Ninety One Managed Fund - Gail Daniel 14 July 2020
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Ninety One Managed Fund Gail Daniel 14 July 2020
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.
This presentation is the copyright of Ninety One SA and its contents may not be re-used without Ninety One SA’s prior permission.
2
Ninety One Managed Fund
Performance
Annualised performance in ZAR
Managed R Inc Managed A Inc (ASISA) South African MA High Equity
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1 year 3 years p.a. 5 years p.a. 10 years p.a. 20 years p.a.
Managed R Inc 10.6% 9.1% 8.8% 12.3% 13.6%
Managed A Inc 9.1% 8.1% 7.7% 11.3% 12.8%
(ASISA) South African MA High Equity 0.5% 3.6% 3.5% 8.1% 10.8%
Past performance is not a reliable indicator of future results, losses may be made.
Source: Morningstar, dates to 30 June 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.
Inception date of R share class: 10 February 1994. Inception date of A share class: 02 May 2000
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. Since inception of R share class: Apr-06 48.0% and Feb-09 -22.9%; Since inception of A share class: Apr-06 47.2% and Feb-09 -23.0%
The Fund is actively managed. Any index is shown for illustrative purposes only. 3
Presentation overview
‒ Covid is here for a while
‒ SA is broke
‒ US election risk
‒ Fund structure
4
Covid Some brief thoughts As at 13 July 2020 5
Covid is not going away
42% of USA is no longer reopening Don't expect much stimulus to wind up in
the economy
As at 3 July 2020 Source: Jefferies Proprietary Survey, 10 July 2020 6
-50
-150
250
-100
200
0
50
150
100
-200
Jan-03
Jul-03
Jan-04
Jul-04
Source: Bloomberg to 10 July 2020
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
US Economic Surprise Index
Jul-07
Jan-08
Jul-08
How many more positive surprises?
US Economic surprise index
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
7
Is the quantum of stimulus announced sufficient?
US leads again
Summary of key stimulus measures (% of region’s GDP)
Monetary Fiscal
13.0%
17.2%
40.5%
% of GDP
21.2%
33.1%
15.2%
4.7% (total)
3.2% (total)
US Eurozone UK Japan China
Source: NinetyOne as at 31 March 2020
8
South Africa is broke
Policy credibility is needed to obtain financing
9
South Africa was in ICU before COVID-19
GFC COVID-19
Banking crisis Health crisis
Slow response Enormous response from DM
SA economy growing at 3.2% SA GDP growing at 0%
Budget deficit -1% Budget deficit -6.8%
Debt to GDP 27.8% Debt to GDP 62.2%
Unemployment 23% Unemployment 29%
Population 49 million Population 60 million
Rand / Dollar R7.80 Rand / Dollar R18.80
Inflation 10% Inflation 4%
VWUL
10South Africa’s financial situation
Where does the money come from?
‒ R 2 billion a day
‒ R6.5 billion every Tuesday
‒ Pension Fund industry is R3.5 trillion
11Ownership of government bonds (SAGBs and ILBs)* Source: Bloomberg, 8 July 2020; *National Treasury, ICIB 12
Key macroeconomic drivers
The decline in GDP will set us back to levels of the economy last seen in about 8 years ago (2012)
Real GDP level
3300000
3100000
2900000
2700000
2500000
2300000
2100000
1900000
1700000
1500000
Jan-20
Jan-21
Jan-22
Jan-23
Jan-24
Jan-25
Jan-26
Jan-27
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
…At 3.5% real GDP growth and 1.0% thereafter, it will take us 7 years to get back. The changes is
nominal GDP will not be as stark, nominal GDP will decline to roughly its 2018 level and be back to
the 2019 level by the end of next year.
Source: Statistics SA, Ninety One, data as at June 2020 13South African consumer confidence – it is not going well
30
20
10
0
-10
-20
-30
-40
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source; Bloomberg to 30 June 2020 14SA bond yields
Where will the money come from?
