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Multi-Manager Quarterly Commentary
Quarter Two; June 2020
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Contents
Contents .............................................................................................................................................. 1
Executive Summary ............................................................................................................................ 2
Highlights............................................................................................................................................. 2
Global Equities .................................................................................................................................... 2
Global Bonds and Listed Property ...................................................................................................... 4
SA Equities ........................................................................................................................................ . 5
SA Bonds and Listed Property ............................................................................................................ 6
SA Cash .............................................................................................................................................. 7
Asset Allocation ................................................................................................................................... 8
Appendix A: Market Performances ..................................................................................................... 9
Disclaimer.......................................................................................................................................... 11
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Executive summary
Risk assets outperformed their defensive counterparts in quarter two on further signs of a V-shaped global
economic recovery and fiscal and monetary stimulus measures totalling a cumulative US$17 trillion. Downward
revisions to global growth by the IMF, reports of a second wave of infections and warnings from the World
Economic Forum of the lasting effects brought on by Covid-19, were shrugged off by the market. Even the IMF’s
warning of a disconnect between the equity market and the real economy was ignored by investors. With
geopolitical tensions escalating between the US and China, a Biden win in upcoming US presidential elections
increasingly likely and a looming US fiscal cliff expected in coming months, an increase in volatility could cause
near term disruptions in equity markets. Despite the risks, valuations and expected returns still favour risk assets
over the coming year.
On the local front, domestic equities and listed property were the best performing of the broad asset classes,
while nominal and inflation-linked bonds lagged their returns. The gains in bonds followed a spike in yields late
in March after Moody’s downgraded the country’s debt to sub-investment grade. Although the tabling of the
2020 Supplementary Budget indicated a surge in the government’s funding requirement in 2020/21, yields were
still lower at the end of June than at the end of March. Given the lower nominal bond yields and a rerating of the
sector, listed property stocks surged as the country moved to Level 3 of the lockdown. The belief that too much
bad news had been priced into the sector was a further catalyst, with valuations suggesting sufficient “fat” in
expected returns. The rally in domestic equities was broad-based with resource stocks coming out winners. A
milder-than-expected economic contraction in quarter one and a rebound in the Absa purchasing managers
index back to over the 50 index level, fuelled domestic demand for equities.
Highlights
IMF revises 2020 global growth forecast lower to -4.9% from -3.0%
IMF warns of disconnect between rising equity markets and the real economy
Global fiscal and monetary stimulus tops US$ 17 trillion
Fiscal deficits to average 14% of GDP in 2020
Will the Fed adopt yield curve targeting to anchor rates at zero percent?
Polls show Biden win in US elections
US-China geopolitical tensions rise on Hong Kong National Security Law
Tito Mboweni paints a dark fiscal picture for SA in Supplementary Budget
SA GDP contracts 2% (QQSAA) in quarter one but the worst is still to come
Consumers to pay for Nersa’s mistake; Eskom tariffs to rise 15% in 2021?
ANC Transformation Committee proposes infrastructure-led recovery but funding options remain
uncertain
Global Equities
Global equities rebounded strongly in the second quarter, partially offsetting some of the losses arising from the
Covid-19 outbreak in quarter one. The MSCI World Index gained 19.4% in US dollars, still short of the -21.1%
recorded the previous quarter. Similarly, emerging market equities returned some 18.1% in US dollars, also
well short of the 23.6% contraction the previous quarter. The catalysts for the sharp gains included further
evidence of a V-shaped global economic recovery as economies began to unlock and furloughed workers
returned to work. Fiscal and monetary stimulus measures totalling a cumulative US$17 trillion were also a major
contributor to the risk-on trade, offsetting downward revisions to global growth by the International Monetary
Fund (IMF), reports of a second wave of infections and warnings from the World Economic Forum of the lasting
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economic, environmental, societal and technological effects brought about by Covid-19. The Covid-19 Risks
Outlook report grouped 31 risks across the five major categories mentioned above, by order of importance.
Further headwinds in the coming months include the expiration of the US’s Paycheck Protection Programme,
amounting to some 3% of GDP, and expanded unemployment benefits and direct payments to individuals
totalling some 1% of GDP. A fiscal cliff is nonetheless expected to be averted with some of these programmes
being rolled over or supplanted with other measures. In addition, betting markets are expecting a Biden win in
the upcoming US elections, with the Democrats also expected to win the Senate and the House. While a Biden
win is likely to result in an abatement of trade tensions with China, expected tax increases under a Democrat-
led government could negatively affect the earnings outlook for S&P500 companies. A full repeal of Trump’s
tax cuts could reduce S&P500 earnings by up to 12%.
The IMF’s June World Economic Outlook Report revised global growth lower to -4.9% from -3.0% in the April
2020 forecast with consumption growth, in particular, being downgraded for most economies. This reflected the
larger-than-anticipated disruption to domestic activity from social distancing and lockdowns, as well as a rise in
precautionary savings. Moreover, investment was expected to be subdued as firms deferred capital expenditure
amid high levels of uncertainty. Although policy support from fiscal and monetary stimulus measures partially
offset the deterioration in private domestic demand, global activity was expected to trough in the second quarter
of 2020, before recovering thereafter. In 2021 growth was projected to strengthen to 5.4%, 0.4% lower than the
April forecast. Consumption was projected to strengthen gradually next year, while investment was also
expected to firm up, but to remain subdued. Global GDP for 2021 as a whole was forecast to just exceed the
2019 level.
