BETTING ON BALANCE SHEET Cy Jacobs | Evan Walker | Mary Curtis 13 - - PowerPoint PPT Presentation
BETTING ON BALANCE SHEET Cy Jacobs | Evan Walker | Mary Curtis 13 May 2020 BACKGROUND ASSETS UNDER MANAGEMENT Long Only Hedge Funds Total Assets R9.3bn ($500m) R9.5bn ($510m) R18.8bn ($1bn) Unit Trusts (R4.9bn) Hedge Funds (R9.5bn)
Cy Jacobs | Evan Walker | Mary Curtis 13 May 2020
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BACKGROUND
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ASSETS UNDER MANAGEMENT
Long Only R9.3bn ($500m) Hedge Funds R9.5bn ($510m) Total Assets R18.8bn ($1bn)
As at 30 April 2020
Unit Trusts (R4.9bn) Segregated (R4.4bn) Funds: Local (R4.8bn) Funds: Offshore (R1.5bn) Segregated: Local (R1.4bn) Segregated: Offshore (R1.8bn) Hedge Funds (R9.5bn) Long Only (R9.3bn)
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M O R G A N S T A N L E Y R E S E A R C H
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SA Strategy December, 2019
Strong balance sheets have stood the test of time
Looking at the long-run history of the MSCI ‘Quality’ Index shows that focussing on strong balance sheets and high ROEs has delivered significant outperformance
Source: MSCI, Thomson Reuters, RMB Morgan Stanley research
50 70 90 110 130 150 170 190 210 230 250 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 Jan-20 MSCI World Quality Index MSCI World Index Relative performance (RHS)
Total return indices in USD terms
M O R G A N S T A N L E Y R E S E A R C H
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SA Strategy December, 2019
South Africa’s balance sheet isn’t strong
Source: IMF, IIF, Thomson Reuters, RMB Morgan Stanley research
0.0 2.0 4.0 6.0 8.0 1980 1985 1990 1995 2000 2005 2010 2015 2020E SA World
Real GDP gr % y/y 10 20 30 40 50 60 70 1995 1998 2001 2004 2007 2010 2013 2016 2019
Government Households Non-fin corporates Financial Corporates
SA debt to GDP: government debt levels have been climbing for 10 years The rise in debt has not translated into better rates of GDP growth
Loads of debt but nothing to show for it
M O R G A N S T A N L E Y R E S E A R C H
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SA Strategy December, 2019
Compared to other markets SA has deteriorated at one of the worst rates in the last 10 yrs
Source: IMF, Thomson Reuters, RMB Morgan Stanley research
Argentina Brazil Chile Colombia Mexico Peru Czech Hungary Poland South Africa Russia Turkey China Taiwan Thailand India Indonesia Korea Malaysia Philippines US UK France Germany Italy Spain Canada Australia NZ Netherlands
10 20
20 40 60 80 100 120 Sum of fiscal balances as % GDP (last 10 yrs) Sum of current account balances as % GDP (last 10 yrs)
Large cumulative fiscal deficits show the SA government is “living beyond it’s means”. Large cumulative current account deficits are a sign that the country in aggregate is “living beyond it’s means”
M O R G A N S T A N L E Y R E S E A R C H
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SA Strategy December, 2019
A weak ZAR is one solution (or a partial solution) in this predicament
Hungary: interest rates, the exchange rate and current account balance
5 10 15 50 70 90 110 130 150 170 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 Real effective exchange rate Yield on Hn long-dated debt CA as % GDP, rhs Source: BIS, Thomson Reuters, RMB Morgan Stanley research
5 10 15 20 25 30 35 40 45 Malaysia South Korea South Africa Czech Republic Brazil Hungary Mexico Chile Russia Hungary Poland Colombia Philippines Indonesia Turkey
Govt external debt as % total government debt
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Presenter: Evan Walker
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US CENTRAL BANK – RAPID RESPONSE
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FED TRYING TO STOP A FINANCIAL CRISIS
Source: Federal Reserve Bank of St.Louis
Fed asset holdings have grown more sharply than during past quantitative easing periods, in which the Fed bought nearly $4 trillion in securities to stimulate the economy
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GLOBAL MARKETS OUTPACING GDP
10 Source: RMB Morgan Stanley
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TRENDS – GLOBAL AND DOMESTIC
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CONCERNS FOR 2020 – SURVEY CHINA
Source: RMB Morgan Stanley
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POTENTIAL DEBT SPIRAL POST LOCKDOWN
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REVENUE DECLINE OF 10% IN 2021, INCREASE OF 5% IN 2022 EXPENDITURE UP 12% in 2021 AND 3% IN 2022
Source: 36ONE Research
40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90%
0,0% 2019 2020 2021 2022 Deficit as % GDP Debt to GDP
