Fact Sheet
Absolute Defensive Fund
November 2013
Actual Asset Allocation AS AT 30 November 2013
Inception Date: October 2002
5.5%
ASSETS UNDER MANAGEMENT: R1.2bn
Fund DESCRIPTION AND Objective
Bonds
The Fund is an investment policy wrapped portfolio (in terms of the Long-term Insurance
Act) designed to target non-negative returns over rolling 1-year periods with a 4%
real return expectation per annum over the long term (before fees). This policy based
investment is specifically designed for institutional investors and is managed to comply
with Regulation 28 of the Pension Funds Act of South Africa.
25.9%
3.4%
Equity
Index-linked Bonds
Benchmark
5.8%
24.8%
The Fund and the underlying managers are measured against Headline CPI for all urban
areas. The Fund’s performance target changed from CPI +5% to CPI +4% on 1 September 2013.
Private Equity
Cash
15.8%
2.1%
Asset Manager Allocation
Manager
Hedge Funds
10.8%
Actual
Strategic
Allocation Allocation
Balanced - Coronation Global Absolute Fund
Balanced - Investec Opportunity Fund
Balanced - SIM Global Absolute Fund
Private Equity - OMR Private Equity
International - Prescient
Multi-Strategy Balanced Fund of Hedge Funds SYm|mETRY*
26.7%
26.9%
31.2%
5.8%
3.9%
26.9%
26.9%
31.9%
5.5%
3.8%
5.5%
5.0%
* The Hedge Fund performance is reported one month in arrears.
Comments
The All Share (ALSI) declined 1.1% on a total return basis over November 2013. Resources
was down 2.2% for the month, financials declined 2.6% and industrials were flat. For the
month of November, the best performing sectors were Household Goods up 6.2%, Industrial
Engineering 4.1% and Media 3.5%. The worst performing sectors were Gold Mining down
12.2%, Coal Mining negative 8.8% and General Retailers down 7.1%. The rand weakened
0.9% against the dollar and 1.2% against the euro in November 2013.
For the month of November the All Bond Index declined 1.35% while inflation linkers’
gained 0.4%. Bonds at the long-end were down 1.6%, 7-12 year bonds declined 1.8%
and bonds in the 3-7 year bucket -1.2%. The short end, 1-3 years, was flat 0.04%. Cash
returned 0.43%. Preference shares were up 2.3%. SA listed property was down 3.0%.
The October 2013 inflation or CPI came in at 5.5% y/y versus the previous print of 6% y/y.
The SYm|mETRY Absolute Defensive Fund produced 0.33% over November 2013. This
is against the target CPI+4% return of 0.51%. The global economic environment shows
marginal signs of recovery; tentative signs of growth have begun to emanate from the
United States (US) prompting Federal Reserve Bank Chairman, Ben Bernanke, to announce
tapering of the US’s quantitative easing programme. Locally, inflation reached 5.5% in
October (down from the previous month). The main drivers of inflation for the month
was the food and non-alcoholic beverages category.
Investec generated -0.28% over the past month. Investec continues to exercise their
preference for selected globally oriented stocks in developed markets. Their international
exposure has a predisposition to North American stocks — the largest holdings include
Chevron Corporation, Pfizer Incorporated, JP Morgan Chase and Company and Microsoft
Corporation. These stocks complement the relatively small weighting in domestic listed
stocks where valuations are expensive. In doing so, the manager aims to minimize the
risk of the fund as well as avoid less promising stocks. A global theme remains present
in the local stock selection with large exposures to companies such as SASOL, British
American Tobacco and Steinhoff. Some of the steady performers in the offshore portfolios
have marginally derated owing to higher discount rates. Further, the earnings of these
businesses have been slightly disappointing owing to weaker currencies (the yen, Indian
rupee, Philippine peso etc.).
