MACROSOLUTIONS INVEST WITH PERSPECTIVE CPI +6% CPI +5% CPI +3% CPI+4% CONSERVATIVE MODERATE RISK/RETURN DYNAMIC PROFILE RANGE FACTSHEETS NOVEMBER 2018
MULTI-ASSET CLASS SOLUTIONS: THE PROFILE RANGE The suite of portfolios is a comprehensive range of unitised, marketlinked portfolios that span the risk/return spectrum. These policy-based 10 investments are specifically designed for institutional investors and are 9 compliant with Regulation 28 of the Pension Funds Act of South Africa. 8 Within the parameters of their mandates, the portfolios invest across a range of local and offshore asset classes including equity, interest-bearing instruments, property, convertibles, commodities and derivatives. There are four portfolios in the portfolio range, from very conservative to aggressive. The investor may also switch between these funds within the range on a seamless basis to correspond with their changing risk profile. STATIC BENCHMARK ASSET ALLOCATION The static benchmark represents our view of the optimal long-term asset allocation per portfolio. 7 6 5 4 3 2 1 2.5 2.5 2.5 2.5 2.5 5.0 10.0 7.5 10.0 25.0 22.5 5.0 42.5 No Static Allocation SA Equity SA Bonds SA Money Market Gold OUR SOLUTIONS Returns Target Return CPI+3% CPI+4% CPI+5% CPI+6% preservation 12month 18month range CAPITAL MODERATE BALANCED EDGE28 Risk JOHN ORFORD GRAHAM TUCKER PETER BROOKE John joined MacroSolutions in June 2014 as a portfolio manager. As a member of the MacroSolutions team, he is responsible for managing conservative funds including the and Funds and the Old Mutual Real Income and Stable Growth Funds. John s background as an investment strategist enables him to integrate top-down and bottom-up analysis into portfolio construction. Prior to joining MacroSolutions, he was the Investment Strategist for South Africa at UBS South Africa for nine years. In his last two years at UBS, he was also responsible for the emerging EMEA Equity strategy. John has 12 years of work experience in financial markets in South Africa and London. In addition, he has seven years of experience as an economist in public and private sector capacities in Namibia and South Africa. Graham joined Old Mutual in 2000 and is the portfolio manager of MacroSolutions range of balanced funds. Before assuming this responsibility in 2014, he was portfolio manager on a number of aggressive funds, including. In addition, Graham is MacroSolutions quantitative strategist, risk manager and a member of the asset allocation group. He is quantitatively driven and adds value through his ability to thoroughly test ideas prior to implementation. Peter joined Old Mutual in May 2005 and has been the Head of MacroSolutions since 2007. Peter has specific responsibility for third-party funds, including the range. He also manages a number of unit trusts including the Old Mutual Flexible Fund, Old Mutual Maximum Return Fund and Old Mutual Fund. Having analysed countries and companies, Peter can integrate top-down and bottom-up drivers and valuations to create an optimal portfolio. Peter is an award-winning analyst who has extensive experience in the investment arena. He worked at a stockbroker for 10 years, as an analyst and equity strategist, after which he was the Head of Research and Head of Equities for Cazenove South Africa.
PROFILE COMMENTARY AS AT 30/09/2018 MARKET OVERVIEW The global equity market delivered good returns for the quarter, but lacked meaningful breadth as US equities (+7.5% in US dollar terms) easily outperformed every other major region. US equities responded to robust economic growth in the region and strong earnings growth reported by the companies during the quarter. Negative sentiment persisted in emerging markets, as China showed signs of slower growth, commodity prices remained under pressure and the likes of Turkey and Argentina reminded investors of the risks of investing in the developing world. Unsurprisingly, emerging market currencies, equities and bonds fell during the quarter, particularly in August and early September. Local assets, already suffering from the poor emerging market sentiment, were dealt another blow in September as StatsSA announced that our economy had fallen further in the second quarter. Although the rand and the bond market largely recovered their losses by the end of the quarter, the equity market was unable to mount a comeback, ending the quarter slightly lower (-1.7%). The challenging economic environment, reflected in company results and updates, shows little sign of relief in the near term. Aspen was a notable casualty of disappointing the market, losing more than a third of its value in a matter of days. EDGE28 PERFORMANCE COMMENTARY Over the longer term, is still ahead of its performance objective, but over the year to date this has been a tough hurdle. The portfolio benefited from exposure to developed equity markets and the domestic share portfolio significantly outperformed the FTSE/ JSE Capped SWIX Index, delivering a positive number against the benchmark s decline. Capitec and Sasol were the most meaningful positive contributors to equity performance, powered by strong results and the rising oil price, respectively. Our positive view on Old Mutual s managed separation strategy yielded a good return, boosted by special dividends from both the new listed entities. The portfolio has had a cautious stance on expensive rand-hedge defensives and Naspers for some time, which paradoxically paid off in a period where the rand was quite weak. Local defensive sectors, including food retail and healthcare (where the portfolio has no exposure), fared no better and lagged the Index. The portfolio has also avoided Aspen, which had a terrible quarter on the back of a disappointing result. We have been concerned about the company s ability to extract growth from its increasingly complex global business. On the negative side, MTN was a major detractor of performance, with the Nigerian authorities announcing two unexpected setbacks in Nigeria. The Nigerian government s stance has since softened, but the issues remain unresolved. We used the share price weakness to add marginally to our position in MTN and the price has since recovered off its worst levels. Looking forward, we maintain a preference for equity over fixed income assets in our global portfolio. In South Africa, we see incremental improvements in state governance, but the local economy remains weak burdened with low confidence and the rising oil price. We are seeking to hold domestic equities that are neither dependent on broad local macroeconomic factors for success nor are highly leveraged to an eventual turn in the economy. We believe that many of the themes of recent years, such as exceptionally low interest rates in developed economies, could be fading and these changes need to be considered when making investments. We are pleased that has performed well in a tough quarter and continue to see opportunities for good performance. BALANCED PERFORMANCE COMMENTARY Longer term, has