satrix investments
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2
industry and market
3
the global etp inflow ytd
september
2014
$190BN global etp cumulative flow
Source: BlackRock | ETP Landscape
4
global etp assets
september
2014
$2.6TN global etp assets and products
Source: BlackRock | ETP Landscape
south african active equity managers how are they doing against the ALSI (SWIX)?
85% 11 out of 13
1995
63% 10 out of 16
1996
82% 14 out of 17
1997
33% 7 out of 21
1998
4% 1 out of 28
1999
23% 7 out of 31
2000
30% 19 out of 63 (40%)
2007
11% 6 out of 55 (33%)
2006
6% 3 out of 47 (13%)
2005
95% 42 out of 44 (75%)
2004
90% 38 out of 42
2003
90% 36 out of 40
2002
19% 7 out of 37
2001
51% 37 out of 73 (37%)
2008
19% 15 out of 78 (31%)
2009
38% 31 out of 82 (24%)
2010
58% 50 out of 86 (38%)
2011
19% 18 out of 97 (12%)
2012
40% 42 out of 104 (49%)
2013
?% ? out of ? (?)
2014
Data source: Morningstar
17% of general equity managers are outperforming the SWIX over a 10 year basis;
21% are outperforming the ALSI June 2014
6
evolution of the cluster
7
investment core
8
11.0
2.6
1.6
4.0 3.5
13.6
4.0
2.0
6.1
3.5
16.4
5.0
2.8
12.4
0.2
4.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Vanilla Smart Beta Sector Offshore Africa Enhanced
Dec 11
Dec 12
Dec 13
R22.7bn
R29.2bn
R40.8bn
assets under management
Note: SWIX from 208m in 2012 (end) to 1.1bn in 2013 (end)
9
vanilla products
Tracker Product Unit
Trust ETF Seg.
Alsi 40
Swix 40
All Share
Swix
Property
All Bond
April 2014
10
sector products
Tracker Product Unit
Trust ETF Seg.
Fini 15
Indi 25
Resi 10
April 2014
11
smart beta products
Tracker Product Unit
Trust ETF Seg.
Dividend Plus
Equally Weighted Top 40
Rafi 40
Momentum
Balanced
Balanced low equity
12
international products
Tracker Product Unit
Trust AUM
World Equity R3.8bn
North American Equity R4.6bn
UK Equity R370m
Europe (excl. UK) Equity R690m
Emerging Markets Equity R400m
Pan Africa (excl. SA Equity) R155m
April 2014
13
Pricing
“Passive Investment Management,
which is significantly cheaper and
not demonstrably inferior to active
management over the long term, is
under-utilised in South Africa”
Strengthening Retirement Savings
National Treasury - 2012
16
satrix philosophy
our philosophy
Understanding the source and nature of all risks one is
exposed to provides a clearer line of sight into the extent
and character of the salvageable premium on offer. The
marriage between this and sound risk management
practice and discipline is pivotal in reaching one’s
investment objectives.
18
what is driving total return?
70's 80's 90's 2000 2010 +
market
beta
β
pure
alpha
α
α
β β β
smart
beta
β+
β+ β+
95% of total mutual fund performance is explained by market beta + smart beta Li & Qu; Financial Product Differentiation over the State Space in the Mutual Fund Industry (2010)
total
return
α α
19
smart beta defined | philosophy
20
Hiport
DSS (Excel API)
Barra Portfolio
Manager
E-Gen
DSS (Excel API)
Barra Portfolio
Manager
Custom Matlab
Applications
E-Gen
DSS (Excel API)
Barra Portfolio
Manager
Decalog /
Neutron /
Hermes /
Bloomberg Statpro
Barra Portfolio
Manager
investment process
Performance monitoring
•Portfolio management duty
•Assisted by a dedicated performance team
•Daily discipline
•Full Attribution
•Re-evaluation of assumptions and risk model (optimisation)
Portfolio management
•Trading
•Liquidity / turnover
•Implementation accuracy
•Monitor trade execution
•Risk analytic
•Absolute and relative risk
•Contributors and detractors
•Factor style diagnostic
Index Reconstruction
•Index rebalancing
•Quarterly
•Dividend flow
•Rights issues
•Other corporate actions
•Optimisation
•Alpha signals
•Risk model
Data
management •Cashflow notification •Index notification
•Re-evaluation of alpha signals
•Risk landscape
•Portfolio / benchmark positions
21
satrix smartcore
what is a factor?