In a further breakdown of growth by region, growth in the advanced economy group was projected at -8.0% for
2020, 1.9% lower than in the April 2020 forecast. There appears to have been a bigger hit to activity in the first
half of the year than anticipated, with signs of voluntary distancing even before lockdowns were imposed. This
points to a more gradual recovery in the second half of the year as fear of contagion is likely to continue. The
recent outbreak of a second wave of infections in Florida, Texas, Arizona, Beijing, Tokyo and Melbourne
highlight these risks, while the risk of new pandemics, such as a new strain of the H1N1 virus (G4 EA H1N1) or
Bubonic Plague, entrench permanent behavioural changes. Among emerging market and developing
economies, the downward revisions to growth also reflect larger spillovers from weaker external demand.
Overall, growth in the group of emerging market and developing economies is forecast at –3.0% in 2020,
2% lower than the April 2020 forecast. In 2021 the growth rate for emerging and developing economies is
projected to strengthen to 5.9%, largely reflecting the rebound in Chinese growth to some 8.2%.
The World Economic Forum’s Covid-19 Risks Outlook report revealed that economic fallout posed the most
likely threat to the global economy in the near future, dominating four of the top five risks overall. With job
losses felt the world over, a prolonged recession has 68.6% of survey participants worried. More than 50%
identified bankruptcies and industry consolidation, the failure of industries to recover and a disruption of supply
chains as crucial worries. The third most worrisome fallout for companies was an increase in cyberattacks and
data fraud, as well as the breakdown of IT infrastructure and networks. Companies were also concerned with
geopolitical disruptions to businesses, with more than 40% of respondents rating tighter restrictions on the
movement of people and goods among the most worrisome effects from Covid-19.
Given the risks mentioned above and the warning from the IMF of the disconnect between equity prices and the
real economy, bottom-up consensus equity valuations also suggest caution over the coming months, whereas
over the longer term, the outlook still remains positive for equities. At quarter-end, the trailing price-to-earnings
ratio (p/e) for the MSCI World Index was on the expensive side at 21.6X earnings, ahead of the 10-year mean
(18.5X) and the long-term mean (21.0X). With earnings over the next year expected to contract by some 6%,
the forward p/e ratio was even higher at 23.0X earnings. However, since markets look out further than 12
months, on a normalised basis (earnings two to three years out), the forward p/e was some 16.5X earnings, still
slightly ahead of the historical mean of 15.9X earnings. While equity markets are expected to trade at a premium
to their historical means given negative or near-zero interest rates, it is the difference between consensus and
implied earnings over the coming year that raises a red flag. Implied earnings priced into the equity market
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point to a 20.8% gain, well ahead of the -6.0% consensus estimate. It is for that reason that equity markets are
at risk of a pullback since they appear to have run ahead of themselves. The cyclically-adjusted price-to-
earnings ratio (Cape Ratio) also suggests that equities could face some headwinds given that the MSCI World
Index is trading at 23.2X earnings, ahead of the 22.7X mean. On a normalised basis, however, consensus
earnings growth of some 22.5% exceeds the 20.8% implied by the market, suggesting longer term upside for
equity markets.
In the case of emerging markets, the implied earnings outlook is for a contraction of 0.5% in earnings, whereas
the bottom-up estimate is for a positive 1.1% growth in earnings. Since there is no material disconnect between
implied earnings and consensus 12-month earnings, there is no red flag. Similarly, if the Cape Ratio is applied
to the MSCI Emerging Markets Index, emerging markets appear attractive on a 13.0X multiple. However, given
the forward p/e of some 16.2X earnings, emerging markets appear stretched relative to the 10-year (13.3X) and
the long term mean (14.8X), again suggesting some caution in the coming months. On a normalised basis,
however, emerging markets are trading on a 11.5X forward multiple, suggesting further upside for this asset
class over the longer term. If our base case view is correct in that the global economy recovers on aggressive
fiscal and monetary stimulus, commodity prices and commodity-exporting economies are expected to record
robust growth over the next two years. Support for this view can be seen in the relative $-price of copper to gold,
which currently favours copper over gold. Furthermore, US cash holdings as a percentage of stock market
capitalization remains near multi-year highs, suggesting that the firepower to fuel further increases in stock
prices has not yet been exhausted. As a consequence, an overweight position is retained in both developed
and emerging market equities over a 12-month investment horizon, in spite of the near-term risks discussed
above. Given the sharp rebound in the US’s ISM (Purchasing Managers) index, there still appears to be upward
momentum to stocks in the very near term.
Global Bonds and Listed Property
Global bonds brought up the rear in the second quarter as an expected surge in fiscal deficits and a step-wise
jump in debt-to-GDP ratios from government fiscal stimulus programmes, weighed on the sector. While the
average global fiscal deficit is expected to rise to 14% of GDP in 2020, global public debt is expected to reach
an all-time high of 101% of GDP, a 19% increase from last year. In most advanced economies, fiscal deficits
are projected to widen to 16.5% of GDP, while government debt is set to exceed 130% of GDP. In emerging
economies, fiscal deficits are projected to widen to 10.5% of GDP, with government debt expected to average
63% of GDP, a 10% increase from last year. Despite the surge in debt, the Barclays Capital Global Aggregate
Bond Index still managed to gain some 3.3% in US dollars and 0.5% in rands as investors betted on central
banks continuing to use quantitative easing to engineer negative or near-zero long term interest rates.