delivered returns in excess of inflation, but below the levels to which we strive. The recent years have been difficult for risk assets, as local economic growth has been weak and many overseas endeavours attempted by companies have yet to bear fruit. Looking forward, we find value in the local bond market, particularly given the recent sell off. We have steadily increased the portfolio s exposure to local government bonds, but only at yields that we believe compensate our clients for the risk. While we believe that South Africa is making progress on the economic reform front, it is slow progress. As such, local assets will benefit in time, yet remain exposed to external and, at times, internal factors for now. Hence, the yield or price we pay for bonds and other local assets is crucial. Value is firmly embedded in our process. However, the environment going forward must be conducive to unlocking that value and to driving an investment beyond its fair value. One example of this is the heavyweight counter, Naspers, which has long been a core holding in the portfolio. At the beginning of this year we softened our view on that positive outlook. This, in turn, necessitated a lower core position. The result is that our clients benefited in the good times, and have been somewhat protected from the recent volatility in the Naspers share price. Another good example is Aspen. Aspen has experienced fantastic growth due to acquisitions. However, the portfolio had no exposure to this stock as we felt the growth story to be unsustainable, the returns to be deteriorating and the valuations to be on the expensive side. Investors in Aspen have now been disappointed and consequently sold the share down sharply. We aim to grow the real wealth of our clients over the long term through our solutions. While valuations are important, we believe that they need to be viewed in the context of the environment that awaits us. This requires constant vigilance, particularly given the dynamic global landscape.
PROFILE COMMENTARY CONT. MODERATE PERFORMANCE COMMENTARY During the quarter, s overweight position in global equities paid off, with global equities delivering the best rand return across major asset classes. The portfolio benefited from exposure to domestic cash and bonds, which delivered positive returns over the quarter. The portfolio s exposure to local property and equities detracted from performance. However, while the portfolio s equity holdings were down over the quarter, they outperformed the overall equity market. The local equity market remained volatile. As always, there were winners and losers. Winners that contributed to your portfolio s equity performance were Capitec, Raubex and Super Group. These are companies that are sensitive to local conditions that have been hit post Ramaphoria, but have subsequently showed some recovery from that low base. On the other side of the performance spectrum, Tiger Brands, MTN and Rhodes Food Group detracted from performance. However, not having had exposure to Aspen, Mediclinic and Shoprite (all of which showed significant declines over the past three months), boosted the return on a relative basis as the absolute return was negative, but still substantially better than the negative return of the equity market. Looking ahead, the portfolio remains overweight local cash, which offers attractive risk-adjusted returns, with 12-month negotiable certificates of deposit (NCDs) offering a yield in excess of 8% compared with the latest annual inflation estimate of 4.9%. The portfolio also has exposure to government bonds, which offer attractive yields of well over 9% for 10-year bond yields. In our view, this compensates investors for the additional return being asked to hold longer-dated bonds. The euphoria about President Ramaphosa has faded, but we continue to think that, in time, the reforms being implemented by Ramaphosa s government will result in lower risk premiums being demanded by investors in South African assets. However, the growth outlook in South African remains very weak and we continue to favour global equities over local equities within the portfolio. is well positioned to weather volatile markets and to deliver to its inflation target over the long term. CAPITAL PERFORMANCE COMMENTARY s overweight position in global equities paid off, with global equities delivering the best rand return across major asset classes in the quarter. The portfolio benefited from exposure to domestic cash and bonds, which delivered positive return over the quarter. The portfolio s exposure to local property and equities detracted from performance. However, while the portfolio s equity holdings were down over the quarter, they outperformed the overall equity market. The local equity market remained volatile. As always, there were winners and losers. Winners that contributed to your portfolio s equity performance were Capitec, Raubex and Super Group. These are companies that are sensitive to local conditions that have been hit post Ramaphoria, but have subsequently showed some recovery from that low base. On the other side of the performance spectrum, Tiger Brands, MTN and Rhodes Food Group detracted from performance. However, not having had exposure to Aspen, Mediclinic and Shoprite (all of which showed significant declines over the past three months), boosted the return on a relative basis as the absolute return was negative, but still substantially better than the negative return of the equity market. Looking ahead, the portfolio remains overweight local cash, which offers attractive risk-adjusted returns, with 12-month negotiable certificates of deposit (NCDs) offering a yield in excess of 8% compared with the latest annual inflation estimate of 4.9%. The portfolio also has exposure to government bonds, which offer attractive yields of well over 9% for 10-year bond yields. In our view, this compensates investors for the additional return being asked to hold longer-dated bonds. The euphoria about President Ramaphosa has faded, but we continue to think the reforms being implemented by Ramaphosa s government should benefit holders of longer-dated government bonds. However, the growth outlook in South African remains very weak and we continue to favour global equities over local equities within the portfolio. The portfolio is well positioned to weather volatile markets and to deliver to its inflation target over the long term. Building multi-asset class solutions for clients is our sole focus. Our active asset allocation process has delivered superior long-term, risk-adjusted performance for clients. To achieve this success, we combine top down macroeconomic research with bottom up fundamental analysis to inform our buy and sell decisions. The structured implementation of this two-dimensional framework enables us to deliver different sources of alpha. We look beyond the conventional asset classes and use an integrated approach to assess the sensitivity of macro factors on our portfolios.
