Satrix style tracker Q3 2021

What worked and what didn’t in Q3 2021?

| 17 November 2021

Factor performance review at a glance

Year-to-date Value is still the best performing factor, although in the third quarter it added little outperformance as the Dividend Yield sub-factor underperformed. Earnings Yield and Book-to-Price added positively. For the quarter, Momentum was the best-performing factor followed by Low Volatility. Locally, Value still leads the way although it was fairly flat during Q3 from a long-short return spreads perspective, and Momentum continued to struggle. Quality remained out of favour due to underperformance from Low Vol stocks.

Locally, Earnings Revisions (-30.6%) showed negative returns through the quarter while Price Momentum (3.5%) contributed positively. Price to Book (6.7%), Dividend Yield (1.6%) and Price to Cash Flow (0.9%) did well while Earnings Yield (-9.3%) lagged performance through the quarter, resulting in Value underperforming slightly for the quarter (-0.1%). Growth (17.1%) again showed positive returns for the period, while Profitability (-10.7%) and Leverage (-17.1%) continued to lag, causing Quality to be one of the underperformers. Local indices were negative and Low Beta (-8.9%) and Low Vol (-10.6%) underperformed in Q3.

Quintile spread performance Q3

Key events that impacted performance in Q3 2021

Vaccinations in emerging markets picked up pace since the beginning of the year, but trailed behind developed markets. This led to a continued uncertainty regarding the spread of Covid-19 and an emergence of new variants, caused by slow vaccination rates and people’s hesitancy to get the jab. As a result, emerging markets fell during the quarter, while developed markets were fairly flat. Local equities were up in July but lost that performance through August and September, ending the quarter negative. For Q3, returns were mixed with the MSCI World Index giving -0.01%, the MSCI Emerging Markets Index -8.1% and the MSCI USA Index 0.3% in net US dollars.

Locally, the Rand weakened against the Dollar in Q3. For the full quarter, the Rand depreciated by 5.6% to the US dollar, closing at R15.11 to the greenback, R20.31 to the pound and R17.49 to the Euro. The South African Reserve Bank (SARB) again unanimously voted to keep its repo rate unchanged at 3.5% during its September meeting, as was expected. There was still uncertainty regarding Covid-19 in South Africa, but the SARB held rates to support South Africa’s economic recovery as inflation was being contained within their target range. Forecast inflation for South Africa was revised up to 4.4% from the previous 4.2%, while President Cyril Ramaphosa eased lockdown restrictions to Level 1 as the country prepared to go to the voting stations in November.

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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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