Satrix style tracker Q1 2021

What worked and what didn’t in Q1 2021?

| 20 May 2021

Factor performance review at a glance

Globally, Value outperformed in most regions followed by Quality, while long-term Momentum contracted through the quarter. Locally, Low Volatility was the best performing factor followed by Value, extending the Value rebound and flight to “cheap and safe” assets. Momentum, along with Quality, continued its contraction this past quarter. It remains to be seen whether there will be a rotation out of Value and into Momentum for the remainder of the year.

For the sub-components, Earnings revisions (-8.3%) showed strong negative returns through the quarter while Price Momentum (6.4%) experienced a rebound, with the net effect being a contraction in the Momentum factor. The Value components delivered through the quarter, with Price to Book (7.3%), Earnings Yield (2.4%), Dividend Yield (4.7%) and Price to Cash Flow (11.9%) all seeing gains. Growth (4.5%) showed positive returns for the period, while Profitability (-7.9%) and Leverage (-1.0%) continued to lag, making Quality one of the underperformers for the quarter. Low Beta (11.0%) and Low Vol (11.3%) extended their rallies from last quarter, while most local indices experienced positive gains.

quintile spread performance

Key events that impacted performance in Q1 2020

Globally, stock markets ended the first quarter of 2021 in the green, with some emerging markets slightly in the red. Several countries went back to stricter levels of lockdown as third waves of Covid-19 gained momentum. Vaccine roll-outs have also been slower than anticipated, particularly in Europe, with several instances of vaccine related complications further slowing down the virus containment. Despite this, equities rounded out the quarter mostly in positive territory, with the US congress finally approving a historic fiscal stimulus package in March. There seems to be no slowdown in the global equity rally, with the MSCI World Index (4.9%), MSCI Emerging Markets Index (2.3%) and MSCI USA Index (5.4%) all gaining in net US dollars. Following a strong recovery late last year, the rand showed resilience through the quarter, weakening only slightly to the dollar (0.6%, closing at R14.76 to the dollar and R20.37 to the pound), but strengthening to the Euro (3.3% and closing at R17.34). This is a remarkable recovery of more than 23% since this time last year, where the rand traded north of R19.11 to the greenback as markets began pricing in the possibility of a virus induced global trade disruption.

The SA Reserve Bank voted to keep its repo rate unchanged at 3.5% in March to support the country’s recovery, with most economists agreeing that the only real short-term drivers of inflation would be the petrol price (which rates would do little to affect).

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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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