Live Ninety One webinar Insights & outlook from our portfolio managers - April 2020
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Live Ninety One webinar Insights & outlook from our portfolio managers April 2020
Income - What can SA investors expect? Peter Kent April 2020
Sharpest sell-off in SA bond market
As ALBI delivers worst month ever
SA 10 year bond
14
24 March 2020
Mar’20 Q1 ‘20
Intraday high: 13.25%
ALBI -9.8% -8.7%
13 ILB’s -7.3% -6.9%
Property -36.6% -48.2%
12
11
10
9
8
7
6
Feb-05
Feb-10
Mar-07
Feb-15
May-11
Mar-17
May-06
Mar-12
Jan-03
Jun-03
Nov-03
Aug-07
May-16
Jul-05
Oct-06
Nov-08
Aug-17
Apr-04
Jan-08
Jun-08
Jul-10
Oct-11
Jan-13
Jun-13
Nov-13
Oct-16
Feb-20
Jan-18
Jun-18
Nov-18
Dec-05
Apr-09
Aug-12
Jul-15
Apr-14
Dec-15
Apr-19
Sep-04
Sep-09
Dec-10
Sep-14
Sep-19
SARB had to step in to calm markets
Source: Bloomberg, data as at 3 April 2020 3Ninety One Diversified Income Fund
Annualised performance in ZAR as at 31 March 2020
10.0%
8.0%
8.3%
8.1%
8.0%
7.3%
7.3%
7.2%
7.2%
7.2%
6.8%
6.5%
6.5%
6.0%
6.1%
4.0%
1 year 3 years 5 years 10 years
Diversified Income H (ASISA) South African IB Money Market STeFI Composite (ALBI 1-3 years pre 01.07.2011)
Past performance is not a reliable indicator of future results, losses may be made.
Source: Morningstar, dates to 31 March 2020, performance figures above are based on lump sum investment, NAV based, inclusive of all annual management fees but excluding any initial charges, gross income
reinvested, fees are not applicable to market indices, where funds have an international allocation this is subject to dividend withholding tax, in South African Rand. The Fund’s benchmark is to the end of the previous
month end. * Since Inception simulation date 01.09.08. Annualised performance is the average return per year over the period. Individual investor's performance may vary depending on actual investment dates.
Highest and Lowest returns are those achieved during any rolling 12 months over the period specified. Jul 12: 13.4% and Jan 14: 4.5%. 4Ninety One Diversified Income Fund
What’s behind Q1’s performance?
Income Capital Diversify
10.5
0.05 2017 & 2018 sources of return:
9.5 1.15 0.14 0.14
ZAR rallied 2.5%: Offshore low and changing USD mix to protect
8.5 0.11
0.56 duration position
% 7.5 Bonds unchanged: Building the SA “disinflation” theme
9.3
6.5 Property returned -4%: Avoided the RES stable and have been
7.4 tactical around a core underweight
5.5
4.5
Credit spreads tightening: Overweight IG, still value
10.5
2019 sources of return:
9.5 0.26 0.13 0.24
1.11 0.25 ZAR rallied 7.1%: Small ‘risk-mitigating’ FX exposure
8.5
0.18 Bonds rallied 0.9%: Disinflation theme still in play, politics and
% 7.5 global result in extreme choppiness
9.0
6.5 Property rallied 1.9%: Strategic underweight with tactical
7.3 opportunities, offshore property helping
