Satrix style tracker Q2 2020

What worked and what didn’t in Q2 2020?

| 10 August 2020

Factor performance review at a glance

Debt to Equity (100%) and Price-to-Book (86.0%) deliver stellar returns
Volatility continued into the second quarter of 2020 with the market bouncing back from its lows in March. This lead to factor spreads experiencing even more distorted dispersion numbers than Q1. Price Momentum (-58.8%) and Return on Equity (-51.4%) which were very good performing factors in the sell-off, got hit hard in the second quarter. However, Earnings Revisions (-4.6%) managed to subdue the Momentum factor in general. Debt to Equity (100%) and Price-to-Book (86.0%) delivered stellar returns as these value and geared stocks surged from their bottom. Dividend Yield (-2.3%) was marginally negative over the quarter. Over a one-year period it was only Price to Book and Debt to Equity that were the only two factors to deliver a positive return spread over one year.

Key events that impacted performance in Q2 2020

Extreme volatility continued into the quarter, but this time markets experienced one of the fastest recoveries from the global stock market crash. For the quarter, the MSCI World Index (19.4%), MSCI Emerging Markets Index (18.1%) and MSCI USA Index (21.6%) in net US dollar all gave substantial positive returns. For the full quarter, the South African rand appreciated by 2.4% to the US dollar, closing at R17.38 to the greenback, R21.52 to the pound and R19.54 to the euro. In spite of the market’s bouncing back, the South African Reserve Bank (SARB) committee mentioned that the economic contraction and slow recovery of the economy would keep inflation below the middle of their target range. In their meeting in May, the committee continued to cut the repo rate by 0.5% to 3.75%, the lowest level in its history.

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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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