Emerging markets have also embarked on quantitative easing, although the form of the intervention between
countries differs. In countries where policy rates are almost zero bound, quantitative easing (QE) has taken the
form of bond purchases in the secondary market in order to flatten the curve, or to provide liquidity to the bond
market, as is the case in South Africa. In other instances, QE has taken the form of bond purchases in the
primary market, effectively supporting public finances through the monetization of debt. This has not deterred
investors with the JP Morgan Emerging Markets Bond Index yielding some 9.1% in US dollars as spreads
narrowed sharply on investors’ search for yield.
The search for yield continued in the high yield corporate bond market with spreads coming in and yields
declining further. The Barclays Capital High Yield Bond Index gained some 12.2% in US dollars highlighting
perceptions of lower default risks in a world of very low interest rates and stimulative monetary and fiscal
measures. Since yields are negative or near-zero in developed market bonds, an underweight position is
retained in this asset class. In contrast, a neutral weighting is tactically retained in emerging market bonds given
higher absolute yields and expectations of US dollar depreciation as the global economy gains traction.
Although inflation expectations are benign and expected to remain anchored at levels below the targeted rate
of inflation for the next few years, inflation-linked bonds gained 6.6% in US dollars and 3.7% in rands. Real
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yields on the Barclays Capital Global Inflation Linked Bond Index declined to –1.4% from –0.9% as breakeven
inflation rates increased across the curve. With globalization on the back foot as trade wars and global supply
chain shifts intensify, production costs are expected to rise spilling over into higher consumer prices. The decline
in the global support ratio viz. the ratio of workers to consumers due to baby-boomers leaving the work force, is
a further inflationary force as consumption rises relative to production. Furthermore, since QE has kept the
neutral rate of interest (consistent with stable inflation and full employment) artificially low, rising fiscal deficits
would ordinarily trigger a higher neutral rate in order to prevent economies from over-heating. Since QE is
expected to remain a corner-stone of current monetary policy, inflation risks will intensify over time. However,
with inflation still benign and the fact that real yields are negative, an underweight position is retained in global
inflation-linkers.
Global listed property gained a respectful 10.3% in US dollars in quarter two but was still 21% lower over the
year-to-date period. The sector rerated with the price-to-book ratio increasing to 1.17X from 1.07X the previous
quarter. Despite initial concerns about high unemployment and weak consumption expenditure, the release of
US unemployment data for June showed the rate declining further to 11.1% from 13.3% the month before, and
sharply lower than the 14.8% unemployment rate recorded in April. While many furloughed workers have
returned to work, unemployment is likely to remain high at around 10% given that some job losses will become
permanent, particularly in the services sector. Although retail sales rebounded off their April lows in May, retail
sales were still 1.4% lower than at the same time last year. The improvements in both employment and retail
sales data do help to allay some concerns about rising vacancies and lower rental resets. A risk to the outlook
remains a second wave of infections which could result in households opting to self-isolate or governments’
again imposing some form of lockdown. The recent outbreak of Covid-19 in some southern US states is a timely
reminder of these risks. Nonetheless, given favourable valuations and the emerging V-shaped recovery seen
in the retail and job market, the global listed property sector is upweighted to neutral.
SA Equities
SA equities tracked their developed and emerging market counterparts higher in the second quarter, rallying a
stellar 23.2% in rands and 26.6% in US dollars. The gains reversed almost all of the –21.4% recorded in the
first quarter. Equity market gains were generally broad based, with resources (Resi-10) gaining a stunning
40.6%, industrials (Indi-25) 17.1% and financials (Fini-15) up a more muted 11.1%. Gold stocks continued to
shine, rallying 68%, as the gold price was supported by extremely low or negative global interest rates. Rising
geopolitical tensions between the US and China over new national security legislation for Hong Kong also
contributed to gold’s safe-haven status. The best performing of the Top 40 stocks included Sasol (258%), RMB
Holdings (96.8%), Gold Fields (75.8%), Northern Platinum (67.4%) and Sibanye Stillwater (67.0%). What
makes the equity market gains even more pleasing is that they came on the back of net foreign sales of domestic
equities totalling R31.3bn. Domestic demand for equities was driven by better than expected quarter one GDP
data which showed the country’s growth rate contracted by 2% quarter-on-quarter, seasonally adjusted
annualised (qqsaa)), less than the –4% consensus estimate. In year/year terms, however, growth contracted by
a mere 0.1%. The best performing sectors on a year/year basis included agriculture, forestry and fishing
(13.6%), finance real estate and business services (3.1%), general government services (1.6%) and personal
services (0.9%). All of the other economic sectors reported year/year contractions in growth.
Equities were also supported by a rebound in the Absa purchasing managers index (PMI) to back over the 50
index level, pointing to an expansion in the manufacturing sector over the coming months. In contrast, the
Standard Bank PMI, a broader measure of economic activity including services, was still in contraction territory
at 42.5 index points, suggesting that a broad based recovery was still some months off. The full extent of the
economic damage caused by the lockdown will, however, only be seen in quarter two data as both household
final consumption expenditure (HFCE) and private sector gross fixed capital formation (GFCF) collapsed. This
is highlighted by the sharp decline in both passenger and commercial vehicle sales which fell some 64.6% and
60.7% respectively over the quarter. Economic growth for the year is now expected to contract by some 8%,
somewhat worse than the SARB and Treasury’s –7.2% estimate.
