Satrix style tracker Q4 2017

What drove performance in Q4 2017?

| 26 January 2018

Momentum

Despite some rotation which started in November (which can largely be explained by the usual year-end profit taking), globally the Momentum factor (particularly Price Momentum) led factor performances for 2017. In South Africa we’ve seen an alignment with global outcomes, as Price Momentum has been the strongest signal domestically for the 2017 and one of the strongest over the prior quarter.

Earnings revision (a sub-component of headline Momentum) on the other hand has not performed in-line with Price Momentum, delivering only mildly positive return spreads, as the quality of corporate earnings estimates was lacking.

Value

After cooling down in Q3, Price to Book completely collapsed in Q4 as investors fled shares which offered deep value, and rather flocked to more defensive shares. For 2017, Price to Book became the worst performing factor after being the top factor during 2016!

The ‘flight-to-safety’ environment benefitted stocks with strong dividend yields, as investors could no longer ignore (as was the case in the first three quarters of 2017) the value of high-yielding shares given the Steinhoff news flow.

Quality

The Return on Equity factor experienced some inconsistency in performance over the first three quarters of 2017, but came back with a vengeance in Q4. In the wake of both the Steinhoff debacle, as well as the outcome of the ANC election concerns, investors preferred profitable companies to ease market uncertainty. Rand strength also aided this factor.

Perversely, during a period of extreme market stress, Debt to Equity failed to perform strongly. This factor typically shows sporadic bursts of defensiveness, but largely disappointed during the prior quarter.

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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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