5.5
Credit spreads tightening: Bank spreads continue to tighten, still
4.5
value in, reducing our overweight IG
2.5
0.28 1.08 2020 YTD sources of return:
2.0 0.16
ZAR sold off 20%: Higher, more defensive, FX exposure
1.5
1.0
0.46 Bonds sold off 11%: Pre-emptive duration reduction. Disinflation
1.7
%
0.5
1.49 1.34 theme still in play, measured approach
0.5 Property sold off 48%: Strategic underweight, valuation uncertainty
0.0
-0.5 Credit spreads widening: Bank spreads lead the widening, Underweight
-1.0 yield contribution similar due to higher spreads
Cash Bonds IG income Bonds IG capital Property FX Total
hurdle income capital & RV
Source: Ninety One, gross of fees to 31 March 2020. Note: figures quoted represent contribution to returns 5Fixed Income Macro view
SARB can now come to the party
Inflation is subdued under most scenarios, allowing for further cuts
16.0% 12.0%
11.0%
14.0%
10.0%
12.0%
9.0%
10.0% 8.0%
7.0%
8.0%
6.0%
6.0% 5.0%
4.0%
4.0%
3.0%
2.0%
2.0%
Repo Rate - LHS CPI - RHS
0.0% 1.0%
Jan-21
Jan-20
Jan-01
Jan-02
Jan-03
Jan-04
Jan-00
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-11
Jan-12
Jan-13
Jan-14
Jan-16
Jan-17
Jan-10
Jan-15
Jan-18
Jan-19
Rand
16.2 17.2 18.2 19.2 20.2 20.7
20 2.1% 2.5% 2.8% 3.1% 3.5% 3.6%
25 2.4% 2.7% 3.1% 3.4% 3.8% 3.9%
35 2.9% 3.2% 3.6% 4.0% 4.3% 4.5%
Oil price
To try and save the economy 45 3.3% 3.7% 4.1% 4.5% 4.9% 5.1%
55 3.8% 4.2% 4.7% 5.1% 5.5% 5.8%
60 4.1% 4.5% 4.9% 5.4% 5.8% 6.1%
Source: Ninety One, data as at 3 April 2020 7Growth remains our biggest challenge
… we’re in for a shocking few quarters
Year on year GDP Budget deficit
4.0% 0.0%
2.0%
-2.0%
0.0%
-2.0%
-4.0%
-4.0%
mining -6.0%
-6.0%
agriculture -6.8%
manufacturing -0.6%
-8.0%
construction
utilities -8.0% -1.5%
-10.0% transport & communication
govt
-1.0%
-12.0% internal trade -9.9%
personal services
-10.0%
-14.0% finance
total
-16.0% -12.0%
2021
2020
2012
2013
2014
2015
2016
2017
2018
2019
Budget defict Lower Lower tax Additional Post Covid
(Budget nominal collection spending
2020) growth pressure
Source: Statistics SA, Ninety One, data as at 3 March 2020 8The bond market’s been petrified…
… of a Moody’s downgrade
SA 9 year bond yield vs EM spread
Nenegate Cabinet ANC Eskom COVID-19
reshuffle Elective Bailout scares Moody's
Conference market downgrade
6.17
6.0
5.31
5.0
4.0
3.50
3.0 3.14
2.76
2.0
1.0
0.0
Jan-20
Jul-17
Jul-13
Jul-16
Jul-19
Jul-14
Jul-15
Jul-18
Sep-14
Sep-18
Sep-15
Mar-20
Sep-17
Sep-13
Sep-16
Sep-19
Jan-18
Jan-14
Jan-17
Jan-15
Jan-16
Jan-19
May-14
May-18
Mar-17
Mar-15
Mar-13
May-15
Mar-16
Mar-19
May-17
May-13
May-16
May-19
Mar-14
Mar-18
Nov-14
Nov-18
Nov-17
Nov-13
Nov-15
Nov-16
Nov-19
Source: Bloomberg, data as at 26 February 2020 9Unfortunately very little of this matters right now
It’s all about COVID-19
This too will pass, but at what cost?