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Despite the weak economic growth outlook, bottom-up rolling consensus earnings estimates for the All Share
Index improved materially over the quarter, with earnings over the coming year now expected to grow some
14.6% rather than the –47% expected the previous quarter. Since implied earnings growth of –5.3% is still priced
into the market, materially lower than the consensus estimate, there is further upside momentum in the market.
With the 12-month forward price-to-earnings ratio also improving to 15X earnings, slightly below the 15.5X
mean, the market is at worst fairly priced, suggesting no near-term mispricing in the market. Similarly, if the
cyclically-adjusted price-to-earnings ratio (Cape Ratio) is used as a valuation tool, the current multiple of 20X
appears attractive relative to the 24X mean. Since equity markets are forward looking, typically by around 12
months, the two-year EPS estimate is also important in valuing the market. Although earnings growth is
expected to slow on a rolling 2-year basis to some 6.9%, total returns in the low teens are still expected from a
small market rerating and growth in dividends. In light of the relatively attractive return expectations, an
overweight position is retained in domestic equities.
SA Bonds and Listed Property
South African bonds outperformed their developed and emerging market counterparts in quarter two, returning
some 9.9% as yields declined after Moody’s downgraded the country’s debt to sub-investment grade in late
March. The yield on the All Bond Index declined from some 11.2% to 10.1% in spite of the tabling of the 2020
Supplementary Budget. Although market expectations surged in the fiscal deficit to around 14% of GDP, up
from a budgeted 6.8% of GDP, the main budget deficit came in higher at 14.6% of GDP and the consolidated
deficit even higher at 15.7% of GDP. Equally concerning was that the primary deficit – the difference between
non-interest expenditure and revenue – jumped to 9.7% of GDP, suggesting that a stabilisation in debt was
unlikely for years to come. The gross debt-to-GDP ratio was also revised higher from 65.6% of GDP to 81.8%
in the current fiscal year, with stabilisation only expected in 2023/24 at some 87.4% of GDP. The envisaged
debt stabilisation coincided with Cabinet’s endorsement of a primary budget surplus in the same year. The
Minister of Finance warned, however, that debt stabilisation was only possible if spending reductions and
revenue adjustments totalling R250bn were made over the next two years. This additional saving was over-and-
above the R160bn announced in wage cuts in the February budget.
But, savings on the wage bill have not yet been finalized. Cosatu-affiliated trade unions have dragged the state
to arbitration at the Public Service Co-ordinating Bargaining Council, while non-aligned unions have gone
directly to the Labour Court. If the debt spiral is not halted and reversed, it is likely that some state-owned
companies and public entities will collapse, triggering a call on guaranteed debt obligations. Since the
Supplementary Budget is a bridge to the October Medium Term Budget Policy Statement, the market’s attention
will shift to government’s plans to introduce structural reforms to boost growth, including plans to rationalise the
number of state-owned enterprises. This commitment, however, appears to be at odds with the ANC’s
Economic Transformation Committee that is recommending a deepening of the developmental state model,
including the creation of two new state owned entities.
While the document acknowledges the use of public-private partnerships to drive infrastructural investment,
including build, operate and transfer delivery methods, the funding model is less clear. What has been proposed
is that Regulation 28 be amended to allow pension funds to invest directly into infrastructure or infrastructural-
bonds, without the intermediation of an asset manager. Without oversight of how government spends pension
fund monies, given its poor track record, it seems unlikely that pension funds would want to invest directly in
government infrastructure projects. Rather, Business for South Africa’s proposal for the private sector to fund,
develop and operate infrastructure in a regulated competitive environment appears to be the most feasible
means of mobilizing pension fund monies. This model will reduce the strain on the fiscus and SOEs without
increasing the cost to the consumer.
Inflation-linked bonds also rebounded sharply in quarter two, returning some 17.7% as real yields declined from
6.1% to 4.5%. The almost 80% increase in government’s funding requirement for the 2020/21 fiscal year
contributed to a slight backup in yields towards the back-end of the quarter. With inflation expected to be
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anchored at the low end of the SARB’s target range through most of the year, the absence of an inflation-carry
informs our neutral weighting in this asset class. Over the longer term (12 months), however, inflation-linkers
are upweighted to overweight given that inflation is expected to trough in 2020 and to increase thereafter on
sharply higher administered prices, notably electricity tariff increases.
Domestic listed property rebounded sharply in the second quarter, gaining some 20.4% in rands and 23.8% in
US dollars. For the year-to-date, however, the sector is still some 38% in the red. The sector rerated relative to
bonds, with the property-to-bond yield ratio declining from 1.77X to 1.72X, still well ahead of the historical mean
of 0.9X. The market appears to have shrugged off concerns about the absence of forward distributions guidance
and the sector’s application to the JSE for exemption of the Reits’ requirement that 75% of earnings be
distributed. A possible explanation for the change in sentiment could be the country’s move to Level 3 of the
lockdown and the realization that so much bad news has already been priced into the market, that downside
risks from here on are extremely limited.
