Satrix style tracker Q4 2021

What worked and what didn’t in Q4 2021?

| 10 February 2022

Factor performance review at a glance

Global stock markets posted positive returns for the final quarter of 2021, finishing the year with a strong equity performance across the globe. From a style perspective, the year 2021 was largely dominated by Value after decades of Momentum and Quality outperformance. Globally, Value was the best performing factor for the year as the Price to Book and Price to Cash-Flow sub-factors dominated.  For the quarter, Quality was the best performer globally – recovering from earlier underperformance in the year, while the Small Size factor was the worst performer for the quarter.

Locally, Low Vol (11.0%) was the best performing factor followed by Value (9.8%). The Quality (4.1%) factor finally enjoyed a positive quarter followed by a modest positive performance from Momentum (1.63%) stocks. Looking at the local sub-factors for the quarter, Price Momentum (-9.8%) showed strong negative returns through the quarter (in line with Value’s strong performance) while Earnings Revision (14.7%) elevated the Momentum factor. For Value, all the sub-factors did well with Price to Book (6.0%), Dividend Yield (11.0%), Price to Cash Flow (6.9%) and Earnings Yield (12.0%) all posting strong performance numbers through the quarter. Growth (-9.8%) lost its positive return for the period, while Profitability (8.7%) and Leverage (8.2%) did very well after a period of underperformance, leading Quality’s charge for the quarter. Low Beta (12.0%) and Low Vol (10%) also performed strongly during the quarter.

Quintile spread Q4 2021

Key events that impacted performance in Q4 2021

Global markets ended the year higher than the 2020 levels for most asset classes, with a very positive fourth quarter driven by good performance in December. The US inflation rate was still elevated as it continued to set new records, with its highest recorded acceleration since June 1982 at 6.8%. This was underpinned largely by increases in commodity prices, continued supply chain disruptions and upward wage pressures. Emerging markets also posted positive returns, ending the year strongly in the green. The Omicron variant of Covid-19 was seen to spread faster but was somewhat milder than any of its predecessors – with markets recovering following severe initial reactions to the variant. For the quarter, equity index returns were mostly positive, with the MSCI World Index returning 7.8%, the MSCI Emerging Markets Index -1.3% and the MSCI USA Index 10% in net US dollar.

Locally, the South African rand weakened against the dollar through the period, on the back of severe travel restrictions imposed. For the full quarter, the South African rand depreciated by 5.6% to the US dollar, closing at R15.93 to the greenback, R21.56 to the pound and at R18.14 to the euro. Fitch revised South Africa’s outlook from negative to stable, citing a recovery in the country’s economy and the possibility of its GDP returning to pre-pandemic levels in 2022. Fitch also mentioned that they expected continued equity and liquidity support from the South African government as they also revised Eskom’s outlook to stable.

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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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