investments in foreign instruments are also subject to fluctuations in exchange rates which may cause the value of the fund to go up or down. The fund may invest in financial instruments (derivatives) for efficient portfolio management purposes. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. Management of the portfolio is outsourced to Sentio Capital Management (Pty) Ltd, (FSP) Licence No. 33843, an Authorised Financial Services Provider under the Financial Advisory and Intermediary Services Act, 2002. Sanlam Collective Investments (RF) (Pty) Ltd retains full legal responsibility for the co-named portfolio. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments scheme. Sources of Performance and Risk Data: Morningstar Direct, INET BFA and Bloomberg. The risk free asset assumed for the calculation of Sharpe ratios: STEFI Composite Index. The highest and lowest 12- month returns are based on a calendar year period over 10 years or since inception where the performance history does not exist for 10 years. Obtain a personalised cost estimate before investing by visiting www.sanlamunittrustsmdd.co.za and using our Effective Annual Cost (EAC) calculator. Alternatively, contact us at 0860 100 266. Glossary Terms Annualised Returns Annualised return is the weighted average compound growth rate over the period measured. Asset Allocation Asset allocation is the percentage holding in different asset classes (i.e. equities, bonds, property, etc.). It is used to determine the level of diversification in a portfolio. Capital Growth Capital growth is the profit made on an investment, measured by the increase in its market value over the invested amount or cost price. It is also called capital appreciation. Distributions The income that is generated from an investment and given to investors through monthly, quarterly, bi-annual or annual distribution pay-outs. Derivatives Derivatives are instruments generally used as an instrument to protect against risk (capital losses), but can also be used for speculative purposes. Examples are futures, options and swaps. Feeder Fund A feeder fund is a South African-based fund that feeds exclusively into its primary foreignbased fund. It allows investors easy access to investing in an offshore fund, eliminating complicated tax and other implications. The shares of the feeder fund represent shares in the primary fund (called a master fund). Liquidity The ability to easily turn assets or investments into cash. Information Ratio The Information Ratio measures the market risk-adjusted performance of an investment or portfolio. The greater a portfolio's Information Ratio, the better its risk-adjusted performance has been compared to the market in general. Maximum Drawdown The maximum drawdown measures the highest peak to trough loss experienced by the fund. Money Market Instruments A money market instrument is a low risk, highly liquid, short-term (one year or less) debt instrument, issued by financial institutions or governments, that tend to have lower returns than high-risk investments. Participatory Interests When you buy a unit trust, your money is pooled with that of many other investors. The total value of the pool of invested money in a unit trust fund is split into equal portions called participatory interests or units. When you invest your money in a unit trust, you buy a portion of the participatory interests in the total unit trust portfolio. Participatory interests are therefore the number of units that you have in a particular unit trust portfolio. Regulation 28 Regulation 28 of the Pension Funds Act sets out prudent investment limits on certain asset classes in investment funds. It applies specifically to investments in Retirement Annuities and Preservation Funds. The allowed maximum exposures to certain asset classes is: 75% for equities; 25% for property; 30% for foreign (offshore) and 10% African assets. Investment Manager Information Sentio Capital Management (Pty) Ltd (FSP) License No. 33843 Physical Address: Illovo Edge, Building 3, 1st floor, 5 Harries Road, Illovo, Johannesburg, South Africa, 2196 Postal Address: Illovo Edge, Building 3, 1st floor, 5 Harries Road, Illovo, Johannesburg, South Africa, 2196 Email: Info@sentio-capital.com Website: www.sentio-capital.com Manager Information Sanlam Collective Investments (RF) (Pty) Ltd Physical Address: 2 Strand Road, Bellville, 7530 Postal Address: P.O. Box 30, Sanlamhof, Bellville, 7532 Tel: +27 (21) 916 1800 Email: service@sanlaminvestments.com Website: www.sanlamunittrusts.co.za Trustee Information Standard Bank of South Africa Ltd Tel: +27 (21) 441 4100 Email: compliance-sanlam@standardbank.co.za Sharpe Ratio The Sharpe Ratio measures total risk-adjusted performance of an investment or portfolio. It measures the amount of risk associated with the returns generated by the portfolio and indicates whether a portfolio’s returns are due to excessive risk or not. The greater a portfolio’s Sharpe ratio, the better its risk-adjusted performance has been (i.e. a higher return with a contained risk profile, where the portfolio manager is not taking excessive risk to achieve those returns). Standard Deviation Standard deviation (also called monthly volatility) is a measure of how much returns on an investment change from month to month. It is typically used by investors to gauge the volatility expected of an investment. Administered by
