Download Sanlam Investment Management Small Cap Fund

(Fund Fact Sheet)
Sanlam Investment Management Small Cap
Fund
April 2017
Fund Objective
This is a specialist equity fund which seeks to achieve maximum capital appreciation
by investing in companies with small to mid - market capitalisations and who display
the potential to deliver above average earnings growth. The fund may invest a
maximum of 25% of assets offshore.
The portfolio manager may borrow up to 10% of the market value of the portfolio to bridge
insufficient liquidity. This fund is also available via certain LISPS (Linked Investment Service
Providers), which levy their own fees. Fluctuations or movements in exchange rates may cause
the value of underlying international investments to go up or down.
Top 10 Holdings
Securities
Fund Strategy
% of Portfolio
Curro Holdings Limited
3.97
BowCalf
3.89
Astrapak
3.21
Advtech
2.97
Why choose this fund?
NBS
2.92
*Small cap companies tend to outperform their large cap counterparts as a result of
being able to grow their earnings faster, with higher volatility.
*Due to a lack of research, there are many more undervalued and mispriced
opportunities amongst small cap stocks.
*Some growing/emerging industries only exist in the small cap arena.
*Today’s small caps are the large caps of tomorrow.
Raubex
2.76
Ascendis Health Ltd (ASC)
2.74
Adaptit Holdings Ltd
2.73
Rhodes Food Group Holdings Ltd
2.68
Dis-Chem Pharmacies Limited
2.66
Fund Information
Top 10 Holdings as at 31 Mar 2017
This is an aggressive, actively managed fund focusing on small to mid cap
companies with above average growth potential and which have been mispriced by
the market. This portfolio may also invest in participatory interests of underlying unit
trust portfolios.
ASISA Fund Classification
SA - Equity - Mid & Small Cap
Risk profile
Aggressive
Benchmark
Market Cap Weighted Index using, FTSE/JSE Mid
Cap and FTSE/JSE Small Cap Indices
Portfolio launch date
02 Jun 1997
3 year
6.73
9.71
Fee class launch date
01 Jul 2004
5 year
10.05
13.20
Minimum investment
Lump sum: R10 000 | Monthly: R500
10 year
5.56
10.75
Portfolio size
R559.5 million
Annualised return is the weighted average compound growth rate over the period measured.
Last two distributions
30 Jun 2016: 3.17 cents per unit
31 Dec 2016: 39.97 cents per unit
Performance (Cumulative) as at 30 Apr 2017 on a rolling monthly basis
Income decl. dates
30 Jun | 31 Dec
Income price dates
1st working day in July and January
Valuation time of fund
15:00
Transaction cut off time
15:00
Daily price information
Local newspaper and www.sanlamunittrusts.co.za
Repurchase period
3 working days
Performance (Annualised) as at 30 Apr 2017 on a rolling monthly basis
Retail Class
1 year
Retail Class
Fund (%)
Benchmark (%)
(0.50)
2.77
Fund (%)
Benchmark (%)
1 year
(0.50)
2.77
3 year
21.57
32.06
5 year
61.40
85.87
10 year
71.81
177.60
Cumulative return is aggregate return of the portfolio for a specified period
Fees (Incl. VAT)
Risk statistics: 3 years to 30 Apr 2017
Retail Class (%)
Advice initial fee (max.)
3.42
Manager initial fee
N/A
Advice annual fee (max.)
1.14
Manager annual fee
1.71
Total Expense Ratio (TER)
1.75
Std Deviation (Ann)
7.89
Sharpe Ratio (Ann)
0.03
Actual highest and lowest annual returns*
Highest Annual %
52.92
Lowest Annual %
(39.11)
Advice fee | Any advice fee is negotiable between the client and their financial advisor. An annual
advice fee negotiated is paid via a repurchase of units from the investor.
Obtain a personalised cost estimate before investing by visiting www.sanlamunittrustsmdd.co.za
and using our Effective Annual Cost (EAC) calculator. Alternatively, contact us at 0860 100 266.
