Satrix style tracker Q1 2022

What worked and what didn’t in Q1 2022?

| 13 May 2022

Factor performance review at a glance

Globally, stock markets started the year on the backfoot, posting negative returns for the first quarter of 2022. Equity market volatility edged higher too, accompanied by accelerated inflation and the start of the Fed interest rate hike cycle. From a style perspective, the quarter was dominated by the continued strong performance from Value, supported by Low Vol strategies. Momentum continued to trail other core styles, while Profitability and Growth also seemed to lose steam. Locally, the Value factor was the best performer followed by Low-Volatility and Quality.

Locally, Value (7.7%) was the best-performer, followed by Low Vol (5.7%). Quality (4.6%) posted a positive quarter, while Momentum underperformed (-12%). Looking at the local sub-factors, Price Momentum (-8.6%) showed negative returns together with Earnings Revisions (-15.1%), leading to a pronounced negative quarter for Momentum. For Value, all sub-factors performed well with Price to Book (3%), Price to Cash Flow (12%), Dividend Yield (9.4%) and Earnings Yield (6.3%) spreads strong through the quarter, resulting in Value outperforming strongly. Growth (-6.9%) had a negative quarter, while Profitability (9.7%) and Leverage (6%) continued to perform well, with Quality delivering value. Low Beta (9.1%) and Low Vol (2.45%) both had a positive quarter.

Quintile spread performance: Q1 2022

Key events that impacted performance in Q1 2022

The first quarter of 2022 was filled with lots of volatility in all markets across the globe. The sheer aggression of Russia’s invasion into Ukraine caused significant panic in energy markets, which pushed record-high inflation numbers even higher. To combat inflation, central banks, including the US Fed, began hiking interest rates. Locally, the South African Reserve Bank(SARB) also hiked its repo rate for the third time in a row. A market sell-off of risky assets ensued, with the S&P 500 index having its worst start to the year since 2009 and the NASDAQ down the most since 2008.

Despite the negative sentiment and inflationary pressures, the Rand strengthened against the dollar. For the full quarter, the Rand appreciated by 5.2% to the US dollar, closing at R14.64 to the greenback, R19.20 to the pound and at R16.22 to the euro. The SARB raised the repo rate by 0.25% in March as the country registered a tenth consecutive month of higher annualised inflation than the 3 to 6% target range.

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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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