By way of example, the current breakeven return for the sector assumes a 30% decline in distributions growth
and a 38% derating in the historical property-to-bond yield ratio. There is thus sufficient “fat” in the numbers to
justify a more aggressive allocation to listed property. While the risk remains that foot-traffic volumes at malls
do not recover to pre-Covid levels or that office space demand evaporates in a world of “working-from-home”,
the resumption of load-shedding and the expectation that this will persist for a number of years, suggests that
office space demand is unlikely to collapse overnight. Domestic listed property has subsequently been
upweighted to overweight given the expectation that returns will be front-loaded even if some form of sector
normalization only takes place over the next two to three years.
SA Cash
SA cash yielded 1.5% in quarter two, underperforming all of the domestic fixed-income asset classes. In light
of downward revisions to inflation estimates for 2020 (3.4%) and 2021 (4.4%), as well as the need to bring
financial relief to hard-hit consumers and businesses from the Covid-19 lockdown, the SA Reserve Bank (SARB)
cut rates a cumulative 275 basis points since the start of the year. Although the SARB’s Quarterly Projection
Model (QPM) suggested no further rate cuts this year, it did signal cumulative increases of 100 basis points in
2021 and 2022. The envisaged repo rate at the end of 2021 and 2022 was some 4.1% and 4.87% respectively,
somewhat different to the money market’s expectations. The money market is still pricing in a further 25 basis
point cut in rates this year, with the 1X4 FRA apportioning a 72% probability to a cut as early as the July MPC
meeting. In contrast, the 3X6 FRA is pricing in a 25 basis point cut with a 100% probability. Contrary to the
QPM’s output of rate hikes in 2021 and 2022, the 18X21 and 21X24 FRA’s are pricing in only a 25 basis point
increase in rates, suggesting no rate hikes in 2021.
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Asset Allocation
Our asset allocation view is summarized in the table below:
Overweight domestic equities on attractive valuations, low interest rates and rebounding leading
economic indicators.
Overweight domestic nominal bonds on high real yields. Downweight to neutral in the medium term (6
to 12 months) on rising inflation expectations
Neutral inflation-linkers on subdued inflation-carry. Upweight to overweight in the medium term (6 to
12 months) on attractive real yields and rising inflation expectations.
Overweight domestic listed property on stress-tested valuations and attractive relative return
expectations
Underweight offshore assets on USD weakness.
Overweight developed market equities on negative or zero-bound long bond yields, normalised
valuations and attractive USD return expectations
Overweight emerging market equities on V-shaped global economic recovery, normalised valuations
and gains in commodity prices.
Underweight developed market bonds on negative real yields, inflation risks and high modified
duration
Neutral emerging market bonds on attractive absolute yields and expected currency appreciation
Underweight global inflation-linked bonds on negative real yields and high duration risks
Neutral global listed property on valuations and V-shaped economic recovery
-2 -1 0 1 2
SA Equities ∆
SA Bonds ∆
SA ILB ∆
SA Property ∆
SA Cash ∆
DM Equity ∆
EM Equity ∆
Global Bonds ∆
Global ILB ∆
Global Property ∆
Global Cash ∆
International ∆
Legend Current Positioning 0 = Neutral
0-3 Month View +/-1 = 1% to 2% over/underweight
∆ 6-12 Month View +/-2 = 2% to 4% over/underweight