MACROSOLUTIONS PROFILE BALANCED PORTFOLIO INVEST WITH PERSPECTIVE MULTI-ASSET CLASS SOLUTIONS: THE PROFILE RANGE The suite of portfolios is a comprehensive range of unitised, market-linked portfolios that span the risk/return spectrum. These policy-based investments are specifically designed for institutional investors and are compliant with Regulation 28 of the Pension Funds Act of South Africa. Within the parameters of their mandates, the portfolios invest across a range of local and offshore asset classes including equity, interest-bearing instruments, property, convertibles, commodities and derivatives. There are four portfolios in the portfolio range, from very conservative to aggressive. The investor may also switch between these funds within the range on a seamless basis to correspond with their changing risk profile. STATIC BENCHMARK ASSET ALLOCATION The static benchmark represents our view of the optimal long-term asset allocation per portfolio. 10 9 8 7 6 5 4 3 2 1 2.5 2.5 2.5 2.5 2.5 5.0 10.0 7.5 10.0 25.0 22.5 5.0 42.5 LONG-TERM RISK AND RETURN OBJECTIVES No Static Allocation SA Equity SA Bonds SA Money Market Gold Conservative Dynamic MARKET COMMENTARY AS AT 30/09/2018 The global equity market delivered good returns for the quarter, but lacked meaningful breadth as US equities (+7.5% in US dollar terms) easily outperformed every other major region. US equities responded to robust economic growth in the region and strong earnings growth reported by the companies during the quarter. Negative sentiment persisted in emerging markets, as China showed signs of slower growth, commodity prices remained under pressure and the likes of Turkey and Argentina reminded investors of the risks of investing in the developing world. Unsurprisingly, emerging market currencies, equities and bonds fell during the quarter, particularly in August and early September. Local assets, already suffering from the poor emerging market sentiment, were dealt another blow in September as StatsSA announced that our economy had fallen further in the second quarter. Although the rand and the bond market largely recovered their losses by the end of the quarter, the equity market was unable to mount a comeback, ending the quarter slightly lower (-1.7%). The challenging economic environment, reflected in company results and updates, shows little sign of relief in the near term. Aspen was a notable casualty of disappointing the market, losing more than a third of its value in a matter of days. FUND PERFORMANCE COMMENTARY AS AT 30/09/2018 Longer term, has delivered returns in excess of inflation, but below the levels to which we strive. The recent years have been difficult for risk assets, as local economic growth has been weak and many overseas endeavours attempted by companies have yet to bear fruit. CPI + 4% CPI + 5% CPI + 6% Looking forward, we find value in the local bond market, particularly given the recent sell off. We have steadily increased the portfolio s exposure to local government bonds, but only at yields that we believe compensate our clients Return CPI + 3% for the risk. While we believe that South Africa is making progress on the economic reform front, it is slow progress. As such, local assets will benefit in Banker time, yet remain exposed to external and, at times, internal factors for now. Hence, the yield or price we pay for bonds and other local assets is crucial. S Risk GRAHAM TUCKER BSc Actuarial Science (Hons), CFA 15 years of investment experience WARREN VAN DER WESTHUIZEN BCom (Hons), CFA 15 years of investment experience Value is firmly embedded in our process. However, the environment going forward must be conducive to unlocking that value and to driving an investment beyond its fair value. One example of this is the heavyweight counter, Naspers, which has long been a core holding in the portfolio. At the beginning of this year we softened our view on that positive outlook. This, in turn, necessitated a lower core position. The result is that our clients benefited in the good times, and have been somewhat protected from the recent volatility in the Naspers share price. Another good example is Aspen. Aspen has experienced fantastic growth due to acquisitions. However, the portfolio had no exposure to this stock as we felt the growth story to be unsustainable, the returns to be deteriorating and the valuations to be on the expensive side. Investors in Aspen have now been disappointed and consequently sold the share down sharply. We aim to grow the real wealth of our clients over the long term through our solutions. While valuations are important, we believe that they need to be viewed in the context of the environment that awaits us. This requires constant vigilance, particularly given the dynamic global landscape. www.macrosolutions.co.za