3. Sentio Sanlam Collective Investments Hikma Shariah Balanced Fund Minimum Disclosure Document As of 2021 /04/30 Portfolio Manager Comment Real Yields & Taper Tantrum: Over the past months, higher UST 10-year yields have been the talk of markets, being up around 80bps since the start of February and almost 90bps since the beginning of the year. Three elements of the rise in rates have been notable: their size, the rise in rates volatility, and also the rise in real rates, particularly in the long end in the US. each country. At the same time, the IMF is proposing a “solidarity” tax on Covid winners, all potentially impacting global “market darlings”, which are still widely held. Globally, there is a shift by governments focussing on the growing gap between the (rich) “haves” versus the (poor) “have nots”, which will invariably lead to higher taxation to fund programs addressing those inequalities. Taking into account where we came from in the last 12 months, this rapid shift higher is indeed noteworthy. Tight valuations across risk assets combined with the speed at which yields moved, brought back uneasy memories of the “Taper Tantrum” of 2013, which led to a sharp sell-off in equity markets. China Tightening. So far, China has been careful not to jeopardise its economic recovery through more aggressive monetary tightening and markets seemingly are taking this for granted. But for many emerging markets, and especially for South African cyclicality, this has to be a potential risk on the radar. So far, any bearishness seems to be countered with talk of tight supply, infrastructure growth and the commodity super cycle. If China starts to tighten, there will undoubtedly be an impact in the cyclical space in general and the South African resources space in particular. A year ago, the 2020 Covid-19 pandemic induced crisis saw a sharp drop in economic activity which was followed by unprecedented policy stimulus (both fiscal and monetary). As economies rebounded, inflation expectations rose, but only gradually. With front-end rates anchored at zero by the Fed, the nominal yield curve steepened, and risk assets posted a strong rally – early stages of recovery were in place. Notably though, real yields remained depressed through 2020. This has begun to change since early in 2021 and the next leg of the reflation trade will be different than what we saw play out in 2020. Examining the composition of the roughly 90bp pick-up in 10-year yields since the beginning of 2021, only about 30 bps is from higher inflation expectations (and in fact, those have inverted for the first time ever, being higher for the next five years but lower for the next thirty years) and 35-odd bps is from higher real yields. In this leg of the economic recovery, growing evidence of strength in economic data is the key. Real yields and inflation expectations rise together when investors expect a stronger, more sustained economic recovery. To assess the potential impact om risk assets, one must look at the multiple episodes during 1997-99, 2004-06 and 2016-18 when real yields went up but so did equities. Historical equity and credit performance have been better when rates are rising than falling, and especially when rates were rising along with inflation expectations, as they are now. Sell-offs occurred in the context of actual or feared policy tightening and/or late in the economic cycle, though currently we are clearly in the early part of the economic cycle. Also, higher real yields with declining inflation expectations would be associated with weaker performance of risk assets, as would spikes in real yields driven by fears about the removal of Fed accommodation. For now, this does not seem to be the case, however, the risk of the “Fed being behind the curve” is one which definitely needs watching. With stretched valuations in many of the major global markets, index levels, while grinding only slowly higher, basically gyrate in a relatively narrow range and are obscuring underlying substantial asset rotation away from longer duration to more cyclical assets, often favouring value as a style, and Emerging Markets as an asset class. As global growth continues to accelerate and with ample liquidity still abound, SA seems well placed to benefit through its liquid, attractively priced capital markets and its exposure to resources in particular. Valuations. In SA, equity or bond valuations remain attractive, despite the recent rally: The All Share is trading on 12-month forward multiples of 10.7x (a 24% discount vs the 5-year history), while the MSCI SA is trading on 10.6x (a 21% discount compared to the 5-year history and a 28% discount to EM). Relative bond valuations also look cheap against the peer group, even after factoring in the lower rating from Moody’s. Any further positive surprise regarding economic reforms or an improving fiscal position would further strengthen its position to become an attractive investment destination. Vaccines. The global roll-out of inoculations continues to pick up speed, currently at c18m doses administered daily across 152 countries, albeit unevenly, and