Total Expense Ratio (TER) | PERIOD: 1 April 2014 to 31 March 2017
Total Expense Ratio (TER) | 1.75% of the value of the Financial Product was incurred as expenses
relating to the administration of the Financial Product. A higher TER does not necessarily imply a
poor return, nor does a low TER imply a good return. The current TER may not necessarily be an
accurate indication of future TER’s.
Transaction Cost (TC) | 0.34% of the value of the Financial Product was incurred as costs relating
to the buying and selling of the assets underlying the Financial Product. Transaction Costs are a
necessary cost in administering the Financial Product and impacts Financial Product returns. It
should not be considered in isolation as returns may be impacted by many other factors over time
including market returns, the type of Financial Product, the investment decisions of the investment
manager and the TER.
Total Investment Charges (TER + TC) | 2.09% of the value of the Financial Product was incurred
as costs relating to the investment of the Financial Product.
This monthly Minimum Disclosure Document should be viewed in conjunction with the Glossary Terms Sheet.
Issue Date: 22 May 2017
Page 1
Looking back at the markets in the first quarter of 2017, the FTSE/JSE All Share
Index (ALSI) gained 3.8% (all returns shown as total returns inclusive of dividends).
The one-year return to 31 March 2017 for the ALSI still remains weak at 2.5%. This
relatively benign All Share performance continues to mask the underlying volatility
among the major sectors. For the quarter, Industrials posted a recovery, gaining
6.6% after a dismal 2016, to outperform Resources (+2.7%) and Financials (-1.1%).
Property stocks gained 1.4% in the quarter.
Asset Allocation
Equity NSX Equities
2.68
Property
International Assets
4.66
2.01
Equity Technology
From a size perspective, the FTSE/JSE Top 40 Index gained 3.9% for the quarter,
ahead of mid-caps (+1.1%) and small-caps (+4.5%). Over the one year to 31 March
2017, small-caps (+13.5%) and mid-caps (+8.0%) handsomely outperformed their
large-cap peers (+0.7%). This divergence over one year can again broadly be
attributed to the relative composition within the indices. Both the mid- and small-cap
indices contained a number of high-flying resource stocks which skewed the
performance of these broad indices.
7.14
Equity Financials
10.77
Equity Telecommunications
1.94
Equity Consumer Services
17.33
Equity Health Care
5.08
Equity Consumer Goods
5.29
Equity Industrials
Portfolio review
25.38
Equity Basic Materials
9.60
Cash and Money Market Assets
8.12
00
05
10
15
20
25
30
Portfolio Manager(s) Quarterly Comment - 31 Mar 2017
Market review
Early in April, the downgrade of our foreign currency debt rating by Standard &
Poor’s (S&P) to junk status gave credence to the fears which surfaced following
President Zuma’s recall of the finance minister from an overseas investor roadshow
and the subsequent Cabinet reshuffle. Fitch followed suit by downgrading both our
foreign and local currency rating to junk status. Unfortunately, the efforts of now
former finance minister Gordhan to stave off a ratings downgrade seem to have
been left in tatters at the expense of political manoeuvring. In their reports, both S&P
and Fitch highlighted heightened political uncertainty, concerns over the financial
health of state-owned enterprises and the abandonment of fiscal consolidation as
key reasons behind their respective decisions.
The local currency debt, at the time of writing, remains investment grade despite the
recent downgrade by Fitch. The importance of this rating should not be underplayed
or overlooked as it underpins the bulk of foreign investment flow into our capital
market. Markets are forward looking and the threat to the local currency rating has
intensified. The situation demands a clear and appropriate policy response. A
downgrade of our local currency rating to junk without the proper policy response
from government would have dire, far-reaching and long-standing consequences
that would alter our economic and social landscapes.
South Africa is not alone in facing these uncertainties. Globally, the frequency of
sociopolitical-driven shocks is on the rise in both emerging and developed
economies. The first quarter of 2017 saw global markets continue to digest
implications of a British-less European Union, a Trump US presidency and the rise
of populism and nationalism. However, there are positives to point to amidst the
noise. The global economy has begun to offer some encouragement as we have
seen an incremental pickup in production, demand and growth trends in key
geographies.