PROFILE BALANCED PORTFOLIO This is an actively managed and a moderate-risk portfolio that aims to provide investors with compelling real returns over the long term by investing in an optimal spread of local and international asset classes. While the bias is towards growth assets, the portfolio manager will allocate to other asset classes to exploit market opportunities and to achieve diversification. PERFORMANCE AS AT 30/11/2018 3 CPI + 5% 5-Year Rolling Returns Closely aligned with our Best Investment View process, this portfolio offers our clients the opportunity to receive the full benefit of our proven investment track record. Investors should note that investment objectives are not guaranteed. This portfolio may be ideal for investors who are prepared to accept the potential for short-term market fluctuations in pursuing significant real growth relative to inflation over the long term. The portfolio complies with Regulation 28 of the Pension Funds Act. PERFORMANCE PER ANNUM 2 1 ADDITIONAL INFORMATION Launch date January 1995 Dec 99 Mar 03 Jun 06 Sep 09 Dec 12 Mar 16 Benchmark Static asset allocation benchmark Risk category Investment objective The portfolio aims to deliver competitive and consistent real returns with a target of CPI + 5% per annum (gross of fees) over the long term. The fund also aims to outperform its composite index benchmark. Investment objectives are not guaranteed. Fees Domestic assets: 0.5 p.a. (rebates for large funds) International assets: 0.8 p.a. Plus: A performance fee in respect of alternative assets. Fees on domestic assets exclude VAT. (VAT is deemed not payable.) Returns as at 30 November 2018 % 11.6% 12.5% Benchmark 10. 7.8% 8.2% 5. 0. 4.6% 4.6% - 2.5% - 3. - 5. - 6. - 7.4% - 10. 3 Months 1 Year 3 Years 5 Years 10 Years ASSET ANALYSIS AS AT 30/11/2018 2. (8%) SA Money Market 6.6% (5.) 25.8% (22.5%) Nominal Bonds 20. (15%) PRINCIPAL HOLDINGS AS AT 30/11/2018 Holding Sector % of fund Naspers Media 3.5 Sasol Oil & Gas 2.7 Nedcor Banks 2.5 ABSA Banks 2.4 Preference Shares 1.5% (0.) 5.5% (5.) Benchmark allocation in brackets Global Cash 0.2% (0.) SA Equities 38.4% (42.5%) Source: Old Mutual Investment Group (HiPortfolio) Old Mutual Life Insurance 1.8 British American Tobacco Consumer Goods 1.8 Standard Bank Banks 1.8 Remgro Ltd Industrials 1.8 MTN Group Telecommunications 1.7 Glencore Basic Resources 1.6 FUND TILT VS BENCHMARKS 8% 4% 0.5% 0. 5. 1.7% 3.2% 21.7-4% -8% -4.1% -2.5% SA Equities Commodities Property SA Convertible Bonds Nominal Bonds SA Money Market Global Equities -5.5% Global Bonds Source: Old Mutual Investment Group (HiPortfolio) Old Mutual Investment Group (Pty) Limited is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group s company registration number is 1993/003023/07. The investment portfolios are market linked. Products may either be policy based or unitised in collective investment schemes. Investors rights and obligations are set out in the relevant contracts. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance.
PROFILE CAPITAL PORTFOLIO MACROSOLUTIONS INVEST WITH PERSPECTIVE MULTI-ASSET CLASS SOLUTIONS: THE PROFILE RANGE The suite of portfolios is a comprehensive range of unitised, market-linked portfolios that span the risk/return spectrum. These policy-based investments are specifically designed for institutional investors and are compliant with Regulation 28 of the Pension Funds Act of South Africa. Within the parameters of their mandates, the portfolios invest across a range of local and offshore asset classes including equity, interest-bearing instruments, property, convertibles, commodities and derivatives. There are four portfolios in the portfolio range, from very conservative to aggressive. The investor may also switch between these funds within the range on a seamless basis to correspond with their changing risk profile. STATIC BENCHMARK ASSET ALLOCATION The static benchmark represents our view of the optimal long-term asset allocation per portfolio. 10 9 8 7 6 5 4 3 2 1 2.5 2.5 2.5 2.5 2.5 5.0 10.0 7.5 10.0 25.0 22.5 5.0 42.5 LONG-TERM RISK AND RETURN OBJECTIVES Return Banker Risk No Static Allocation SA Equity SA Bonds SA Money Market Gold Conservative Dynamic CPI + 3% CPI + 4% S CPI + 5% JOHN ORFORD CPI + 6% BA Economic History (Hons), Postgraduate Dip (Quantitative Development Economics), MSc (Development Economics), MBA 14 years of investment experience ALIDA JORDAAN BMus (Hons) (cum laude), MBA (cum laude), CFA 23 years of investment experience MARKET COMMENTARY AS AT 30/09/2018 The global equity market delivered good returns for the quarter, but lacked meaningful breadth as US equities (+7.5% in US dollar terms) easily outperformed every other major region. US equities responded to robust economic growth in the region and strong earnings growth reported by the companies during the quarter. Negative sentiment persisted in emerging markets, as China showed signs of slower growth, commodity prices remained under pressure and the likes of Turkey and Argentina reminded investors of the risks of investing in the developing world. Unsurprisingly, emerging market currencies, equities and bonds fell during the quarter, particularly in August and early September. Local assets, already suffering from the poor emerging market sentiment, were dealt another blow in September as StatsSA announced that our economy had fallen further in the second quarter. Although the rand and the bond market largely recovered their losses by the end of the quarter, the equity market was unable to mount a comeback, ending the quarter slightly lower (-1.7%). The challenging economic environment, reflected in company results and updates, shows little sign of relief in the near term. Aspen was a notable casualty of disappointing the market, losing more than a third of its value in a matter of days. FUND PERFORMANCE COMMENTARY AS AT 30/09/2018 