Satrix style tracker Q4 2020

What worked and what didn’t in Q4 2020?

| 27 January 2021

Factor performance review at a glance

Globally, stock markets recovered from the deep drawdowns experienced in the first half of 2020 and ended the year mostly with positive double digit returns. Momentum and Quality underpinned this recovery from a style perspective, with Value extending its losses further.


Locally, Value was the best-performing factor, continuing its rebound from years past and cementing the notion of a Value rebound. Momentum (and, in particular, Price Momentum), along with Quality metrics, continued detracting from Value.   Low Volatility posted double digit positive return spreads through the quarter, highlighting that “stable” and “cheap” were the dominant factors locally in an otherwise historically turbulent year.


Price Momentum (-8.9%) showed strong negative returns in Q4 while Earnings Revisions (6.7%) continued to contribute positively to the Momentum factor. Price to Book (16.0%), Earnings Yield (12.2%), Dividend Yield (11.6%) and Price to Cashflow (13.5%) all rallied in Q4, making Value one of the best-performing factors for 2020. Growth (15.5%) showed robust return signals, while Profitability (-3.0%) lagged its quality counterpart. Leverage (-14.65%) failed to deliver as investors sought to avoid highly geared and risky stocks. As the markets recovered from the first half of the year’s losses, Low Beta (12.7%) and Low Vol (11.5%) garnered strong market support.

Key events that impacted performance in Q4 2020

The fourth quarter started as a potent cocktail of uncertainty amid a resurgence of coronavirus infections across the globe, with some countries re-imposing lockdown restrictions, triggering a sharp sell-off in October. Increasing geopolitical tensions and looming US election uncertainties all served to heighten tensions and underpin global uncertainty. Subsequent to October’s sell-off, markets again rebounded with the MSCI World Index (14.0%), MSCI Emerging Markets Index (19.7%) and MSCI USA Index (13.0%) all handsomely paying off in net US dollars. Locally, the South African rand somewhat surprisingly appreciated by 12.1% to the US dollar, closing at R14.67 to the greenback, R20.08 to the pound and R17.94 to the euro. The South African Reserve Bank (SARB) committee continued to hold the repo rate fixed in November at the 3.5% level, with the committee not reaching a unanimous decision (underscoring the possibility of further easing to help bolster depressed economic activity).


Fitch and Moody’s added to South Africa’s economic troubles as Moody’s moved South Africa two levels below investment grade status while Fitch brought it three levels below. This, however, failed to move the proverbial needle on the rand, as market forces driving carry spreads continue to dominate local and fundamental idiosyncrasies in determining par value for the currency. We expect this trend of seeming “rand indifference” to local fundamental factors to continue as the fortunes of our liquid currency will likely remain inextricably tied to factors affecting global carry trade prospects in a low (or even negative) global yield environment in the next 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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