SA bond yields
13.0
12.5
12.0
11.5
11.0
10.5
10.0
9.5
9.0
8.5
8.0
Jul-17
Jul-18
Jul-15
Jul-16
Jul-19
Mar-20
Jul-20
Mar-17
Mar-18
Mar-16
Mar-19
Nov-17
Nov-18
Nov-15
Nov-16
Nov-19
Nominal Sovereign 10y Yield Less Reported Inflation*
Source: Bloomberg, 8 July 2020; *Bloomberg & Ninety One, 6 July 2020 1520
5
10
15
Jun-00
Dec-00
Jun-01
Dec-01
Rand / US$
Jun-02
Dec-02
Source: Bloomberg, 10jULY 20202020
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Long term trend is very poor
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
The rand – not a long term winner
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
16Local is not lekker Source: Investec Securities, 8 July 2020 17
The decline of SA Inc
Foschini
R15bn
Truworths
R14.5bn Harmony
R50bn
Massmart
R5bn
Source: Ninety One June 2020 18The collapse of SA Inc.
Foschini Nedbank
25000 35000
30000
20000
25000
15000 20000
10000 15000
10000
5000
5000
0 0
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
Growthpoint Nampak
3500 4000
3000 3500
2500 3000
2500
2000
2000
1500
1500
1000 1000
500 500
0 0
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
Source: Bloomberg to 7 July 2020 19The collapse of SA Inc. ROE Foschini Nedbank Growthpoint Nampak Source: Bloomberg to 7 July 2020 20
America election
Potential for a Democrat clean sweep
21US equities vs. rest of the world
GLOBAL EQUITIES: US VS THE REST FORECAST EPS: US Vs REST OF WORLD
240 240 325 325
DATASTREAM INDICES FOR THE US.
220 220 300 US RECESSIONS SHADED. 300
INDEX JANUARY 2007=100
200 200 275 275
EPS JAN (2007=100)
S&P 500 250 250
180 180
225 225
160 160 US TMT
200 200
140 140
175 175
120 120 US EX-TMT
150 150
100 100 125 125
80 80 100 100
60 MSCI ALL COUNTRY EX-US 60 75 75
MSCI ALL COUNTRY EX-US
40 40 50 50
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
FORECAST SALES PER SHARE (INDEX TO JAN 2007) FORECAST PROFIT MARGINS
240 240 13 13
US$ EPS SERIES. MSCI INDICES. † MXWDU INDEX. US RECESSIONS SHADED. † MXWDU INDEX. MSCI INDICES. US RECESSIONS SHADED
220 220 12 12
200 200 US (MSCI)
11 11
180 180
INDEX 2007=100
% OF SALES
160 160 10 10
US (MSCI)
140 140 9 9
120 120 8 8
100 100
MSCI ALL COUNTRY EX-US† 7 7
80 80
MSCI ALL COUNTRY EX-US†
60 60 6 6
40 40 5 5
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Sources: Minack Advisers; [1] MSCI, NBER [2] MSCI, DataStream, NBER [3] MSCI, IBES/DataStream, NBER [4] MSCI, IBES/DataStream, NBER 22US equities: FAAANM Vs S&P494
S&P500 MARKET VALUE, 2015=100 FORECAST EARNINGS, US$, 2015=100
375 375 200 200
* FACEBOOK, APPLE, ALPHABET,
* FACEBOOK, APPLE, ALPHABET,
AMAZON, NETFLIX & MICROSOFT.
350 AMAZON, NETFLIX & MICROSOFT. 350
325 325 180 180
INDEX, 1/1/2015=100
300 300
INDEX 2015 = 100
FAAANM STOCKS*
FAAANM STOCKS* 160 160
275 275
250 250
225 225 140 140
S&P500 EX FAAANM
200 200
175 175 120 120
150 S&P500 EX FAAANM 150
125 125 100 100
100 100
MSCI AC EX-US MSCI ALL COUNTRY EX-UNITED STATES
75 75 80 80
2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021
FORECAST SALES, 2015=100 S&P500 PROSPECTIVE PE
220 220 35 35
* FACEBOOK, APPLE, ALPHABET, * FACEBOOK, APPLE, ALPHABET,
AMAZON, NETFLIX & MICROSOFT. AMAZON, NETFLIX & MICROSOFT.