Asset Allocation Positioning
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Appendix A: Market Performances
Periods up to 30 June 2020 1 month 3 months 6 months YTD 1 year 3 years 5 Years 10 Year
ALL SHARE (ZAR) 7.74% 23.18% -3.16% -3.16% -3.30% 5.11% 4.16% 10.89%
ALL SHARE ($) 9.32% 26.62% -22.06% -22.06% -21.52% -4.32% -3.03% 2.17%
ALL SHARE (GBP) 9.38% 27.06% -16.44% -16.44% -19.16% -2.72% 1.74% 4.15%
TOP 40 7.85% 24.18% 0.37% 0.37% -0.55% 6.68% 4.82% 11.23%
MID CAP 6.06% 15.37% -25.67% -25.67% -17.60% -3.50% -0.62% 8.00%
SMALL CAP 11.33% 17.21% -20.95% -20.95% -22.93% -11.59% -5.85% 6.54%
FLEDG 6.53% 7.58% -20.92% -20.92% -23.02% -11.36% -3.88% 4.65%
DERIVATIVE
RES 20 8.62% 40.63% 6.23% 6.23% 11.69% 24.13% 9.55% 4.64%
IND 25 8.33% 17.11% 9.73% 9.73% 7.18% 4.24% 4.60% 16.24%
FIN 15 3.13% 11.09% -33.41% -33.41% -36.93% -6.59% -4.85% 8.05%
FIN 30 7.49% 16.78% -2.23% -2.23% -5.54% 1.82% 2.73% 14.44%
ALL SHARE ECONOMIC GROUP
RESOURSES 8.77% 41.20% 5.52% 5.52% 12.38% 24.64% 10.47% 4.97%
BAS MAT 8.82% 41.30% 5.66% 5.66% 12.53% 24.73% 14.20% 7.21%
INDUST -1.48% 6.12% -33.54% -33.54% -35.71% -14.96% -7.93% 3.28%
CON GDS 4.97% 11.88% 0.94% 0.94% 0.60% -6.43% 0.41% 13.17%
HEALTH -1.46% 14.47% -12.39% -12.39% 2.93% -17.89% -15.31% 4.97%
CON SRV 7.11% 5.00% -23.45% -23.45% -26.06% -3.80% 1.19% 17.06%
TELECOMS 1.08% 14.90% -17.75% -17.75% -34.24% -13.22% -14.84% 2.52%
FINAN 4.17% 12.87% -31.68% -31.68% -34.50% -8.55% -5.26% 7.92%
TECHNOL 13.28% 24.53% 39.32% 39.32% 36.54% -7.58% -6.96% 10.50%
ALL SHARE SHARE SECTOR
CHEMICALS 41.27% 160.51% -52.23% -52.23% -57.52% -25.18% -17.95% -1.81%
FORESTRY -0.43% 8.62% -5.42% -5.42% -5.65% -3.38% 5.76% 19.63%
MINING 8.71% 41.77% 12.76% 12.76% 23.85% 37.66% 20.15% 8.42%
CONSTRUCTION 11.87% 12.30% -25.19% -25.19% -26.80% -15.05% -10.62% -10.59%
GENERAL IND -1.98% 3.93% -34.03% -34.03% -37.18% -14.10% -6.30% 7.57%
ELECTRONIC -21.75% -21.23% -50.22% -50.22% -46.48% -21.66% -14.88% -6.52%
IND TRN -2.06% 25.47% -30.25% -30.25% -29.02% -16.39% -11.58% 2.67%
SUPPORT 13.16% 6.56% -21.60% -21.60% -22.14% -12.66% -15.25% -2.13%
AUTOMOBILES 33.60% 28.93% -21.86% -21.86% -23.35% 1.08% -10.58% 11.61%
BEVERAGES 1.17% 5.82% -30.09% -30.09% -32.63% -11.67% -5.40% 9.53%
FOOD PR 6.01% -1.60% -11.55% -11.55% -6.74% -10.95% -4.00% 6.67%
PERSON 8.08% 14.04% 0.78% 0.78% -6.11% 2.21% 3.78% 16.74%
HEALTH -5.12% -5.97% -28.46% -28.46% -14.36% -16.01% -14.87% 4.96%
PHARMACEUTIC 3.09% 52.26% 17.83% 17.83% 33.88% -20.22% -15.92% 4.69%
DRG RET 2.84% -2.04% -15.04% -15.04% -12.28% -1.91% 1.08% 9.93%
GEN RET 9.11% 13.71% -36.23% -36.23% -41.69% -14.58% -13.29% 4.60%
MEDIA 22.84% 23.90% -8.78% -8.78% -20.68% 7.93% 11.11% 28.68%
TRAVEL 39.71% 26.39% -54.98% -54.98% -61.00% -30.73% -21.47% -5.03%
FIX LN 65.53% 44.33% -14.91% -14.91% -67.35% -18.07% -9.36% 1.62%
MOBILE -0.87% 13.72% -17.92% -17.92% -30.87% -12.93% -15.14% 2.52%
BANKS 0.59% 7.40% -38.41% -38.41% -43.27% -5.21% -3.02% 8.51%
N/L INS -0.74% 0.00% -4.65% -4.65% -6.57% 7.77% 9.15% 14.68%
LIFE IN 5.23% 19.01% -24.01% -24.01% -26.17% -1.95% -2.03% 12.33%
REAL ESTATE 6.09% 22.50% -23.64% -23.64% -20.26% -10.42% -6.96%
GEN FIN 3.95% 13.98% -24.59% -24.59% -24.13% -10.49% -8.62% 5.41%
EQ INV -10.53% -11.98% -16.66% -16.66% 1.73% -5.64% -1.23% 10.25%
SOFTWARE 13.28% 24.53% 39.32% 39.32% 36.54% -7.58% -6.96% 10.61%
ALL SHARE SUB SECTOR
GOLD MN 20.00% 68.03% 75.79% 75.79% 149.08% 61.44% 38.62% 8.03%
PLATINUM 8.15% 62.04% -9.44% -9.44% 67.40% 50.03% 17.94% -1.34%
GEN MIN 5.83% 31.88% 7.61% 7.61% 5.01% 31.84% 16.96% 9.86%
SPECIALIST
SA FIN 7.18% 15.60% -7.17% -7.17% -9.92% -1.02% 0.71% 12.55%