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TRADE DISRUPTION ON THE LOCAL ECONOMY
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Presenter: Cy Jacobs
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PORTFOLIO POSITIONING
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CURRENT POSITIONING
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PORTFOLIO POSITIONING
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36ONE BCI EQUITY FUND TOP 10 EQUITY HOLDINGS %
British American Tobacco 9.8 Naspers 8.3 AngloGold Ashanti 5.1 Prosus 5.0 Zambezi Platinum (Pref Share) 4.1 Mondi 4.1 Gold Fields 3.6 Impala Platinum 3.4 NewGold Issuer 3.2 Sibanye Stillwater 3.1 Total 49.7
As at 30 April 2020
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PORTFOLIO POSITIONING
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36ONE GLOBAL FUND PC TOP 10 EQUITY HOLDINGS %
Microsoft 9.2 Alphabet 7.5 Activision Blizzard 6.9 Amazon 6.2 Netflix 4.4 Facebook 4.0 Sony 3.8 Philip Morris International 1.9 Berkshire Hathaway 1.7 Twitter 1.7 Total 47.3
As at 30 April 2020
35,0% 8,9% 1,9% 1,7% 1,4% 1,3% 0,8%
SECTOR EXPOSURE
Technology General Consumer Tobacco Investment Holding Company Beverages Financial Services Luxury
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PORTFOLIO POSITIONING
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RAND HEDGE EXPOSURE
As at 30 April 2020
88% 12%
36ONE BCI EQUITY FUND
Rand Hedge Domestic (SA Inc.) 56% 44%
36ONE BCI FLEXIBLE OPPORTUNITY FUND
Rand Hedge Domestic (SA Inc.)
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29,4% 21,7% 10,4% 5,1% 2,9% 1,2% 15,3% 14,0%
0% 5% 10% 15% 20% 25% 30% 35%
Local Equity Bonds Money Market Pref Shares Local Cash Local Property Offshore Cash Offshore Equity
PORTFOLIO POSITIONING
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36ONE BCI FLEXIBLE OPPORTUNITY FUND
As at 30 April 2020
Offshore Exposure: 29.3%
ASSET ALLOCATION
Cash & Equivalents: 28.6%
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PORTFOLIO POSITIONING
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36ONE BCI FLEXIBLE OPPORTUNITY FUND TOP 5 FIXED INCOME HOLDINGS %
Government Bond (2030) 3.6 Absa Additional Tier 1 (2024) 3.4 Absa Additional Tier 1 (2022) 2.4 Standard Bank Additional Tier 1 (2022) 1.6 Nedbank Additional Tier 1 1.5
As at 30 April 2020
53% 26% 21%
FIXED INCOME EXPOSURE
Additional Tier-1 Corporate Bonds Government Bonds
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Presenter: Cy Jacobs
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PROPERTY SECTOR
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How did we get here?
yields in offshore market.
Where are we now?
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PROPERTY SECTOR
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TRUE LOAN TO VALUE (LTV) HIGHER THAN DISCLOSED
Disclosed LTV Mark to Market (MTM) LTV* MTM LTV with direct property marked down 20%
Resilient 27.5% 34.1% 40.1% Vukile 40.6% 44.1% 54.6% Redefine 43.8% 51.4% 62.9% Hyprop 34.0% 39.5% 49.4% Hyprop (fully consolidated) 43.9% 49.0% 61.3% Growthpoint 39.3% 41.6% 51.2%
Source: 36ONE Research
*Associates at market value and foreign loans at current exchange rate
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Presenter: Cy Jacobs
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PERFORMANCE
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36ONE BCI FLEXIBLE OPPORTUNITY FUND
36ONE BCI Flexible Opportunity Fund Repo + 2 Out/(under) performance
YTD 1.7% 2.6% (0.9%) 12 months 5.6% 8.4% (2.8%) 3 years p.a. 4.5% 8.7% (4.2%) 10 years p.a. 12.5% 8.1% 4.4% Since inception p.a. (5 Sept 2005) 14.8% 9.1% 5.7%
Source: Bloomberg as at 30 April 2020. Inception Date: September 2005. Highest and lowest calendar year performance since inception (as at 30 April 2020): High 52.09 Low -31.30
Annualised returns 0% 100% 200% 300% 400% 500% 600% 700% 800% Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 36ONE BCI Flexible Opportunity Fund SA Repo + 2%
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PERFORMANCE
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36ONE BCI EQUITY FUND
36ONE BCI Equity Fund % Capped SWIX* % Outperformance %
YTD 5.9% (16.2%) 22.1% 12 months 12.0% (17.9%) 29.9% 3 years p.a. 7.7% (3.4%) 11.1% 5 years p.a. 5.1% (1.2%) 6.3% Since inception p.a. (1 July 2012) 12.8% 7.2% 5.6% Annualised volatility since inception p.a. 11.6% 13.6%
Source: Bloomberg as at 30 April 2020. Inception Date: July 2012. Highest and lowest calendar year performance since inception (as at 30 April 2020): High 33.66 Low -6.38 (Class A) *Benchmark: 1 July 2012 – 31 October 2017: FTSE JSE SWIX (J403T). 1 Nov 2017 – Current: FTSE JSE CAPI SWIX (J433T), calculated over a rolling 1 year period, capped at 2% p.a.