200 200 FAAANM STOCKS*
FAAANM STOCKS* 30 30
INDEX 1-1-2015=100
PROSPECTIVE PE
180 180
25 25
160 160
140 140
MSCI ALL COUNTRY 20 20
EX-UNITED STATES S&P500 EX FAAANM
120 120
15 15
100 100
S&P500 EX FAAANM
MSCI ALL COUNTRY EX-UNITED STATES
80 80 10 10
2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021
Sources: Minack Advisers; [1] MSCI, Bloomberg [2] MSCI, Bloomberg, IBES/DataStream [3] MSCI, Bloomberg, IBES/DataStream [4] MSCI, Bloomberg, IBES/DataStream 23Growth and profits
China is pulling both fiscal and monetary policy levers to help recovery
Chinese nominal GDP and EPS growth Total debt / GDP to increase sharply in 2020
80 30
60 25
40 20
4 QTR %
EPS* (LHS)
12M%
20 15
0 10
-20 5
NOMINAL GDP†
-40 0
* MSCI TRAILING EPS INDEX. † LEADING BY 2 QTRS. US RECESSION SHADED.
-60 -5
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Sources: Minack Advisers; DataStream/Worldscope , NBER 24Managed Fund
Ninety One Managed Fund
Active asset allocation
Asset class 30-Sep-19 31-Dec-19 31-Mar-20 30-Jun-20 13-Jul-20
Total Equity 44.5 57.3 36.5 47.3 55.5
SA Equity 23.3 31.7 13.4 21.6 24.0
Foreign Equity 21.2 25.6 23.1 25.7 31.5
Total Bonds 10.0 8.4 9.3 12.8 10.5
SA Bonds 5.6 5.6 2.8 10.9 8.6
Foreign Bonds 4.4 2.8 6.5 1.9 1.9
Total Cash 39.4 28.2 46.0 34.2 28.6
SA Cash 32.0 27.7 40.7 27.5 27.6
Foreign Cash 7.4 0.5 5.3 6.7 1.0
Total Property 0.6 0.6 0.5 0.0 0.0
SA Property
Foreign Property 0.6 0.6 0.5
Total Commodities 5.5 5.5 7.7 5.7 5.4
Commodities 5.5 5.5 7.7 5.7 5.4
Total Offshore 33.6 29.5 35.4 34.3 34.4
This is not a buy or sell recommendation of any particular security. The portfolio may change significantly over a short space of time.
Source: Ninety One as at 13 July 2020
Note that there is a 2% (of fund) currency hedge in place (USD to ZAR). Therefore, non-ZAR currency exposure is 32.3% 26Ninety One Managed Fund
Positioning as at 13 July 2020
Top ten shares* Asset allocation
As a % of fund
Naspers + Tencent 6.0 Financials
6.0%
Newgold 3.5
Walmart 2.7
FirstRand 2.5
Activision 2.4 Resources*
30.0%
Barrick Gold 2.2
Industrials
Glencore 2.2
64.0%
South32 2.2
Louis Vuitton 2.2
BHP 1.8
This is not a buy or sell recommendation of any particular security. The portfolio may change significantly over a short space of time.