SAPY (ZAR) 13.41% 20.43% -37.56% -37.56% -39.98% -18.33% -9.06% 4.68%
SAPY ($) 15.07% 23.79% -49.75% -49.75% -51.29% -25.66% -15.34% -3.55%
INDUST & FINAN 8.31% 16.59% 6.753% 6.75% 4.04% 2.52% 3.34% 14.62%
CAPPED INDICES
CAP TOP 40 6.91% 24.11% -2.77% -2.77% -4.00% 4.73% 3.53% 10.75%
CAP ALL SHARE 7.03% 22.94% -5.16% -5.16% -5.64% 3.76% 3.41% 10.55%
SHAREHOLDER WEIGHTED
SH WE TP 40 8.36% 23.40% -2.27% -2.27% -2.89% 3.32% 2.49% 10.99%
SH WE ALL SHARE 8.07% 22.09% -6.33% -6.33% -6.09% 2.00% 2.08% 10.61%
Capped SH WE ALL SHARE 6.98% 21.64% -10.68% -10.68% -10.78% -0.81% 0.07%
SA VALUE 6.80% 19.13% -16.38% -16.38% -18.75% -0.24% -1.59% 6.47%
SA GROWTH 8.43% 26.20% 9.47% 9.47% 12.15% 10.12% 8.81% 14.06%
10
Appendix A (2): Market Performances
Periods up to 30 June 2020 1 month 3 months 6 months YTD 1 year 3 years 5 Years 10 Year
CREDIT MARKETS
BONDS 1-3 YEARS 0.93% 6.25% 7.55% 7.55% 10.56% 9.74% 9.04% 8.01%
BONDS 3-7 YEARS 0.46% 12.76% 7.00% 7.00% 11.22% 10.41% 9.80% 9.06%
BONDS 7-12 YEARS -1.69% 13.23% 2.04% 2.04% 5.34% 9.04% 8.39% 8.86%
BONDS 12+ YEARS -2.03% 8.03% -4.05% -4.05% -2.32% 6.28% 6.01% 7.82%
ALL BOND (ZAR) -1.18% 9.94% 0.36% 0.36% 2.85% 8.11% 7.49% 8.30%
ALL BOND ($) 0.26% 13.01% -19.23% -19.23% -16.53% -1.60% 0.07% -0.21%
ALL BOND (GBP) 0.32% 13.41% -13.40% -13.40% -14.02% 0.06% 4.99% 1.72%
BARCLAYS SA INFLATION BOND INDEX (ZAR) -0.40% 17.73% -2.07% -2.07% -2.98% 0.81% 2.12% 6.08%
BARCLAYS SA INFLATION BOND INDEX ($) 1.06% 21.01% -21.19% -21.19% -21.26% -8.24% -4.93% -2.26%
STEFI Composite (ZAR) 0.44% 1.46% 3.18% 3.18% 6.86% 7.17% 7.20% 6.48%
STEFI Composite ($) 1.91% 4.30% -16.96% -16.96% -13.27% -2.45% -0.21% -1.89%
INTERNATIONAL MARKETS
DOW JONES $ 1.82% 18.51% -8.43% -8.43% -0.54% 9.07% 10.61% 12.97%
FTSE £ 1.54% 10.17% -17.51% -17.51% -12.99% -1.56% 2.87% 6.73%
MSCI WORLD All Countries ($) 3.20% 19.22% -6.25% -6.25% 2.11% 6.14% 6.46% 9.16%
MSCI WORLD All Countries (ZAR) 1.71% 15.98% 16.48% 16.48% 25.82% 16.61% 14.36% 18.47%
MSCI WORLD $ - MSCI 2.65% 19.36% -5.77% -5.77% 2.84% 6.70% 6.90% 9.95%
MSCI WORLD ZAR - MSCI 1.16% 16.12% 17.09% 17.09% 26.72% 17.23% 14.83% 19.33%
MSCI WORLD $ - INET 2.51% 18.84% -6.64% -6.64% 1.08% 4.52% 4.74% 7.71%
MSCI WORLD (ZAR) INET 1.03% 15.61% 16.00% 16.00% 24.54% 14.83% 12.52% 16.90%
MSCI WORLD GROWTH ($) - MSCI 4.54% 25.64% 6.63% 6.63% 17.83% 14.45% 11.75% 13.29%
MSCI WORLD GROWTH (ZAR) - MSCI 3.03% 22.23% 32.50% 32.50% 45.18% 25.74% 20.05% 22.95%
MSCI WORLD VALUE ($) - MSCI 0.77% 12.89% -17.39% -17.39% -10.62% -0.10% 2.93% 7.63%
MSCI WORLD VALUE (ZAR) - MSCI -0.68% 9.82% 2.65% 2.65% 10.13% 9.75% 10.57% 16.82%
MSCI EMERGING MARKET($) - MSCI 7.36% 18.14% -9.74% -9.74% -3.34% 1.93% 2.90% 3.35%
MSCI EMERGING MARKET(ZAR) - MSCI 5.81% 14.93% 12.16% 12.16% 19.11% 11.98% 10.54% 12.17%
MSCI EMERGING MARKET($) - INET 6.96% 17.27% -10.73% -10.73% -5.67% -0.51% 0.47% 0.81%
MSCI EMERGING MARKET(ZAR) - INET 5.42% 14.08% 10.93% 10.93% 16.24% 9.30% 7.93% 9.41%
MSCI EM GROWTH ($) - MSCI 9.35% 22.08% -1.58% -1.58% 9.60% 6.13% 6.34% 5.84%
MSCI EM GROWTH (ZAR) - MSCI 7.77% 18.76% 22.29% 22.29% 35.05% 16.59% 14.23% 14.86%
MSCI EM VALUE ($) - MSCI 5.36% 13.89% -18.08% -18.08% -15.75% -2.65% -0.77% 0.81%
MSCI EM VALUE (ZAR) - MSCI 3.84% 10.80% 1.79% 1.79% 3.80% 6.95% 6.60% 9.41%
S&P 500 1.99% 20.54% -3.09% -3.09% 7.49% 10.71% 10.71% 13.97%
Euro Stoxx 50 (€) 6.48% 17.76% -11.99% -11.99% -4.53% 1.03% 2.14% 6.07%
Nikkei 225 (¥) 1.99% 17.97% -4.78% -4.78% 6.77% 5.42% 3.72% 11.02%
DAX(EUR) 6.25% 23.90% -7.08% -7.08% -0.71% -0.04% 2.38%
DAX(ZAR) 5.73% 23.38% 15.52% 15.52% 20.66% 9.26% 10.13% 15.67%
Barclays Capital Global Aggregate Govt ($) 0.60% 2.04% 3.05% 3.05% 3.55% 3.57% 3.43% 2.23%