also with increasing breadth of approved vaccines. Countering this success are persistent logistical problems hampering distributions, “vaccine nationalism” and the emergence of more and more variants of the Covid-19 virus, rendering the objective of protection and prevention of infections more difficult. In South Africa, vaccine roll-out has begun, while local Health Insurer Discovery recently estimated that c60% of SA residents already had exposure to the virus, leaving it potentially not far from “herd immunity” levels (if immunity can be preserved). Risk-on. Notwithstanding the abovementioned concerns and potential obstacles, markets continue to pre-empt the global recovery, driving cyclical risk-assets higher. A recent global Fund Manager survey saw 91% of respondents expecting a stronger economy over the next 12 months, the most optimistic outlook on record since 1994. Tech Regulation. A risk largely ignored for a long time, the Chinese government has now started to introduce and enforce regulation designed to rein in the power of its national Social Media champions. While not all of them are Shari’ah compliant, given their large weight in indexes and bellwether characteristics, it is a risk worth watching. For TenCent and Alibaba in particular, the “holy grail of a social media world”, where you can offer your subscriber a holistic one-stop eco-system across all spheres of (daily) life, seems at risk. Worse still, a scenario where the Chinese government force the incumbents to split to foster competition is not inconceivable. At the same time, similar developments can be observed in the US where Tech behemoths like Facebook, Twitter, Google, Amazon and also Apple have their business models and dominance by the regulator. This is all particularly pertinent for SA market heavy-weights Naspers and Prosus, given their large exposure to TenCent, dominating their business and valuations, as well as the benchmark role the US Tech space is occupying globally. Geopolitics. While maybe less confrontational, the US/China tensions have not gone away under the new US presidency and have actually become more pronounced in a number of areas, particularly technology, as the two superpowers battle for global leadership. In addition, potential Domestic Terror in the US have joined traditional geo-political “hotspots” like the Middle East, North Korea, Russia/Ukraine and potentially now the South China Sea, in its threat to global political and market stability. Earnings. Into the U.S. earnings season and on low conviction with possible supply chain disruption still an issue, earnings still carry the potential to disappoint. In the US complacency levels into the reporting period are relatively elevated as a function of the 25year lows in corporate negative-to-positive preannouncements, even as the upward guidance has dropped significantly so far in 2021. From an earnings perspective, Emerging Markets, including South Africa, probably still have the benefit of more defensive valuations (which don’t count for macro but do on earnings day) as well as ongoing positive revisions. Conclusion. For now, the global backdrop continues to improve on the back of an acceleration in inoculations globally, re-opening of economies, positive earnings revisions and continued loose monetary and fiscal conditions. In addition, there continue to be attractive investment opportunities base on cheap valuations, particularly here in South Africa. With this, the fund remains fully geared to take advantage of those positive market drivers. In Sukuks, we still see upside from current levels given the benign inflation environment and risk-on sentiment but remain cautious about the global reflation trade. However, given the abovementioned risks the fund also continues to try and cater for those risks through a careful, disciplined and scientific portfolio construction framework. Portfolio Managers Mohamed Mayet BCOM (Wits), BCOM Hons (Adv Fin), NASD (USA) Rayhaan Joosub BSc Chemical Engineering (Wits) , BCom (Unisa) Imtiaz Suliman CFA: CFA Institute , BSc: Financial Mathematics, University of Pretoria Olwethu Notshe B.Bus Sci, CFA, CAIA Sanveer Hariparsad CFA; CAIA; MSc (Fin Eng); BSc (Hons) (Fin Math) (Cum Laude); BSc (Act Sci) Risks versus Return: Against the above backdrop, there seems to form an eerie market consensus around the world’s trajectory over the next 12 months. However, complacency would be very misplaced as there are a number of risks worth keeping an eye on: Rates: As mentioned above, with US Treasuries having moved sharply higher, markets are concerned about a potential sudden and sharp “late Fed” monetary tightening that might lead to another taper tantrum. We believe that for now the Fed will stay inactive as long as no instability arises in the financial system, however, particularly a spike in real yields would be worrisome. Taxation: Could we be set for a repeat of 2017 where the market didn’t seem to take the US tax cuts seriously until they were very close to happening, just this time taxes are likely to go up!? US President Biden’s minimum global tax plan continues to get refined and he’s now calling for multinationals to pay levies to national governments based on their sales in Administered by