A factor is a unique,
systematic risk or theme
that is common to a subset
of securities on a capital
market for which it is
well evidenced and
reasoned that a
compensating return
premium is available.
23
smartcore | domestic product factor range
New
harvesting factors
25
satrix momentum fund
26
price behaviour
the propensity for securities
to exhibit persistence in their
price behaviour
What underpins the satrix momentum factor?
earnings revisions /
surprises
analysts / the sell side do
have a significant impact on
the local equity capital
market
philosophy | why does this factor premiums exist?
academic theory is conclusive, it exists: Jegadeesh and Titman
(1993), Fama and French (2008)
market systematically underestimates earnings due to the macro
factor risk and then sharply rerates when confirmed by analysts
and macro risks abate (Novy Marks)
… / process
27
explaining momentum
28
stock is cheap on value screen
value investor buys
explaining momentum
momentum signal positive
momentum investor buys
momentum signal negative
momentum investor sells
stock is expensive
value investor sells
29
return to
value
investor
explaining momentum
30
return to
momentum
investor
explaining momentum
31
style correlations (rank) | momentum factor
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
Jan 0
0
Ju
l 00
Ja
n 0
1
Ju
l 01
Ja
n 0
2
Ju
l 02
Ja
n 0
3
Ju
l 03
Ja
n 0
4
Ju
l 04
Ja
n 0
5
Ju
l 05
Ja
n 0
6
Ju
l 06
Ja
n 0
7
Ju
l 07
Ja
n 0
8
Jul 08
Ja
n 0
9
Ju
l 09
Ja
n 1
0
Ju
l 10
Ja
n 1
1
Ju
l 11
Ja
n 1
2
Ju
l 12
Ja
n 1
3
Ju
l 13
Book to Price Log Market Cap Volatility Dividends to Price Ratio
Source: S&P
32
portfolio characteristics
33
scores from momentum model
rebalanced monthly
strict turnover constraints
no fundamental overlay
continuous monitoring
benchmark SWIX
active risk 4
turnover around 100% p.a.
2% sector risk limits
3% stock bet limit
process
34
performance and risk
35
momentum | hotspot | swix | oct 2014
36
performance | momentum factor | sept 2014
-25%
-15%
-5%
5%
15%
25%
35%
45%
-40%
-20%
0%
20%
40%
60%
80%
Jan-02 May-03 Sep-04 Jan-06 May-07 Sep-08 Jan-10 May-11 Sep-12 Jan-14
SWIX Rolling 12 month (LHS) Monthly excess returns (RHS)
Rolling 12 months excess (RHS)
37
annualised performance portfolio benchmark excess
3 months 1.5% -0.5% 2.0%
YTD 13.3% 11.2% 2.0%
12 months 21.9% 17.9% 4.0%
24 months 28.1% 21.6% 6.5%
36 months 29.9% 23.3% 6.5%
since inception (50 months) 24.9% 19.0% 5.9%
… including backtest
5 years 24.5% 18.9% 5.6%
7 years 15.2% 12.0% 3.1%
10 years 24.0% 19.6% 4.5%
portfolio performance | sept 2014
38
satrix dividend + fund
39
annualised performance portfolio swix alsi
3 months -2.1% -0.5% -2.1%
ytd 2.2% 11.2% 9.4%
1 year 7.0% 18.0% 15.4%
3 years 14.6% 23.3% 22.2%
dividend+ | performance | sept 2014
40
high yield investment strategy
top 30 stocks with the highest forward
dividend yield
rebalance semi-annually
large cap + mid cap - property
what underpins the dividend + factor?