JPM Global Government Bonds ($) 0.49% 1.46% 4.60% 4.60% 5.24% 4.19% 3.81% 2.57%
JPM Global Government Bonds (ZAR) -0.97% -1.30% 29.97% 29.97% 29.68% 14.46% 11.51% 11.32%
Barclays Capital World Govt ILB ($) 1.10% 5.90% 6.21% 6.21% 7.19% 5.02% 4.71% 4.60%
Barclays Capital World Govt ILB (ZAR) -0.36% 3.03% 31.97% 31.97% 32.08% 15.38% 12.48% 13.53%
Barclays Capital Global Aggregate ($) 0.89% 3.32% 2.98% 2.98% 4.22% 3.79% 3.56% 2.81%
Barclays Capital Global Aggregate (ZAR) -0.57% 0.51% 27.96% 27.96% 28.42% 14.03% 11.24% 11.60%
Barclays Capital Global Inflation Linked ($) 1.35% 6.63% 3.73% 3.73% 5.53% 4.15% 3.17% 3.96%
Barclays Capital Global Inflation Linked (ZAR) -0.11% 3.74% 28.88% 28.88% 30.02% 14.43% 10.83% 12.83%
Barclays Capital Global Aggregate Credit ($) 1.91% 7.68% 2.64% 2.64% 5.49% 4.49% 4.23% 4.26%
Barclays Capital Global Aggregate Securitised ($) 0.28% 1.45% 3.18% 3.18% 4.70% 3.48% 2.91% 3.01%
Barclays Capital Global High Yield ($) 2.28% 12.19% -4.66% -4.66% -1.98% 2.22% 4.40% 6.43%
Barclays Capital Global Emerging Markets ($) 2.49% 9.60% -0.85% -0.85% 2.14% 3.75% 4.85% 5.70%
JPM EM BONDS ($) 1.72% 9.06% -0.40% -0.40% 1.23% 2.66% 4.91% 5.53%
JPM EM BONDS (ZAR) 0.25% 6.09% 23.76% 23.76% 24.74% 12.79% 12.70% 14.53%
JPM EM Corporate Diversified HY ($) 3.68% 15.06% -3.07% -3.07% 1.03% 3.67% 5.44% 6.11%
JPM EM Corporate Diversified HY (ZAR) 2.18% 11.94% 20.44% 20.44% 24.48% 13.90% 13.27% 15.16%
JPM EM Corporate HY ($) 3.29% 13.18% -2.73% -2.73% 1.73% 4.44% 6.41% 6.46%
JPM EM Corporate HY (ZAR) 1.80% 10.11% 20.87% 20.87% 25.35% 14.74% 14.31% 15.54%
Barclays Capital EM Govt ILB ($) 0.71% 7.28% 3.30% 3.30% 5.83% 3.12% 2.50% 3.24%
Barclays Capital EM Govt ILB (ZAR) -0.75% 4.37% 28.35% 28.35% 30.40% 13.30% 10.10% 12.05%
Barclays Capital Global Corporate Bonds ($) 2.09% 8.55% 2.67% 2.67% 5.77% 4.62% 4.48% 4.48%
Barclays Capital Global Corporate Bonds (ZAR) 0.61% 5.61% 27.57% 27.57% 30.33% 14.94% 12.23% 13.39%
EPRA / NAREIT Dev Mrkts Property ($) 2.70% 10.31% -20.97% -20.97% -15.49% -0.63% 2.24% 7.15%
EPRA / NAREIT Dev Mrkts Property (ZAR) 1.21% 7.32% -1.80% -1.80% 4.13% 9.17% 9.83% 16.29%
CURRENCY
RAND vs US$ 1.46% 2.79% -19.52% -19.52% -18.84% -8.98% -6.91% -7.86%
RAND vs EURO 0.49% 0.42% -19.57% -19.57% -17.71% -8.51% -7.04% -7.05%
RAND vs GBP 1.52% 3.15% -13.71% -13.71% -16.40% -7.45% -2.33% -6.08%
RAND vs JPY 0.14% -0.06% -0.73% -0.73% 0.13% -1.35% -2.44% 2.00%
11
Disclaimer
While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document
("the information"), Sanlam Multi Manager International, its shareholders, subsidiaries, clients, agents, officers and
employees (collectively referred to as "SMMI") do not make any representations or warranties regarding the accuracy or
suitability of the information. SMMI shall not be held responsible and disclaims all liability for any loss, liability and damage
whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the
information. The information does not constitute financial advice. Information accurate as at 30 June 2020.
Sanlam Multi Manager International (Pty) Ltd which is approved as a Discretionary Financial Service Provider
in terms of the Financial Advisory and Intermediary Services Act, 2002.
Registration Number 2002/030939/07
Registered Offices
Address: Willie van Schoor Avenue, Bellville or
Private Bag X8, Tyger Valley, 7536, South Africa
Telephone: (+27-21) 950-2600
Fax: (+27-21) 950 2126
12
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 Cred it 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.
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 exchang
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