PROFILE BALANCED
PORTFOLIO
MACROSOLUTIONS
INVEST WITH PERSPECTIVE
MULTI-ASSET CLASS SOLUTIONS: THE PROFILE RANGE
MARKET OVERVIEW
The suite of Profile 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.
Globally, the focus is back on China where it has implemented harsher credit extension
Within the parameters of their mandates, the Profile portfolios invest across
a range of local and offshore asset classes including equity, interest-bearing
instruments, property, convertibles, commodities and derivatives.
to debt concerns and a 5% growth projection over the next five years, Moody’s
There are four portfolios in the Profile 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.
regulations, aimed at controlling its credit boom. This is against the backdrop of it
already tightening liquidity and reportedly slowing credit growth. As a result, second
quarter growth is expected to slow and this has raised downside growth risks. Due
has downgraded China’s sovereign and local debt one notch. This is the first since
1989, but they remain six levels into investment grade. Concerns over China, the
imminent US Federal Reserve interest rate hike and the likely postponed fiscal stimulus
in the US have all contributed to weaker commodity prices, with iron ore sliding from
US$68 per metric ton at the end of April to US$56.20 at the end of May. Over the
STATIC BENCHMARK ASSET ALLOCATION
period, growth data out of the Eurozone was stronger, while the US disappointed.
The static benchmark represents our view of the optimal long-term asset allocation
per portfolio.
This resulted in US bond yields moving lower and the US dollar weakening, which
100%
Locally, headline inflation fell from 6.1% in March to 5.3% in April, in line with our
80%
2.5%
5.0%
10.0%
2.5%
5.0%
5.0%
2.5%
5.0%
5.0%
10.0%
15.0%
20.0%
70%
60%
17.5%
22.5%
30%
25.0%
30.0%
45.0%
20%
10%
0%
7.5%
15.0%
50%
40%
long-held view. The likelihood of a further downward surprise is very possible. At
No Static Allocation
90%
Gold
the Monetary Policy Committee (MPC) meeting in May rates were left unchanged,
SA Property
as expected, and the committee acknowledged the weaker economy (downgrades
Global Bonds
Global Equities
SA Money Market
Profile
Moderate
Profile
Capital
to growth forecast), lower inflation and a stable currency. While the South African
Reserve Bank (SARB) comments had a dovish tone, they are still very concerned about
SA Bonds
a potential slump in the rand. Our view on interest rates remains unchanged, with
SA Equity
a cut expected later this year, assuming a stable currency. On the ratings front, both
30.0%
20.0%
helped emerging market currencies and bonds, including the rand and our bonds.
Fitch and S&P left our rating unchanged.
Profile
Balanced
Financial markets were again well behaved, with global equity up 0.8% in rand terms,
Profile
Edge28
local equity down 0.1% and local bonds up 1.0%. The US dollar was weak in May
and, as a result, the R/US$ exchange rate moved from R13.38 to R13.19/US$ over
the month, strengthening 1.4%.
LONG-TERM RISK AND RETURN OBJECTIVES
Conservative
Moderate
Profile
Moderate
CPI + 4%
Profile
Balanced
CPI + 5%
Dynamic
Profile
Edge28
CPI + 6%
Return
Profile
Capital
CPI + 3%
Profile
Banker
Risk
PORTFOLIO MANAGERS
GRAHAM TUCKER
PORTFOLIO MANAGER
• BSc Actuarial Science (Hons), CFA
• 15 years of investment experience
WARREN VAN DER WESTHUIZEN
PORTFOLIO MANAGER
• BCom (Hons), CFA
• 15 years of investment experience
www.macrosolutions.co.za
FUND PERFORMANCE COMMENTARY
Profile Balanced was marginally down in the month of May, but this did not
derail our strong start to the year. The portfolio has delivered strong relative
performance over the one-year period, while absolute returns remain muted.
Our focus on portfolio construction and building a robust solution has helped in
navigating these turbulent times. We have maintained our large global exposure,
both direct and indirect. Our preference is for global equity over global bonds,
within the direct global component. This is against the backdrop of an improving
global environment and tighter monetary policy, which should support growth
assets like global equities. Further down the line this better growth environment
will lead to higher levels of global inflation and, given the historically low level
of bond yields, we believe they offer little value at current levels (bond yields
fall as bond prices rise).
Locally, our preference is for growth assets: equity and property. We have
continued to take profits on certain equity counters, in line with our tactical
strategy of increasing the emphasis of the valuation in our positioning while the
market exhibits volatility. In doing so, we slightly reduced our allocation to equity,
while retaining a significant allocation to growth assets. In line with this, we have
tactically placed a structure on Naspers, the largest holding in the portfolio, where
we retain exposure if the share continues to run, while protecting our clients if
the share price falls below a certain level.
Uncertainty is expected to remain elevated and a well-diversified portfolio is
required to navigate these uncertain times. Profile Balanced provides both the
flexibility to take advantage of opportunities should they arise, and the stability
through its portfolio construction and well-diversified holdings.
PROFILE BALANCED PORTFOLIO
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 AS AT 31/05/2017
30%
Profile Balanced
CPI + 5%
PERFORMANCE PER ANNUM
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.
20%
10%
0%
Dec 99
Mar 03
Jun 06
Sep 09
Dec 12
ADDITIONAL INFORMATION Mar 16
Source: Old Mutual Investment Group (IRIS)
Returns to 31 May 2017
Launch date
January 1995
16%
14%
Benchmark
Static asset allocation benchmark
Profile Balanced
13.8%
Benchmark
12.7%
12%
10.9%
10%
Risk category
Moderate
7.9%
8%
6%
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.
4.4%
4.1%
9.4%
8.8%
4.2%
4%
1.9%
2%
0%
3 Months
1 Year
3 Years
5 Years
10 Years
Source: Old Mutual Investment Group (IRIS)
ASSET ANALYSIS TO 31/05/2017
Fees
Domestic assets: 0.50% p.a. (rebates for large funds)
International assets: 0.80% p.a.
SA Money Market 9% (7.5%)
Global Equities 24% (20%)
Nominal Bonds 13% (15%)
Plus: a performance fee in respect of alternative assets.
Fees on domestic assets exclude VAT. (VAT is deemed not payable.)
Global Bonds 2% (5%)
Convertible Bonds 2% (0%)
SA Property 8% (5%)
PRINCIPAL HOLDINGS AS AT 31/05/2017
Holding
Sector
Naspers
Media
Sasol
Oil & Gas
6.2
British American Tobacco
Consumer Goods
6.1
Barclays Africa
Banks
6.0
Old Mutual
Life Insurance
4.8
Remgro Ltd
Industrials
4.4
Anglo American
Basic Resources
4.4
Standard Bank
Banks
4.2
MTN Group
Telecommunications
3.6
Steinhoff Holdings
Industrials
3.5
Commodities 2% (2.5%)
% of equity
14.3
57.6
SA Equities 41% (45%)
Benchmark allocation in brackets
Source: Old Mutual Investment Group (HiPortfolio)
FUND TILT VS BENCHMARKS
8%
4%
2.8%
0%
-4%
-8%
3.7%
1.8%
1.6%
-0.3%
-2.2%
-3.1%
-4.2%
SA
Equities
Commodities
SA
Property
Convertible Nominal SA Money
Bonds
Bonds
Market
Global
Equities
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.