41 41
the dna of the fund remains true to label
fundamental view style exposure view
0
2
4
6
8
10
12
14
Nov 2008Nov 2009Nov 2010Nov 2011Nov 2012
Rolling One Year Index Dividend
Yield
RESI INDI FINI PREF
SAPY DIVI DTOP
SIMDIF 4.8% 5.0% 4.9% 4.6% 4.7% 4.6%
ALSI 3.1% 3.2% 3.2% 2.9% 2.8% 2.9%
SIMDIF 4.8% 5.0% 5.0% 4.5% 4.8% 4.9%
ALSI 3.0% 3.1% 2.9% 2.7% 3.1% 3.1%
historic dy
forward dy
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
Jan-13 May-13 Sep-13 Jan-14
Active factor exposure relative to ALSI
Size
Momentum
Trading Activity
Market Variability
Foreign Exposure
Yield
Growth
Value
Financial Leverage
Market Sensitivity
Primary ForeignListing
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
Jan-13 May-13 Sep-13 Jan-14
Active factor exposure relative to SWIX Size
Momentum
Trading Activity
Market Variability
Foreign Exposure
Yield
Growth
Value
Financial Leverage
Market Sensitivity
Primary ForeignListing
3/12 6/12 9/12 2/12 3/12 5/12
3/12 6/12 9/12 12/12 3/12 5/12
42 42
dividend+ | performance | sept 2014
-25%
-15%
-5%
5%
15%
25%
35%
45%
-40%
-20%
0%
20%
40%
60%
80%
Jan-04 Feb-05 Mar-06 Apr-07 May-08 Jun-09 Jul-10 Aug-11 Sep-12 Oct-13
SWIX Rolling 12 month (LHS) Monthly excess returns (RHS)
Rolling 12 months excess (RHS)
43 43
dividend+ | hotspot | alsi | oct 2014
44 44
dividend+ | hotspot | swix | oct 2014
45
satrix balanced fund
46
DISCLOSURE OF SIMULATED DATA USED IN PERFORMANCE CHARTS
AND TABLES
The performance information presented in certain charts
or tables represent back tested performance based on a
combination of simulated index data and actual data for
the Satrix unit trusts. However, for comparison
purposes and/or portfolio construction where various
unit trusts were included in charts or tables, the
actual unit trust returns were used.
Clients should note that simulated data is not an
indication of future performance, and may differ to the
actual performance.
47
93.60% 88%
81.40% 76.60%
69.70%
91.50%
4.60% 1.80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1974-1983 1993-1997 1988-1998 1962-2001 Bear Markets 1978-1987 1978-1987 1978-1987
PensionFunds (91)
PensionFunds (58)
U.S. Balancedmutual funds
(94)
U.S. Balancedmutual funds
(507)
U.S. Balancedmutual funds
(68)
StrategicAsset
Allocation
Stock Picking Tactical AssetAllocation
Strategic Asset Allocation contributes more to long-term returns
Source: Vanguard Investment, Brinson et al 1991.
48
55%
8%
6%
5%
6%
15%
5%
Domestic Cash
Domestic Property
Domestic ILB
International Bonds
International Equity
Domestic Bonds
Domestic Equity
Divi +
Equally
Weighted
Momentum
Equal
Weighted
FUND DESIGN: STRATEGIC ASSET ALLOCATION
49
Smart Beta Rationale: Equity Building Block
STRATEGY INDEX EXPLAINED BIAS
DIVIDEND
PLUS
• 30 high dividend yielding companies within the universe of Top 40 and Mid Cap Index
• Expected to pay the best normal dividends over the forthcoming year
• Fund will have a low correlation with other indices on the JSE
Value
EQUALLY
WEIGHTED
TOP 40
• Top 40 Equally Weighted Index represents the 40 largest, most liquid shares listed on JSE
• Equal weighting methodology offers a more balanced exposure to all companies
Size
MOMENTUM
• Momentum is a composite of price and earnings momentum as measured by analyst revisions.
• Fund is negatively correlated to value investing
• Momentum Fund designed to be:
• Risk Controlled;
• Consistent and True to Label
• Robust blend of price and earnings momentum styles
Momentum
50
Returns to 31 December 2013 | Source: MoneyMate and SIM | Back-tested
,pro forma
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
Jun-
03
Dec
-03
Jun-
04
Dec
-04
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Dec
-08
Jun-
09
Dec
-09
Jun-
10
Dec
-10
Jun-
11
Dec
-11
Jun-
12
Dec
-12
Jun-
13
Dec
-13
ALSI Balanced Equity Carve-Out
Rolling
1 Year
Balanced Equity
Carve-Out ALSI Active
Feb 09 -29.03% -37.59% 8.56%
Oct 08 -25.82% -30.87% 5.04%
Nov 08 -23.07% -27.68% 4.61%
Relative Protection – Rolling 1 year
Equity Building Block vs ALSI
51
Returns to 31 December 2013 | Source: MoneyMate and SIM | Back-tested ,pro forma
returns
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Jun-
07
Sep-
07
Dec-
07
Mar
-08
Jun-
08
Sep-
08
Dec-
08
Mar
-09
Jun-
09
Sep-
09
Dec-
09
Mar
-10
Jun-
10
Sep-
10
Dec-
10
Mar
-11
Jun-
11
Sep-
11
Dec-
11
Mar
-12
Jun-
12
Sep-
12
Dec-
12
Mar
-13
Jun-
13
Sep-
13
Dec-
13
ALSI Balanced Equity Carve-Out
CONSISTENT
Outperformance over
ALL rolling 5 year
periods
Consistent Outperformance – Rolling 5 year
Equity Building Block vs ALSI
Domestic
Cash
Domestic
Ilbs
International
Bonds
DIVI PLUS
Intern.