s overweight position in global equities paid off, with global equities delivering the best rand return across major asset classes in the quarter. The portfolio benefited from exposure to domestic cash and bonds, which delivered positive return over the quarter. The portfolio s exposure to local property and equities detracted from performance. However, while the portfolio s equity holdings were down over the quarter, they outperformed the overall equity market. The local equity market remained volatile. As always, there were winners and losers. Winners that contributed to your portfolio s equity performance were Capitec, Raubex and Super Group. These are companies that are sensitive to local conditions that have been hit post Ramaphoria, but have subsequently showed some recovery from that low base. On the other side of the performance spectrum, Tiger Brands, MTN and Rhodes Food Group detracted from performance. However, not having had exposure to Aspen, Mediclinic and Shoprite (all of which showed significant declines over the past three months), boosted the return on a relative basis as the absolute return was negative, but still substantially better than the negative return of the equity market. Looking ahead, the portfolio remains overweight local cash, which offers attractive risk-adjusted returns, with 12-month negotiable certificates of deposit (NCDs) offering a yield in excess of 8% compared with the latest annual inflation estimate of 4.9%. The portfolio also has exposure to government bonds, which offer attractive yields of well over 9% for 10-year bond yields. In our view, this compensates investors for the additional return being asked to hold longer-dated bonds. The euphoria about President Ramaphosa has faded, but we continue to think the reforms being implemented by Ramaphosa s government should benefit holders of longer-dated government bonds. However, the growth outlook in South African remains very weak and we continue to favour global equities over local equities within the portfolio. The portfolio is well positioned to weather volatile markets and to deliver to its inflation target over the long term. www.macrosolutions.co.za
PROFILE CAPITAL PORTFOLIO This is an actively managed and a very conservative investment that aims to provide high levels of capital protection by investing primarily in interestbearing assets, while limited exposure to equity and quoted property provides scope for growth in excess of inflation. This portfolio may be an attractive option for investors with a low risk appetite but who are mindful of the erosive effects of inflation on a cash-only portfolio, and the consequent need for some exposure to a selection of quality growth assets. Investors should note that investment objectives are not guaranteed. The portfolio complies with Regulation 28 of the Pension Funds Act. ADDITIONAL INFORMATION Launch date: January 1995 Benchmark: Static asset allocation benchmark Risk category: Conservative Investment objective The portfolio aims to offer returns in excess of cash, and targets CPI + 3% per annum (gross of fees) over the long term, at a relatively low level of risk. The fund also aims to preserve capital over any 12-month period. Investment objectives are not guaranteed. Fees Domestic assets: 0.4 p.a. (rebates for large funds) International assets: 0.8 p.a. Plus: A performance fee in respect of alternative assets. Fees on domestic assets exclude VAT. (VAT is deemed not payable.) ASSET ANALYSIS AS AT 30/11/2018 PERFORMANCE AS AT 30/11/2018 PERFORMANCE PER ANNUM 25% 2 15% 1 5% 12. 10. 3-Year Rolling Returns Dec 97 Jul 00 Feb 03 Sep 05 Apr 08 Nov 10 Jun 13 Jan 16 8. 6. 4. 2. 0. -2. -4. -6. Fund Benchmark -2.3% -3.5% Returns as at 30 November 2018 3.3% 2.7% 6.4% 5.9% 8. CPI + 3% Aug 18 7.7% 9.9% 3 Months 1 Year 3 Years 5 Years 10 Years 9.1% SA Equities 19% (20.) Preference Shares 4% (0.) 6% (2.5%) Nominal Bonds 21% (30.) 35% 3 12-Month Rolling Returns (Non-annualised) 31 December 1995 to 30 November 2018 12-month capital preservation success rate: 10 Global Cash 2% () 12% (10.) Inflation-linked Bonds 6% (0.) 25% 2 15% 4% (%) SA Money Market 26% (20.) 1 Source: Old Mutual Investment Group (HiPortfolio) Benchmark allocation in brackets PRINCIPAL HOLDINGS AS AT 30/11/2018 Holding Sector % of fund Naspers Media 1.6 Sasol Oil & Gas 1.2 Nedcor Banks 1.0 MTN Group Telecommunications 1.0 Standard Bank Banks 0.8 ABSA Banks 0.8 Glencore Basic Resources 0.8 Old Mutual Life Insurance 0.7 Anglo American Basic Resources 0.7 British American Tobacco Consumer Goods 0.6 9.2 5% Dec 95 Dec 99 FUND TILT VS BENCHMARKS 8. 6. 4. 2. 0. -2. -4. -6. -8. -10. -12. -0.6% SA Equities -2.5% Commodities 3.7% 0. Convertible Bonds Dec 03 Dec 07 Dec 11 Dec 15-9.5% Nominal Bonds 6.1% 6.5% Inflation- linked Bonds SA Money Market 1.6% 0. Global Property -10.9% 3.5% Preference Shares 2. Global Cash 0. Africa Source: Old Mutual Investment Group (HiPortfolio) Old Mutual Investment Group (Pty) Limited is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group s company registration number is 1993/003023/07. The investment portfolios are market linked. Products may either be policy based or unitised in collective investment schemes. Investors rights and obligations are set out in the relevant contracts. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance.
