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How much is Enough?Winning the Losers Game
*The Raging Bull Award for Best 3 Year Performance – Global Equity General was awarded on 31/01/2019 for performance on the 3-years to 31/12/2018. Full details are available on request.
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S&P 100 Top & Bottom 10yr Returns
Source: Bloomberg 2
Top 10 10yrs (cumulative)
Netflix
Amazon.com
Booking.com
Nvidia Corp.
Starbucks
MasterCard
Apple
Adobe
Visa
United Health
6,168%
2,828%
2,238%
1,554%
1,261%
1,220%
1,194%
963%
906%
837%
Average 1,917%
Bottom 10 10yrs (cumulative)
General Motors
PepsiCo
Walgreens Boots Alliance
Exxon Mobile
Schlumberger
Exelon Corp.
Citigroup
Kraft Heinz
Kinder Morgan
General Electric
-2%
-7%
-10%
-15%
-15%
-19%
-22%
-41%
-50%
-53%
Average -23%
In comparison, the S&P 100 Index returned 158% over the period
*Price returns are cumulative over 10 years to December 2018
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The Folly of Rebalancing?
Source: Bloomberg, BlueAlpha Research 3
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SA looking “cheap”?
Source: RMB Morgan Stanley 4
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Mind the Gap
Source: Bloomberg 5
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Growth has been a persistent weak point for SA
Source: Maddison Project Database (2018)
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Growth has been a persistent weak point for SA
Source: Bloomberg
*Consensus EPS estimates in ZAR
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South African Skills Emigration
Source: United Nations, ETM Analytics 8
Origin of Incoming Migrants (2013): 1,566,594 people Destination of Outgoing Migrants (2013): 582,580 people
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South African Skills Emigration
Source: United Nations, ETM Analytics 9
Origin of Incoming Migrants (2017): 1,641,115 people Destination of Outgoing Migrants (2017): 607,175 people
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South African Skills Exit Acceleration
Source: FNB 10
Reason for selling – Emigration %
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South African Skills Creation
Source: ETM, Department of Education 11
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South African Unemployment
Source: Bloomberg 12
Unemployment rate
Age 20 – 24 50%
Age 25 – 29 37%
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South African Productivity and Private Sector
Source: Macrobond, ETM Analytics 13
10 year percentage change
% %
-20
-10
0
10
20
30
40
50
60
70
-20
-10
0
10
20
30
40
50
60
70
75 80 85 90 95 00 05 10 15 20
Source: Macrobond, ETM Macro Advisors
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South African Fiscal Degradation
Source: National Treasury 14
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South African Savings Depletion
Source: FNB 15
Data smoothed with 5yr exponential MA
Percent Percent
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
60 65 70 75 80 85 90 95 00 05 10 15 20
Source: Macrobond, ETM Macro Advisors
Percent Percent
10
15
20
25
30
35
40
45
10
15
20
25
30
35
40
45
60 65 70 75 80 85 90 95 00 05 10 15 20
Source: Macrobond, ETM Macro Advisors
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South African Growing Disparity & Unrest
Source: World Bank, ACLED 16
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“Cheap” South Africa = Expensive Investment?
Source: FNB 17
• High skills emigration
• Low skills immigration
• Poor skills creation
• Weakening productivity or rising inefficiency
• Depletion of tax base
• Rising debt burden
• Crowding out of private sector vs. government
• A poor savings culture
• Erosion of its capital base
• Widening disparity between rich and poor
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18Source: Mapping Worlds, Bloomberg
“Prudential” guideline?
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19Source: Bloomberg, BlueAlpha Research
Preference of high-return “expensive” vs. low-return “cheap”
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For SA investors, global exposure provides opportunity
20Source: Bloomberg
No. of companies in Index per ROE Decile
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Conclusion
21
• Ignore “prudential” guideline
• SA Cheap?
• SA Risky?
• Get much more global exposure
• How much ?
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BlueAlpha’s Global Equity Fund Performance
22Source: MoneyMate
1 Year & Rank3 Years
(annualised) & Rank
4 Years (annualised)
& Rank
Since Inception (annualised)
& Rank
BlueAlpha BCI Global Equity 23.8% 15.1% 14.9% 16.8%
Benchmark 21.9% 9.8% 12.2% 13.7%
Category Rank 9 / 59 1 / 44 1 / 39 1 / 35
MSCI World Index (ZAR) 22.5% 11.6% 12.5% 13.7%
Outperformance to MSCI WI 1.3% 3.5% 2.4% 3.1%
Performance reported for A Class net of fees in ZAR as at 30/04/2019, Inception: 02/09/2014; Annualised return is the weighted compound growth rate over the period measuredBenchmark: 80% MSCI World TR Index, 20% USD LiborCategory Rank is against the Asisa Global Equity General Category
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Disclaimer
BlueAlpha Investment Management (Pty) Ltd is an authorised Financial Service Provider FSP number 118.
Past performance is no guarantee of future returns. Financial markets have historically exhibited high levels ofvolatility and negative movements that have affected the price of all assets within a specific class. The fund’sinvestments will thus be subject to market risk. No taxation has been deducted in the computation of returns. Thetaxation treatment of returns is the investor’s responsibility. All returns are disclosed net of performance fees, unlessotherwise stated.
We believe the information displayed in this presentation is accurate and reliable, but no warranty of accuracy orreliability is given and no responsibility arising in any way from errors and omissions (including by way of negligence)is accepted by BlueAlpha Investment Management (Pty) Ltd.
This information is not intended to provide advice to, or take into account individual investors objectives, orcircumstances. This material should not be construed to represent a solicitation to invest in the Fund(s) and isdisclosed for information purposes only.
Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique CollectiveInvestments Scheme, approved in terms of the Collective Investments Schemes Control Act, No 45 of 2002 and is afull member of the Association for Savings and Investment SA.
Collective Investment Schemes in securities are generally medium to long term investments. The value ofparticipatory interests may go up or down and past performance is not necessarily an indication of futureperformance.
The Manager does not guarantee the capital or the return of a portfolio. Collective Investments are traded atruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximumcommissions is available on request. BCI reserves the right to close the portfolio to new investors and reopencertain portfolios from time to time in order to manage them more efficiently. Performance figures quoted for theportfolio is from MoneyMate, as at the date of this document for a lump sum investment, using NAV-NAV withincome reinvested and do not take any upfront manager’s charge into account, unless otherwise stated. Incomedistributions are declared on the ex-dividend date. Actual investment performance will differ based on the initialfees charge applicable, the actual investment date, the date of reinvestment and dividend withholding tax.Boutique Collective Investments (RF) Pty Ltd retains full legal responsibility for the third party named portfolio.
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