10Portfolio positioning
Ninety One Diversified Income Fund
Credit holdings as at 8 April 2020
Weight Spread Contribution SpreadD AAA AA A
Energy 0.1% 1.50% 0.00% 0.0 0.0% 0.1% 0.0%
Materials 0.3% 1.47% 0.00% 0.0 0.2% 0.2% 0.0%
Industrials 1.0% 1.35% 0.01% 0.0 0.0% 1.0% 0.0%
Consumer Discretionary 0.8% 1.59% 0.01% 0.0 0.8% 0.0% 0.1%
Consumer Staples 0.0% 0.00% 0.00% - 0.0% 0.0% 0.0%
Healthcare 0.0% 0.00% 0.00% - 0.0% 0.0% 0.0%
Bank - Senior 20.3% 1.46% 0.30% 0.9 4.2% 16.1% 0.0%
Bank - Subordinated 10.0% 2.06% 0.21% 0.2 3.3% 6.8% 0.0%
Consumer Finance 0.2% 0.85% 0.00% 0.0 0.2% 0.0% 0.0%
Capital Markets 0.0% 0.00% 0.00% - 0.0% 0.0% 0.0%
Asset Backed 2.1% 1.46% 0.03% 0.1 2.0% 0.1% 0.0%
Insurance 3.5% 1.52% 0.05% 0.1 1.2% 2.0% 0.2%
Real Estate 4.7% 1.66% 0.08% 0.2 2.1% 2.5% 0.0%
Telecommunication Services 2.3% 1.79% 0.04% 0.1 1.0% 1.4% 0.0%
Utilities 10.8% 2.36% 0.26% 0.4 10.4% 0.4% 0.0%
56.2% 0.99% 1.9 25.2% 30.5% 0.3%
20-Jan-20 60.9% 1.1% 2.14 21.7% 38.8% 0.3%
Change -4.7% -0.2% -23.1% 3.5% -8.3% 0.0%
Source: Ninety One, data as at 8 April 2020 12Ninety One Diversified Income Fund
Positioning as at 8 April 2020: Still defensive, measured duration and property increases
100% ‒ No growth, no inflation: SARB will do what is
necessary
Overweight Underweight Current
75% ‒ Budget 2020 showed some resolve: priorities
(and funding) have changed
50%
‒ Reforms, or else?
‒ Global central banks are slashing rates and
25%
supporting fiscal stimulation
‒ VOLATILITY is the game in town
0%
Cash Bonds Credit Property FX Alternative
Current 21.7% 20.1% 56.2% 1.3% 8.0% 0.7%
Duration Exposure Yield
Nominal 0.90 USD 3.0% 8.3%
ILBs 0.23 EUR 2.1%
JPY 1.1%
EM 1.8%
Years 1.13 FX 8.0%
Positioned to participate and protect
Source: Ninety One as at 8 April 2020 13Thank you www.ninetyone.com
Important information
All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not
purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough
examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security.
Collective investment scheme funds are generally medium to long term investments and the manager, Ninety One Fund Managers SA (RF) (Pty) Ltd, gives no guarantee with respect
to the capital or the return of the fund. Past performance is not necessarily a guide to future performance. The value of participatory interests (units) may go down as well as up.
Funds are traded at ruling prices and can engage in borrowing and scrip lending. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. A schedule of
charges, fees and advisor fees is available on request from the manager which is registered under the Collective Investment Schemes Control Act. Additional advisor fees may be
paid and if so, are subject to the relevant FAIS disclosure requirements. Performance shown is that of the fund and individual investor performance may differ as a result of initial fees,
actual investment date, date of any subsequent reinvestment and any dividend withholding tax. There are different fee classes of units on the fund and the information presented is
for the most expensive class. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Where the fund invests in
the units of foreign collective investment schemes, these may levy additional charges which are included in the relevant TER. Additional information on the funds may be obtained,
free of charge, at www.ninetyone.com. Ninety One SA (Pty) Ltd (“Ninety One SA”) is an authorised financial services provider and a member of the Association for Savings and
Investment SA (ASISA).
Investment Team: There is no assurance that the persons referenced herein will continue to be involved with investing for this Fund, or that other persons not identified herein will
become involved with investing assets for the Manager or assets of the Fund at any time without notice.
Investment Process: Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any present or
future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative
purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. Portfolio data is expected to change
and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels
presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the
illustrative portfolio and implement its investment strategy or investment objective.
In the event that specific funds are mentioned please refer to the relevant minimum disclosure document in order to obtain all the necessary information in regard to that fund.
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