MACROSOLUTIONS PROFILE EDGE28 PORTFOLIO INVEST WITH PERSPECTIVE MULTI-ASSET CLASS SOLUTIONS: THE PROFILE RANGE The suite of portfolios is a comprehensive range of unitised, market-linked portfolios that span the risk/return spectrum. These policy-based investments are specifically designed for institutional investors and are compliant with Regulation 28 of the Pension Funds Act of South Africa. Within the parameters of their mandates, the portfolios invest across a range of local and offshore asset classes including equity, interest-bearing instruments, property, convertibles, commodities and derivatives. There are four portfolios in the portfolio range, from very conservative to aggressive. The investor may also switch between these funds within the range on a seamless basis to correspond with their changing risk profile. STATIC BENCHMARK ASSET ALLOCATION The static benchmark represents our view of the optimal long-term asset allocation per portfolio. 10 9 8 7 6 5 4 3 2 1 2.5 2.5 2.5 2.5 2.5 5.0 10.0 7.5 10.0 25.0 22.5 5.0 42.5 LONG-TERM RISK AND RETURN OBJECTIVES Return Banker Risk No Static Allocation SA Equity SA Bonds SA Money Market Gold Conservative Dynamic CPI + 3% CPI + 4% S CPI + 5% PETER BROOKE Head of MacroSolutions BBusSc Finance (Hons) 21 years of investment experience ARTHUR KARAS BCom, CFA 25 years of investment experience CPI + 6% MARKET COMMENTARY AS AT 30/09/2018 The global equity market delivered good returns for the quarter, but lacked meaningful breadth as US equities (+7.5% in US dollar terms) easily outperformed every other major region. US equities responded to robust economic growth in the region and strong earnings growth reported by the companies during the quarter. Negative sentiment persisted in emerging markets, as China showed signs of slower growth, commodity prices remained under pressure and the likes of Turkey and Argentina reminded investors of the risks of investing in the developing world. Unsurprisingly, emerging market currencies, equities and bonds fell during the quarter, particularly in August and early September. Local assets, already suffering from the poor emerging market sentiment, were dealt another blow in September as StatsSA announced that our economy had fallen further in the second quarter. Although the rand and the bond market largely recovered their losses by the end of the quarter, the equity market was unable to mount a comeback, ending the quarter slightly lower (-1.7%). The challenging economic environment, reflected in company results and updates, shows little sign of relief in the near term. Aspen was a notable casualty of disappointing the market, losing more than a third of its value in a matter of days. FUND PERFORMANCE COMMENTARY AS AT 30/09/2018 Over the longer term, is still ahead of its performance objective, but over the year to date this has been a tough hurdle. The portfolio benefited from exposure to developed equity markets and the domestic share portfolio significantly outperformed the FTSE/JSE Capped SWIX Index, delivering a positive number against the benchmark s decline. Capitec and Sasol were the most meaningful positive contributors to equity performance, powered by strong results and the rising oil price, respectively. Our positive view on Old Mutual s managed separation strategy yielded a good return, boosted by special dividends from both the new listed entities. The portfolio has had a cautious stance on expensive rand-hedge defensives and Naspers for some time, which paradoxically paid off in a period where the rand was quite weak. Local defensive sectors, including food retail and healthcare (where the portfolio has no exposure), fared no better and lagged the Index. The portfolio has also avoided Aspen, which had a terrible quarter on the back of a disappointing result. We have been concerned about the company s ability to extract growth from its increasingly complex global business. On the negative side, MTN was a major detractor of performance, with the Nigerian authorities announcing two unexpected setbacks in Nigeria. The Nigerian government s stance has since softened, but the issues remain unresolved. We used the share price weakness to add marginally to our position in MTN and the price has since recovered off its worst levels. Looking forward, we maintain a preference for equity over fixed income assets in our global portfolio. In South Africa, we see incremental improvements in state governance, but the local economy remains weak burdened with low confidence and the rising oil price. We are seeking to hold domestic equities that are neither dependent on broad local macroeconomic factors for success nor are highly leveraged to an eventual turn in the economy. We believe that many of the themes of recent years, such as exceptionally low interest rates in developed economies, could be fading and these changes need to be considered when making investments. We are pleased that has performed well in a tough quarter and continue to see opportunities for good performance. www.macrosolutions.co.za