Annualised returns 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 36ONE BCI Equity Fund FTSE/JSE Capped SWIX Total Return
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PERFORMANCE
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36ONE BCI EQUITY FUND IS A CONSISTENT TOP PERFORMER – TOP QUARTILE
The Fund is ranked number 1 in it’s ASISA category over YTD, 3, 5 and 7 years (# 2 over 1 year)
YTD % 1 Year % 3 Year p.a. % 5 Year p.a. % 7 Year p.a. % 36ONE BCI Equity Fund
5.9 12.0 7.7 5.1 10.6
ASISA Category Average
SA - Equity - General
(12.9) (14.0) (2.1) (1.0) 4.7
Outperformance
18.8 26.0 9.9 6.1 5.9
Source: Bloomberg, MoneyMate as at 30 April 2020.
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OUR DEGREE OF DIFFERENCE
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WHY US?
HEDGE FUND THINKING HAND PICKED TEAM OWNER MANAGED GREATER OPPORTUNITY
Challenging conventional wisdom Sizeable team & highly qualified 20+ years experience Larger investable universe due to
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SIGNIFICANT OUTPERFORMANCE
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FUND RANGE Unit Trusts Inception Date YTD % 1 Year % 3 Year p.a. % 5 Year p.a. % Since Inception p.a. %
36ONE BCI Equity Fund Jul 2012 5.9 12.0 7.7 5.1 12.8 36ONE BCI SA Equity Fund Nov 2016 (7.7) (4.8) 1.4 1.6 3.6 36ONE BCI Flexible Opportunity Fund Sep 2005 1.7 5.6 4.5 3.9 14.8 36ONE Reg 28 Balanced Mandate Nov 2018 1.7 6.8
Hedge Funds
36ONE SNN QI Hedge Fund Apr 2006 3.7 10.3 10.4 8.2 16.1 36ONE SNN Retail Hedge Fund Nov 2016 3.1 10.4 9.7
Capped Swix
(17.9) (4.3) (2.1)
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Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique Collective Investments Scheme and Sanne Management Company (RF) (Pty) Ltd (“Sanne”) are registered and approved in terms of the Collective Investment Schemes Control Act 45 of 2002 and are full members of the Association for Savings and Investment SA. Collective Investment Schemes in securities and hedge funds are generally medium to long term investments. The value of participatory interests may go up or down and past performance is not necessarily an indication of future performance. The Manager does not guarantee the capital or the return of a
available on request. 36ONE Asset Management (Pty) Ltd (“36ONE”) reserves the right to close and reopen certain portfolios from time to time in order to manage them more efficiently. Additional information, including application forms, annual or quarterly reports can be obtained from 36ONE, free of charge. Should a performance fee be applicable, the performance fees will be calculated and accrued on a daily/monthly basis based upon the daily/monthly outperformance, in excess of the benchmark, multiplied by the share rate and paid over to the manager monthly. Performance figures quoted are from either Morningstar, Bloomberg, Maitland, Maitland Guernsey, or Sanne as at the date of this report for a lump sum investment, using either NAV-NAV with income reinvested or mandate specific parameters and do not take any upfront manager’s charge into account. Income distributions are declared on the ex-dividend date. Actual investment performance will differ based on the initial fees charge applicable, the actual investment date, the date of reinvestment and dividend withholding tax. Annualised return is the weighted average compound growth rate over the period measured. Investments in foreign securities may include additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information. Boutique Collective Investments (RF) Pty Ltd and Sanne Management Company (RF) (Pty) Ltd retain full legal responsibility for third party named portfolios. Although reasonable steps have been taken to ensure the validity and accuracy of the information in this document, 36ONE does not accept any responsibility for any claim, damages, loss or expense, however it arises, out of or in connection with the information in this document, whether by a client, investor or intermediary. This document does not constitute a solicitation, invitation or investment recommendation, and prior to selecting a financial product or fund it is recommended that investors seek specialised financial, legal and tax
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