Equity
Domestic
Property
Dom.
Bonds
Now add other asset
classes
53
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
2005
/09/
01
2006
/01/
01
2006
/05/
01
2006
/09/
01
2007
/01/
01
2007
/05/
01
2007
/09/
01
2008
/01/
01
2008
/05/
01
2008
/09/
01
2009
/01/
01
2009
/05/
01
2009
/09/
01
2010
/01/
01
2010
/05/
01
2010
/09/
01
2011
/01/
01
2011
/05/
01
2011
/09/
01
2012
/01/
01
2012
/05/
01
2012
/09/
01
2013
/01/
01
2013
/05/
01
2013
/09/
01
2014
/01/
01
Satrix Balanced Index Fund SA - Multi Asset - High Equity
Returns to 31 December 2013 | Source: MoneyMate and SIM | Back-tested
,pro forma ret.
Average
Outperformance
of 3.1%
annualised
Rolling 3 years
CONSISTENT
Outperformance over
ALL rolling 3 year
periods
Satrix Balanced vs Average Balanced
Manager
54
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2007
/09/
01
2007
/12/
01
2008
/03/
01
2008
/06/
01
2008
/09/
01
2008
/12/
01
2009
/03/
01
2009
/06/
01
2009
/09/
01
2009
/12/
01
2010
/03/
01
2010
/06/
01
2010
/09/
01
2010
/12/
01
2011
/03/
01
2011
/06/
01
2011
/09/
01
2011
/12/
01
2012
/03/
01
2012
/06/
01
2012
/09/
01
2012
/12/
01
2013
/03/
01
2013
/06/
01
2013
/09/
01
2013
/12/
01
Satrix Balanced Index Fund SA - Multi Asset - High Equity
Returns to 31 December 2013 | Source: MoneyMate and SIM | Back-tested
,pro forma ret.
Average
Outperformance of
2.8% annualised
Rolling 5 years
CONSISTENT
Outperformance over ALL
rolling 5 year periods
Satrix Balanced vs Average Balanced Manager
55
Name 2013 QR 2012 QR 2011 QR 2010 QR 2009 QR 2008 QR
Satrix Balanced
Index Fund 17.56% 3 24.27% 1 9.82% 1 16.15% 1 19.31% 1 -8.65% 2
Prudential
Balanced Fund 24.03% 1 20.72% 1 6.64% 2 13.45% 2 18.64% 2 -10.35% 3
Cadiz Managed
Flexible Fund 15.46% 3 18.96% 1 5.65% 3 17.64% 1 22.43% 1 -11.53% 3
Momentum
Balanced Fund 19.09% 2 18.93% 1 6.36% 2 9.89% 4 21.61% 1 -12.21% 3
Old Mutual
Balanced Fund 20.03% 2 18.12% 2 6.83% 2 12.69% 2 18.39% 2 -14.44% 4
SA - Multi Asset
High Equity 18.01% /133 15.95% /117 5.83% /104 11.68% /84 15.80% /77 -8.46% /72
Returns to 31 December 2013 | Source: MoneyMate and SIM | Back-tested ,pro forma ret.
CONSISTENT
Outperformance of Category and
BM cognisant managers
Satrix Balanced vs Benchmark Cognisant Managers
56
Returns highlighted in red, the fund has underperformed
Satrix Balanced
Returns to 31 December 2013 | Source: MoneyMate and SIM | Back-tested
,pro forma ret.
