Satrix style tracker Q3

What drove performance in Q3 2017?

| 8 November 2017

An in-depth look at factor performance

In the charts on the following page we look in-depth at the drivers of the last quarter’s performance for the various styles: Momentum (Price Momentum and Earnings Momentum),  Value (Price to Book and Dividend Yield) and Quality (Return on Equity and Debt to Equity).


Momentum’s stellar performance during Q3 was a sign of alignment with global outcomes, as Price Momentum’s strong recovery in Q3 2017 has seen the factor redeem itself somewhat and recoup much of the losses it experienced last year. Interestingly, Price Momentum gains have been driven by the short side with the long basket performing broadly in lines with the market.
Earnings revisions have also started showing strong improvement during the quarter after a tepid start to the year. Still, corporate earnings estimates are being weighed down by domestic economic and policy uncertainty.

Momentum factors


Price to Book has started to cool down after a fantastic 2016 and strong first half of 2017. Cyclical upswings and low levels of economic and policy uncertainty are not typically the optimal environment for this factor.

Dividend yield similarly did well in 2016, along with Q2 in 2017. However, this factor has struggled in Q3 with a sluggish SA economy, and investors redirecting their attention away from counters that offer higher margins of safety (from a valuation perspective) toward more cyclical or growth orientated shares.

Value factors


The Return on Equity factor has experienced some inconsistency in performance over the prior quarters. After being the best factor in Q1, it fell back into its ‘2016-like’ performance during Q2, which was followed up by a positive performance over the subsequent third quarter. We maintain that the factor still has some overhang from a moderately crowded position in 2015, based on valuation measures. After some further normalisation, the factor’s long-term premium should become more accessible.

Debt to Equity continues to deliver positively year-to-date after an improved 2016, where this factor showed sporadic bursts corresponding to periods of extreme market stress, reminding us of its defensive attributes.

Quality factors

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Satrix Managers (RF) (Pty) Ltd (Satrix) a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS. Collective investment schemes are generally medium- to long-term investments. Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETFs are index tracking funds, registered as a Collective Investment and can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFs may incur additional costs due to it being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF Minimum Disclosure Document. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF Minimum Disclosure Document and/or on the Satrix website. Performance is based on NAV to NAV calculations of the portfolio. Individual performance may differ to that of the portfolio as a result of initial fees, actual investment date, dividend withholding tax and income reinvestment date. The reinvestment of income is calculated based on actual distributed amount and factors such as payment date and reinvestment date must be considered. If the fund holds assets in foreign countries it could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange, tax, settlement and potential limitations on the availability of market information.


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