Source: Ninety One as at 31 July 2020. * Including ETFs 27Sector positioning Overweight Underweight Technology Banks – local Gold (took profits) Property Online retailers Physical retailers Pharmaceuticals Hospitals Mining Source: Ninety One as at 18 May 2020 28
Resources have positive revisions Follow the revisions General Mining Index (RHS) relative to weighted average upside (downside) to consensus earnings if spot commodity prices prevail (LHS) Source: Bloomberg, Thomson Reuters Datastream, Renaissance Capital estimates, 6 July 2020 29
Gold prices buoyed by supportive financial conditions … low interest rate environment The global monetary policy rate is now well below Current state of G4 central bank balance sheets post-GFC lows Source: RMB Morgan Stanley Research, July 2020 30
Gold equities have delivered robust
returns and cash flow
The quality of gold companies continues to improve
Management are focused on:
12.0% 25.0%
10.0%
20.0%
1
8.0%
Capital
15.0%
6.0% allocation
Net Debt/Net Debt+Equity
10.0%
ROCE, FCF yield
4.0%
2.0% 5.0%
0.0%
0.0%
2 Deleveraging
-2.0%
-5.0%
-4.0%
-6.0%
-8.0%
-10.0%
-15.0%
3 Returning cash to
shareholders
ROCE FCF yield Net Debt/Net Debt+Equity
Source: Ninety One, 31 December 2019. *Simple average of Barrick, Newmont Goldcorp, Newcrest, Franco-Nevada, Buenaventura, Kirkland Lake Gold, Evolution Mining, Anglogold Ashanti, Wheaton Precious Metals. 31The Banking Equation Can they beat their cost of capital? Key issue ‒ Are profits being permanently socialised? ‒ Banks ‒ Hospitals ‒ Telcos Source: Ninety One research, Company reports, June 2020 32
FirstRand and Lloyds – one and the same thing?
8000 70
7000 65
60
6000
55
5000
50
4000
45
3000
40
2000
35
1000 30
0 Jan-20 25
Jan-20
Jun-20
Jun-20
Jun-20
Jul-19
Jul-19
Oct-19
Oct-19
May-20
May-20
Mar-20
Mar-20
Dec-19
Dec-19
Dec-19
Sep-19
Sep-19
Apr-20
Apr-20
Jul-20
Aug-19
Aug-19
Feb-20
Feb-20
Nov-19
Nov-19
FirstRand (LHS) Lloyds Bank (RHS)
Source: Bloomberg, 2 June 2020 33The last decade in SA retail Driver #1: Space growth* Average LFL vol growth** Sources :*Euromonitor, RMB; ** RMB Morgan Stanley, Company reports; 34
Investment view
Ninety One Managed Fund
‒ Long offshore equity
‒ Underweight SA local equity
‒ Digital delivery
‒ Rand hedge
‒ Underweight SA Bonds
‒ Overweight gold and tech
35Advantages of Ninety One Managed Fund
‒ Boutique fund with large institutional support
‒ Highly flexible
‒ Offshore fund is fully integrated and flexible
‒ PM’s incentive totally based on fund performance
‒ Only fund that PM runs
‒ Target liquidity
‒ Ninety One is a globally integrated business
Watch, Understand, Adapt
36Thank you
Biographies
Gail Daniel
Portfolio Manager
Joined the firm in 1991
Joined the industry in 1991
Gail is a portfolio manager at Ninety One with responsibility for the
Managed Fund. She joined the firm in 1991, where she worked on the
trading desk and contributed her analytical skills to the investment team.
One year later, Gail joined the investment team and moved wholly into
investments where she took responsibility for a selection of institutional
portfolios and later, the Managed Fund. She managed the Worldwide
Fund from its inception in 1995 until October 2000, when she was
promoted to head of equities in South Africa. Gail served in this role until
2007, at which stage she focused on portfolio management and the
development of the Equity Fund and the Equity Hedge Fund, which she
managed successfully until October 2009.
Gail graduated from the University of the Witwatersrand in 1990 with a
Bachelor of Arts degree in Mathematics, Economics and Psychology, and
gained her Honours in Economics from the University of South Africa in
1991. She also holds an MBA degree from the University of Cape Town
Graduate School of Business.
For further information on investment team, please see the Important Information section. 38Important 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.
This presentation is the copyright of Ninety One SA and its contents may not be re-used without Ninety One SA’s prior permission.
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