PROFILE EDGE28 PORTFOLIO This is an actively managed and a flexible portfolio that seeks to deliver superior real returns over the long term by capitalising on high-conviction asset allocation and stock selection opportunities across local and international asset classes. This investment suits investors who are prepared to accept the potential for significant short-term fluctuations in pursuit of maximum growth over the long term. Investors should note that investment objectives are not guaranteed. PERFORMANCE AS AT 30/11/2018 4 3 CPI + 6% 7-Year Rolling Returns The portfolio complies with Regulation 28 of the Pension Funds Act. ADDITIONAL INFORMATION Launch date January 1995 2 1 Benchmark No static asset allocation benchmark Risk category Active Investment objective The portfolio aims to maximise real returns, and targets CPI + 6% per annum (gross of fees) over the long term. As such, a relatively high level of short-term volatility can be expected. Investment objectives are not guaranteed. Fees Domestic assets: 0.65% p.a. (rebates for large funds) International assets: 0.8 p.a. Plus: A performance fee in respect of alternative assets. Fees on domestic assets exclude VAT. (VAT is deemed not payable.) Dec 01 16. 12. 8. 4. 0. -4. -8. Jul 03 Feb 05 Sep 06 Apr 08 Nov 09 Jun 11 Jan 13 Aug 14 Mar 16 Oct 17 Returns as at 30 November 2018 12.6% 8.6% 4.5% - 3.2% - 6.5% 3 Months 1 Year 3 Years 5 Years 10 Years PRINCIPAL HOLDINGS AS AT 30/11/2018 Holding Sector % of fund Nedcor Banks 2.7 Sasol Oil & Gas 2.6 Naspers Media 2.6 Old Mutual Life Insurance 2.2 ABSA Banks 2.1 Pepkor Consumer Goods 1.8 MTN Group Telecommunications 1.6 Foschini Group Consumer Goods 1.6 Glencore Basic Resources 1.5 Kap Industrials 1.5 20.3 ASSET ANALYSIS AS AT 30/11/2018 Africa 2% Alternatives 5% 27% Preference Shares 1% SA Equities 4 Nominal Bonds 12% 7% SA Money Market 6% Source: Old Mutual Investment Group (HiPortfolio) Old Mutual Investment Group (Pty) Limited is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group s company registration number is 1993/003023/07. The investment portfolios are market linked. Products may either be policy based or unitised in collective investment schemes. Investors rights and obligations are set out in the relevant contracts. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance.
MACROSOLUTIONS PROFILE MODERATE PORTFOLIO INVEST WITH PERSPECTIVE MULTI-ASSET CLASS SOLUTIONS: THE PROFILE RANGE The suite of portfolios is a comprehensive range of unitised, market-linked portfolios that span the risk/return spectrum. These policy-based investments are specifically designed for institutional investors and are compliant with Regulation 28 of the Pension Funds Act of South Africa. Within the parameters of their mandates, the portfolios invest across a range of local and offshore asset classes including equity, interest-bearing instruments, property, convertibles, commodities and derivatives. There are four portfolios in the portfolio range, from very conservative to aggressive. The investor may also switch between these funds within the range on a seamless basis to correspond with their changing risk profile. STATIC BENCHMARK ASSET ALLOCATION 10 The static benchmark represents our view of the optimal long-term asset allocation per portfolio. LONG-TERM RISK AND RETURN OBJECTIVES Return 9 8 7 6 5 4 3 2 1 Banker 2.5 2.5 2.5 2.5 2.5 5.0 10.0 7.5 10.0 Conservative Dynamic CPI + 3% 25.0 CPI + 4% S 22.5 5.0 42.5 Risk CPI + 5% JOHN ORFORD SA Equity SA Bonds SA Money Market Gold CPI + 6% BA Economic History (Hons), Postgraduate Dip (Quantitative Development Economics), MSc (Development Economics), MBA 14 years of investment experience ALIDA JORDAAN BMus (Hons) (cum laude), MBA (cum laude), CFA 23 years of investment experience No Static Allocation MARKET COMMENTARY AS AT 30/09/2018 The global equity market delivered good returns for the quarter, but lacked meaningful breadth as US equities (+7.5% in US dollar terms) easily outperformed every other major region. US equities responded to robust economic growth in the region and strong earnings growth reported by the companies during the quarter. Negative sentiment persisted in emerging markets, as China showed signs of slower growth, commodity prices remained under pressure and the likes of Turkey and Argentina reminded investors of the risks of investing in the developing world. Unsurprisingly, emerging market currencies, equities and bonds fell during the quarter, particularly in August and early September. Local assets, already suffering from the poor emerging market sentiment, were dealt another blow in September as StatsSA announced that our economy had fallen further in the second quarter. Although the rand and the bond market largely recovered their losses by the end of the quarter, the equity market was unable to mount a comeback, ending the quarter slightly lower (-1.7%). The challenging economic environment, reflected in company results and updates, shows little sign of relief in the near term. Aspen was a notable casualty of disappointing the market, losing more than a third of its value in a matter of days. FUND PERFORMANCE COMMENTARY AS AT 30/09/2018 During the quarter, s overweight position in global equities paid off, with global equities delivering the best rand return across major asset classes. The portfolio benefited from exposure to domestic cash and bonds, which delivered positive returns over the quarter. The portfolio s exposure to local property and equities detracted from performance. However, while the portfolio s equity holdings were down over the quarter, they outperformed the overall equity market. The local equity market remained volatile. As always, there were winners and losers. Winners that contributed to your portfolio s equity performance were Capitec, Raubex and Super Group. These are companies that are sensitive to local conditions that have been hit post Ramaphoria, but have subsequently showed some recovery from that low base. On the other side of the performance spectrum, Tiger Brands, MTN