Calendar
Year
Allan Gray
Balanced
Coronation
Balanced Plus
Foord
Balanced
Satrix Balanced
2003 23.29% 17.68% 13.98% 17.48%
2004 23.38% 32.01% 22.59% 26.72%
2005 36.47% 35.02% 43.75% 32.78%
2006 30.26% 30.48% 32.39% 30.87%
2007 13.24% 13.09% 10.56% 13.04%
2008 -1.82% -8.19% -7.23% -8.65%
2009 13.89% 23.00% 17.05% 19.31%
2010 10.41% 15.43% 15.54% 16.15%
2011 11.83% 6.77% 9.41% 9.82%
2012 13.32% 20.07% 21.91% 24.27%
2013 23.72% 25.60% 22.01% 17.56%
Cyclicality of Returns – Calendar Year Performance
Balanced Manager Selection
57
Calendar
Year
Allan Gray
Balanced
Coronation
Balanced Plus
Foord
Balanced
2003 5.81% 0.21% -3.50%
2004 -3.35% 5.29% -4.13%
2005 3.69% 2.24% 10.97%
2006 -0.61% -0.39% 1.53%
2007 0.19% 0.04% -2.49%
2008 6.83% 0.47% 1.43%
2009 -5.43% 3.69% -2.26%
2010 -5.74% -0.72% -0.61%
2011 2.01% -3.06% -0.41%
2012 -10.94% -4.20% -2.36%
2013 6.16% 8.04% 4.45%
Cyclicality around
investment processes
causes
underperformance
Returns to 31 December 2013 | Source:
MoneyMate and SIM | Back-tested ,pro
forma ret.
Cyclicality around investment
processes causes
underperformance
Cyclicality of Returns – Calendar Year Performance relative to Satrix Balanced
Balanced Manager Selection
58
TER Date to 31 December 2013 | Source: ASISA
Fund TER Current Proposed
Allan Gray Balanced 1.71% 33.3% 25.0%
Coronation Balanced Plus 1.65% 33.3% 25.0%
Foord Balanced 1.73% 33.4% 25.0%
Satrix Balanced 0.30% 0.0% 25.0%
Estimated Portfolio TER 1.70% 1.34%
Satrix Balanced: Active/Passive Blend
59
TER Date to
31 December
2013
Source: ASISA
relative
to peer
group
outperformance
underperformance
Balanced
Composite A
(Passive +
Active)
Balanced
Composite B
(Top 3)
Multi-Asset
High Equity
Average
Active Return
(Composite A)
Active Return
(Composite B)
2003 18.09% 18.34% 17.53% 0.56% 0.81%
2004 26.17% 25.95% 28.09% -1.92% -2.14%
2005 36.98% 38.38% 26.76% 10.22% 11.62%
2006 31.03% 31.08% 24.39% 6.64% 6.69%
2007 12.52% 12.35% 12.48% 0.04% -0.13%
2008 -6.46% -5.68% -8.58% 2.12% 2.90%
2009 18.32% 17.94% 15.77% 2.55% 2.17%
2010 14.40% 13.78% 11.44% 2.96% 2.34%
2011 9.46% 9.35% 5.71% 3.75% 3.64%
2012 19.84% 18.34% 16.01% 3.83% 2.33%
2013 22.22% 23.79% 17.72% 4.50% 6.07%
Calendar Year Analysis for Composites
Diversification
Lower fees
Consistency
No performance compromise
Satrix Balanced: The real value …
…/ Low Equity
61
msci world tracker
62 62
msci world | tracking approach
• index methodology
• The MSCI World index is a market-cap weighted index that aims to measure
the equity performance of developed markets throughout the world. With
1 612 constituents, the index covers approximately 85% of the free float-
adjusted market capitalization in each country (23 countries).
• The index is reviewed quarterly—in February, May, August and November—
with the objective of reflecting change in the underlying equity.
• optimisation strategy using barra risk model
• +/- 800 stocks and etf’s
• Understanding index construction rules.
• Monitoring & managing Corporate Actions and their effect on the portfolio.
• Trading and Broker network – use Barclays, CITI, Merrill's etc.
• Cash flows – cash flows are managed using a representative combination of I-
Shares to reduce trading costs.
• Fund may hold up to 10% of total fund market value in I-Shares
• ex-ante active risk: 17 bps
63 63
SATRIX MSCI WORLD EQUITY FEEDER FUND
• Management Style
• The fund uses optimisation, sampling and derivative instruments to track
the MSCI World Index.
• As at August 2014, holds 862 constituents vs. 1615 in the MSCI World
Index.
• Tracking Error
• Average annualised tracking error of 0.68% since inception measured over
3-year periods.
• Maximum annualised tracking error of 1.28% attained in July 2007.
• Annualised 3-year tracking error as at September 2014: 0.41%
LOW TRACKING ERROR IN VOLATILE MARKET CONDITIONS
Source: Morningstar, SI; updated to 30 September 2014.