Local data releases during the quarter painted a somewhat mixed picture. Gross
domestic product growth for 2016 was recorded at just 0.3% year-on-year (y/y), hurt
by a particularly weak fourth quarter (-0.3% quarter-on-quarter (q/q)), down from
1.5% y/y in 2015. Key sectors such as mining and agriculture saw year-on-year
declines while manufacturing endured a very tough second half of the year. The
local growth outlook continues to remain subdued. Consumer resilience will again
be tested in the coming months - in January we saw retail sales come under
pressure, which reflected in the results published by some listed companies.
However, on a positive note, the latest vehicle sales numbers offer some indication
of improving consumer confidence.
On the monetary policy front, the South African Reserve Bank (SARB) kept interest
rates unchanged following both the January and March meetings as inflation
moderated to move closer to the targeted band. Inflation began to taper off in the
first quarter particularly as food prices moderated on the back of lower soft
commodity prices. In the coming months, the SARB will have to carefully balance
their dual mandate of inflation targeting and growth as the potential impact of ratings
downgrades begin to manifest. The rand remains a key risk to the inflation outlook.
Following the ratings downgrades and subsequent devaluation of the rand, the
likelihood of rate cuts by the SARB appears to have diminished in the short term.
Over the quarter the rand continued to appreciate relative to the US dollar, gaining
2% to bring the cumulative gain since the end of 2015 to 13%. Since quarter-end,
however, the rand has lost 4% to the dollar, at the time of writing.
Looking back at the markets in the first quarter of 2017, the FTSE/JSE All Share
Issue Date: 22 May 2017
Morningstar data indicates that the SIM Small Cap Unit Trust generated a
negative return of 1.59% in the first quarter of 2017 (three months ending 31
March 2017), underperforming the peer average return for the ASISA small- and mid
-cap fund category of 1.12%. For the one year to 31 March 2017, the SIM Small Cap
Fund generated a positive return of 5.84%, compared to the peer average return for
the ASISA small- and mid-cap fund category of 8.45%.
By contribution, taking into account total return (share price move and dividend
received) and the size of each share within the portfolio, when analysing this past
quarter, shares held within the SIM Small Cap Unit Trust that added the most to
performance included: Namibia Breweries (generating a 21% total return for the
first quarter of 2017), ADvTECH (+17%), Exxaro (+32%), PSG (+13%), Adcorp
(+16%) and Grand Parade (+13%).
The largest detractors that underperformed from a contribution perspective for the
quarter were: Adapt IT (lost 24% for the 3 months ending 31 March 2017),
Renergen (-23%), Ascendis Health (-12%), Bowler Metcalf (-8%) and Sygnia (15%).
From a trading perspective, new positions added to the portfolio in the first quarter
included Blue Label Telecoms, Datatec and Tongaat. The fund also participated in
the Sea Harvest Group listing. Positions exited during the period included Spur and
Taste.
Risks and opportunities
Against this difficult backdrop in which we face anaemic local growth and potential
further downgrades from ratings agencies, the risks faced by companies in the midand small-cap area of the JSE are elevated. The mid- and small-cap area has a
significantly higher exposure to local macroeconomic (‘SA Inc.’) factors relative to
the more internationally diversified Top 40 Index. In challenging environments such
as this, it is worth reminding investors that our investment principles are unwavering.
We continue to rely on our fundamental research to identify undervalued businesses
and keep the protection of our clients’ capital at the forefront of our risk management
efforts.
There are potentially some very dark days ahead for our country. Accompanying this
could be heightened volatility in our capital markets. As long-term investors we are
prepared to ride out ‘the noise’ and focus on the fundamentals. Our approach in the
small- and mid-cap space is rigorous but also dynamic, allowing us to be nimble in
order to capitalise on undue fear in the markets.
Portfolio Manager(s)
Vanessa van Vuuren
BBusSc Honours, B. Com (Hons), CFA
Management of Investments
Risk Profile (Aggressive)
Glossary Terms
This is an aggressively managed, high-risk portfolio that aims to deliver capital growth over the
long term (greater than 5 years). It is designed to substantially outperform the markets and
therefore carries a long-term investment horizon (5 years and upwards). The portfolio will be
diversified across all major asset classes with significant exposure to equities, and may include
offshore equities. There may be some capital volatility in the short term, although higher returns
may be expected from five years or beyond.