Coronation delivered a one-month return of 0.04%. The manager asserts that a bulk of
the returns in the recent past has been as a result of exposure to risky asset classes such
as domestic and global equity. Rand weakness has further enhanced returns. Despite the
strong performance to date, Coronation continues to believe global assets are attractively
positioned. It cannot be ignored that Quantitative Easing has supported global assets,
but the manager points out that many of the world’s best companies are still trading at
undemanding ratings and attractive dividend yields. Local assets remain expensive in
the manager’s view. The manager is reducing the position sizes of many of their larger
holdings in order to reduce the risk profile of the fund. Nonetheless, exposure to risky
assets still needs to be maintained in order to achieve the return objectives of the fund
over the long term.
SIM was up 0.76% over November. From a bottom-up valuation perspective, local equities
are trading above SIM’s assessment of its intrinsic value. Guided by their valuations, SIM is
comfortable with maintaining a defensive position in domestic equities which is achieved
mainly through downside protection that they have in place. The manager still has a
preference for international over domestic equities, in particular the European equities.
From their point of view, listed property still looks expensive relative to nominal bonds.
Nominal bond yields are trading at levels slightly above their assessment of its long-term
fair value and they are selective buyers into weakness.
International Equity
5.9%
International Cash
International Bonds
Source: SYm|mETRY Multi-Manager
Historical Returns AS AT 30 November 2013
20%
Fund
18%
Fund Target: CPI +4%
16.4%
16%
14%
13.4%
13.3%
12.4%
12%
10%
9.7%
9.4%
9.8%
9.7%
8%
5.9%
6%
4.9%
4.5%
4%
1.8%
2%
0.3% 0.5%
0%
1 Month
3 Months 6 Months
1 Year
3 Years
5 Years
Since
Inception
1. Returns for periods greater than 1 year are annualised.
2. Where applicable all returns reflected are net of performance fees paid to underlying
managers. Where net priced asset manager portfolios are used, returns stated are net of net
priced asset manager fees and gross of SYm|mETRY fees.
Source: SYm|mETRY Multi-Manager/I-Net
Rolling 12-Month Returns
20%
19.4%
18%
16.7%
16%
14%
15.1%
13.9%
16.8% 16.8%
16.2%
14.8%
18.5%
17.7%
16.4%
16.3%
14.4%
12%
10%
8%
6%
4%
2%
0%
Nov
-12
Dec
-12
Jan
-13
Feb
-13
Mar
-13
Apr
-13
May
-13
Jun
-13
Jul
-13
Aug
-13
Sep
-13
Oct
-13
Nov
-13
Source: SYm|mETRY Multi-Manager/I-Net
The Balanced Fund of Hedge Funds returned 1.55% for the month with its target returning
88 basis points (bps). Over a rolling 12-months the fund has returned 17.5% while its
STeFI + 5% target has returned slightly more than 10%. The 12 month volatility of the
Fund is 4.5% and its largest drawdown for the period is -84bps which is far below that
of the Johannesburg Stock Exchange which is -5.7%. The long short equity component of
the fund has been the largest contributor to the Fund’s return. The fixed income strategy
has been a weak performer, as foreigners sold off bonds and current account deficit
concerns weighed on the market. The strategy has marginally outperformed bonds, but
is still behind the cash target.
* Our hedge fund allocation is priced one month in arrears.
Disclaimer
SYmImETRY Multi-Manager is a division of Old Mutual Life Assurance Company (South Africa) Limited. Registration number 1999/004643/06. Old Mutual Life Assurance Company (South Africa) Limited is a licensed financial services provider, FSP 703,
authorised in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 to furnish advice and render intermediary services with regard to long-term insurance and pension fund benefits as well as providing intermediary services as
a discretionary investment manager. The investment portfolios are market-linked and policy based. 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.
Guarantees on returns and against capital losses are not provided. All returns are rand returns unless otherwise stated. Whilst every care has been taken in compiling the information in this document, the information is not advice and SYm|mETRY
Multi-Manager and/or its associates do not give any warranty as to the accuracy or completeness of the information provided and disclaim all liability for any loss or expense, however caused, arising from any use of or reliance upon the information.
HELPLINE +27 21 524 4430 | FACSIMILE +27 21 441 1199 | EMAIL symmclientquery@SYm|mETRY.co.za | INTERNET www.symmetry.co.za