0%
5%
10%
15%
20%
25%
30%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
Jul 0
7Se
p 0
7N
ov
07
Jan
08
Mar
08
May
08
Jul 0
8Se
p 0
8N
ov
08
Jan
09
Mar
09
May
09
Jul 0
9Se
p 0
9N
ov
09
Jan
10
Mar
10
May
10
Jul 1
0Se
p 1
0N
ov
10
Jan
11
Mar
11
May
11
Jul 1
1Se
p 1
1N
ov
11
Jan
12
Mar
12
May
12
Jul 1
2Se
p 1
2N
ov
12
Jan
13
Mar
13
May
13
Jul 1
3Se
p 1
3N
ov
13
Jan
14
Mar
14
May
14
Jul 1
4Se
p 1
4
Vo
lati
lity
of
MSC
I Wo
rld
Ind
ex
3 Y
ear
Tra
ckin
g Er
ror
(an
nu
alis
ed
)
Sanlam World Equity Tracker MSCI World Index (USD)
65 65
annualised performance portfolio benchmark excess
3 months -2.1% -2.2% 0.1%
ytd 4.1% 3.9% 0.2%
1 year 12.4% 12.2% 0.2%
3 years 17.8% 17.9% -0.1%
5 years 10.7% 10.9% -0.1%
msci portfolio performance (usd) | sep 2014
Performance figures are provided by Sanlam International Investments.
All fund figures are gross of investment management fees and reported in USD.
1y attribution
• aggregate residual effect +24bps
• allocation -7bps, selection +54bps, market timing -2bps, currency -11bps
• return adjustment -10bps
• trading effect -1bps
66 66 PERFORMANCE CONSISTENTLY ABOVE THE AVE
GLOBAL GENERAL EQUITY MANAGER IN SA
Source: Morningstar, SI; updated September 2014.
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Jun
07
Au
g 0
7
Oct
07
De
c 0
7
Feb
08
Ap
r 0
8
Jun
08
Au
g 0
8
Oct
08
De
c 0
8
Feb
09
Ap
r 0
9
Jun
09
Au
g 0
9
Oct
09
De
c 0
9
Feb
10
Ap
r 1
0
Jun
10
Au
g 1
0
Oct
10
De
c 1
0
Feb
11
Ap
r 1
1
Jun
11
Au
g 1
1
Oct
11
De
c 1
1
Feb
12
Ap
r 1
2
Jun
12
Au
g 1
2
Oct
12
De
c 1
2
Feb
13
Ap
r 1
3
Jun
13
Au
g 1
3
Oct
13
De
c 1
3
Feb
14
Ap
r 1
4
Jun
14
Au
g 1
4
5-Y
ear
Ro
llin
g R
etu
rn
25th Percentile 50th Percentile 75th Percentile 90th Percentile Satrix MSCI World Equity Index Feeder Fund
67
blending active and passive
68
how will we define benchmarks in
future?
how is my risk budget defined?
how do I want to spend my risk
budget?
what is the risk character of my
active versus passive blend?
am I happy with my intended and
unintended risk / style factor
exposures?
portfolio construction | philosophy
Active Process
organisation and people
philosophy and process
is the manager skilful?
Is the ‘alpha’ signature
‘significant’ and ‘predictable’ given
varying environments?
pricing, turnover and transaction
costs
‘Passive’ Process
coverage
investability and liquidity
pricing, turnover and transaction cost
index construction rules
69
process | lets apply the logic | momentum & div+
“my risk budget is defined in the relative space and
tracking error is important. I would like to consider
different combinations of the two factors and understand
how my tracking error is spent.”
3.89
2.35 1.46 1.05
0.41 -0.16 0
0
0.5 1.43 1.97 3.04
5.29
7.17
-1
0
1
2
3
4
5
6
7
8
100 /
0
75 /
25
65 /
35
60 /
40
50 /
50
25 /
75
0 /
100
tracking error
(ex- ante)
momentum weight / div+ weight variations
active risk (tracking error)
contribution
ex ante
Div+
Mom
…then add other portfolio
construction process
pillars
1) + targeted active risk
level (+ vanilla passive)
2) + factor / risk diagnostic
3) + active manager skill
4) + fundamental and
qualitative value
70
The SATRIX
Advantage
Most experienced
team in the market Only player objective on
ETF | UT | Segregated
Portfolio Construction
and Risk Management
Growing business
in established
investment core
Market understanding
and relationship
World class systems,
dealing & compliance
Representation on
FTSE/JSE
advisory committee
Driven by passion Leverage off top
fundamental team
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