and Rhodes Food Group detracted from performance. However, not having had exposure to Aspen, Mediclinic and Shoprite (all of which showed significant declines over the past three months), boosted the return on a relative basis as the absolute return was negative, but still substantially better than the negative return of the equity market. Looking ahead, the portfolio remains overweight local cash, which offers attractive risk-adjusted returns, with 12-month negotiable certificates of deposit (NCDs) offering a yield in excess of 8% compared with the latest annual inflation estimate of 4.9%. The portfolio also has exposure to government bonds, which offer attractive yields of well over 9% for 10-year bond yields. In our view, this compensates investors for the additional return being asked to hold longer-dated bonds. The euphoria about President Ramaphosa has faded, but we continue to think that, in time, the reforms being implemented by Ramaphosa s government will result in lower risk premiums being demanded by investors in South African assets. However, the growth outlook in South African remains very weak and we continue to favour global equities over local equities within the portfolio. is well positioned to weather volatile markets and to deliver to its inflation target over the long term. www.macrosolutions.co.za
PROFILE MODERATE PORTFOLIO This is an actively managed and a conservative portfolio which aims to provide investors with an attractive combination of stable capital growth and capital protection by investing in a well-diversified mix of local and global assets. A selection of quality shares helps to defend capital against inflation and provide valuable dividend payouts, while bonds, property and money market securities provide volatility protection and a steady income yield. All income is reinvested. PERFORMANCE AS AT 30/11/2018 3 CPI + 4% 3-Year Rolling Returns It is an ideal consideration for investors nearing retirement who want to preserve wealth while continuing to grow capital. Investors should note that investment objectives are not guaranteed. The portfolio complies with Regulation 28 of the Pension Funds Act. ADDITIONAL INFORMATION Launch date: January 1995 Benchmark: Static asset allocation benchmark Risk category: Conservative Investment objective The portfolio targets returns of CPI + 4% (gross of fees) per annum over the long term, while aiming to minimise capital loss over rolling 18-month periods. The portfolio has a low level of risk relative to a typical balanced fund. Investment objectives are not guaranteed. Fees Domestic assets: 0.45% p.a. (rebates for large funds) International assets: 0.8 p.a. Plus: A performance fee in respect of alternative assets. Fees on domestic assets exclude VAT. (VAT is deemed not payable.) ASSET ANALYSIS AS AT 30/11/2018 PERFORMANCE PER ANNUM 2 1 12. 10. 8. 6. 4. 2. 0. -2. -4. -6. Dec 97 Jul 00 Feb 03 Sep 05 Apr 08 Nov 10 Jun 13 Jan 16 Benchmark -4.3% -4.9% Returns as at 30 November 2018 1.1% 0.6% 5.7% 5.7% 8.3% 8.1% 3 Months 1 Year 3 Years 5 Years 10 Years Aug 18 10.8% 10.9% 5% (10.) 17% (%) SA Equities 29% (30.) 35% 18-Month Rolling Returns (Annualised) 30 June 1996 to 30 November 2018 18-month capital preservation success rate: 97% 3 7% (2.5%) 25% Global Cash 2% () Preference Shares 3% (0.) 2 SA Money Market 11% (%) 15% Inflation-linked Bonds 5% (0.) Nominal Bonds 21% (25.) 1 5% Source: Old Mutual Investment Group (HiPortfolio) Benchmark allocation in brackets PRINCIPAL HOLDINGS AS AT 30/11/2018 Holding Sector % of Fund Naspers Media 2.5 Sasol Oil & Gas 1.9 Nedcor Banks 1.5 MTN Group Telecommunications 1.5 Standard Bank Banks 1.3 ABSA Banks 1.2 Glencore Basic Resources 1.2 Old Mutual Life Insurance 1.0 Anglo American Basic Resources 1.0 British American Tobacco Consumer Goods 1.0 14.0-5% Jun 96 May 00 Apr 04 Mar 08 Feb 12 Jan 16 FUND TILT VS BENCHMARKS 2 15% 1 5% -5% -1-0.5% -2.5% SA Equities Commodities 4.2% 2.9% Preference Shares 0. Convertible Bonds -4.4% Nominal Bonds 5.4% Inflation-linked Bonds -4. SA Money Market 1.6% -5.2% 0. 1.9% 0. Global Property Global Cash Africa Old Mutual Investment Group (Pty) Limited is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group s company registration number is 1993/003023/07. The investment portfolios are market linked. Products may either be policy based or unitised in collective investment schemes. Investors rights and obligations are set out in the relevant contracts. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance.
CONTACT Our dedicated distribution team or visit us at www.macrosolutions.co.za Sathyen Mahabeer Chief Operating Officer E smahabeer@oldmutualinvest.com T +27 (0)21 504 4614 C +27 (0)82 440 8801 Merrelyn Diale Senior Account Manager E mdiale@oldmutualinvest.com T +27 (0)21 504 4257 C +27 (0)82 464 8864 Melanie Vollenhoven Business Development Specialist E mvollenhoven@oldmutualinvest.com T +27 (0)21 509 2166 C +27 (0)76 010 6550 Mutualpark, Jan Smuts Drive, Pinelands 7405 PO Box 878, Cape Town 8000, South Africa Tel +27 (0)21 509 5022, Fax +27 (0)21 509 4663 Old Mutual Investment Group (Pty) Limited is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group is a wholly owned subsidiary of Old Mutual (South Africa) Limited. Reg No 1993/003023/07. The investment portfolios are market linked. Products may either be policy based or unitised in collective investment schemes. Investors rights and obligations are set out in the relevant contracts. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance. All satellite photography courtesy NASA.