Capital appreciation
Capital appreciation is the profit made on an investment, measured by the increase in its market
value over the invested amount or cost price. It is also called capital growth.
Additional Information
LISP (Linked Investment Service Provider)
A Linked Investment Service Provider is a financial institution which packages, distributes and
administers a broad range of unit trust based investments. Any investment made through these
products gives an investor a single point of entry into a selection of different investments.
All reasonable steps have been taken to ensure the information on this MDD is accurate,The
information to follow does not constitute financial advice as contemplated in terms of the Financial
Advisory and Intermediary Services Act. Use or rely on this information at your own risk.
Independent professional financial advice should always be sought before making an investment
decision.
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective
investment schemes are generally medium- to long-term investments. Please note that past
performances are not necessarily a guide to future performances, and that the value of
investments / units / unit trusts may go down as well as up. A schedule of fees and charges and
maximum commissions is available from the Manager, Sanlam Collective Investments (RF) Pty
Ltd, a registered and approved Manager in Collective Investment Schemes in Securities.
Additional information of the proposed investment, including brochures, application forms and
annual or quarterly reports, can be obtained from the Manager, free of charge. Collective
investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective
investments are calculated on a net asset value basis, which is the total market value of all assets
in the portfolio including any income accruals and less any deductible expenses such as audit
fees, brokerage and service fees. Actual investment performance of the portfolio and the investor
will differ depending on the initial fees applicable, the actual investment date, and the date of
reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager
does not provide any guarantee either with respect to the capital or the return of a portfolio. The
performance of the portfolio depends on the underlying assets and variable market factors.
Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div
date. Lump sum investment performances are quoted. The portfolio may invest in other unit trust
portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the
portfolio options presented are approved collective investment schemes in terms of Collective
Investment Schemes Control Act, No 45 of 2002 (“CISCA”). The fund may from time to time invest
in foreign instruments which could be accompanied by additional risks as well as potential
limitations on the availability of market information. The Manager has the right to close any
portfolios to new investors to manage them more efficiently in accordance with their mandates.
The portfolio management of all the portfolios is outsourced to financial services providers
authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank
of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments scheme.
Sources of Performance and Risk Data: Morningstar Direct, INET BFA and Bloomberg.
The risk free asset assumed for the calculation of Sharpe ratios: STEFI Composite Index.
The highest and lowest annualised performance numbers are based on 10 non-overlapping one
year periods or the number of non-overlapping one year periods from inception where
performance history does not yet exist for 10 years.
Trustee Information
Standard Bank of South Africa LTD
Tel no.: 021 441 4100, E-mail: [email protected]
Downside risk
The likelihood of a fund's potential to decline in value if market conditions deteriorate.
Market capitalization (or market cap)
Market capitalization (or market cap) is the total value of the issued shares of a publicly listed and
traded company. It is calculated by multiplying the share price by the number of ordinary shares in
issue. It is used to determine a company's size and value as a listed entity on the South African
stock exchange, as opposed to sales or total asset figures.
Sanlam's Pragmatic Value Investment Style
This is a philosophy which enables our fund managers to make rational - not emotional - decisions
based on in-depth research. This gives them insight into what an asset is truly worth, not what
investors are willing to pay based on greed or fear. We take a more practical (pragmatic) approach
and invest in stocks that are, in our opinion, trading below their fair value but which do not strictly
qualify as value stocks from a theoretical perspective.
Sharpe ratio
The Sharpe ratio measures risk-adjusted performance of an investment or portfolio. It measures
the amount of risk associated with the returns generated by the portfolio and indicates whether a
portfolio’s returns are due to excessive risk or not. The greater a portfolio’s Sharpe ratio, the better
its risk-adjusted performance has been (i.e. a higher return with a contained risk profile, where the
portfolio manager is not taking excessive risk to achieve those returns).
Specialist equity fund