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What is the Return Outlook for Key Asset Classes?
BCI Global Investment ConferenceMay 2019
Historic Asset Class Total Returns to 31 March 2019
Expect Similar Returns to the last 3-years
WeightedBenchmark
3 Years
5 Years
10 Years
15 Years
All Share Index 48% 6% 7% 14% 15%
All Bond Index 25% 10% 8% 9% 9%
SA Property Index -4% 6% 12% 17%
Cash (Stefi) 11% 7% 7% 7% 7%
MSCI World Index in ZAR 16% 10% 14% 17% 13%
Balanced Benchmark 8% 8% 12% 12%
SA CPI Inflation (avg.) 5% 5% 5% 6%
Source: Bloomberg, 31 March 2019.
0
200
400
600
800
1000
Mar '04 Mar '07 Mar '10 Mar '13 Mar '16 Mar '19
Equity BondsInflation MSCI World (ZAR)Balanced Benchmark
Domestic Bond Outlook
SA Bonds offer High Real Yield
SA Offers High Real Yields
Source: Bloomberg, 31 March 2019.
SA All Bond Index offers real yields of 4.6%.
Concerns around slow growth and Eskom.
We expect inflation risks contained while the rand is expected to remain resilient.
The JSE All Bond Index could return 10% over the 3 year period ending 2021.
Scope for upside on policy reform and higher growth.
Concern about SARB independence.-4%
0%
4%
8%
12%
16%
Mar '05 Mar '07 Mar '09 Mar '11 Mar '13 Mar '15 Mar '17 Mar '19
ALBI Yield SA CPI Real Yield
4.6%
Where is the Rand going? Purchasing Power Parity to USD
Favourable Terms of Trade & High Real Interest Rates » Resilie
Source: Bloomberg, 31 March 2019.
-40%
-20%
0%
20%
40%
60%
80%
100%
0
2
4
6
8
10
12
14
16
18
Mar '91 Mar '95 Mar '99 Mar '03 Mar '07 Mar '11 Mar '15 Mar '19
Premium / (Discount) Purchase Power Parity Fair Value USDZAR Rand Spot
12.7
We are facing a world of Unprecedented Disruption
Lateral Thinking is Needed to Stay Ahead of the C
Environment Health
Political Disruption Regulatory Disruption
Global DisruptorsSA Disruptors
CommunicationRadical Economic Transformation
What Consumers Want
Better Business Models
Carbon Tax, ICASA, NHI
SA Economic Outlook – No quick fix
Economic outlook has improved under President Ramaphosa but structural headwinds remain.
SA’s terms of trade are good with key commodity export prices strong and record automotive exports.
ANC is tied to a socialist ideology despiteclear evidence of its failings.
Lot of talk by the government but no action.
Reform and stimulus is needed to kickstart the Eco
Source: Bloomberg, 31 December 2018.
-4%
-2%
0%
2%
4%
6%
8%
Dec '00 Dec '03 Dec '06 Dec '09 Dec '12 Dec '15 Dec '18
South Africa Real GDP
3 Year Average Growth 1 Year Growth Source:
Equity Outlook
Global economy slowing but is still supportive.
US driven by FANG’s while the consumer is still in good shape.
Europe challenged by aging populations.
Weak SA economy hinders SA equities.
Quality of SA corporate governance and management has deteriorated.
SA equity environment will remain challenging.
Global PE’s are not Unduly Elevate
Valuations: Local vs International PE’s
Source: Bloomberg, 31 March 2019.
5
10
15
20
25
30
35
40
Mar '07 Mar '09 Mar '11 Mar '13 Mar '15 Mar '17 Mar '19
SP500 DAX ALSI
Select Equity Ideas
Avoid Property: Long-term downturn due to
structural oversupply. High debt makes it risky.
MultiChoice: Capital light business with excellent
African growth potential trading a discount to fair value.
MMI: New management re-invigorating MMI and
trading at a 36% discount to embedded value.
WBO: Competitors falling by the wayside, trading on
a forward P/E of 6x.
PGMs: Long-term structural shortage in supply-demand developing.
South Africa: Trading Density (yoy%)
Source: SAPOA, Statistics SA, Morgan Stanley.
-15%
-10%
-5%
0%
5%
10%
15%
2005 2007 2009 2011 2013 2015 2017
Trading Density - Current prices
Trading Density - Inflation adjusted - real
Retail space growth in sqm (yoy%)
What is the Solution?
Discipline – Stick to benchmark unless strong rationale to deviate.
Identify change early – oversupply in property, scarce supply in PGM’s, etc.
Quality focus but don’t overpay.
Add trading Alpha via executing correctly.
Target alpha to compensate for low return environment thus delivering real returns to clients.
Recalibrate Return Expectation
Summary of Asset Class Outlook
A Balanced Approach Reduces Ri
Local Asset Classes
Outlook: 3yr HistoricReturn
Negative Neutral Positive
SA Equities 6%
Offshore Equities 10%
SA Property -4%
SA Bonds 10%
SA Cash 7%
Balanced Benchmark 8%
Nationalise the Reserve
Bank
Privatise Eskom
90
100
110
120
130
140
150
160
Apr '14 Apr '15 Apr '16 Apr '17 Apr '18 Apr '19
EW ex CBF EW
An Allocation to Centaur Improved Returns and Reduced Risk – 5 years
As at: 30 Apr’19 EW EW ex CBF ∆Return p.a. 7.8% 7.3% 0.5%Std. deviation 7.0% 7.3% -0.3%
Grow
th o
f R10
0 in
vest
men
t (cu
mul
ative
) EW – An equally weighted portfolio of SA’s 4 largest SA Multi-Asset High Equity Funds and the Centaur BCI Balanced Fund.
EW ex CBF – the above equally weighted portfolio excluding the Centaur BCI Balanced Fund.
Higher return with Lower Risk
Source: Bloomberg for 5 year period ending 30 April 2018. Investment performance is for illustrative purposes only and calculated by taking
actual initial fees and ongoing fees into account for amount shown with income reinvested on reinvestment dates. Past performance is not a
reliable indicator of future returns.
Contact Details
Centaur Contact DetailsTel: 021 685 2408 E-Mail: [email protected]: www.centaur.co.za
Physical address: Great Westerford Building, 240 Main Road, Rondebosch, Cape Town, 7700.
Postal address: P.O. Box 35, Newlands, 7725.
Centaur Asset Management (Pty) Ltd is an authorised Financial Service Provider FSP 647. Valuation takes place daily and prices can be viewed on Centaur’s website (www.centaur.co.za) or in the daily newspaper. Actual annual performance figures are available to existing investors on request. Upon request the Manager will provide the investor with portfolio quarterly investment holdings reports.
Custodian InformationThe Standard Bank of South Africa LimitedTel: 021 441 4100
Management Company InformationBoutique Collective Investments (RF) (Pty) LimitedCatnia Building, Bella Rosa Office Park, Durban Road, Bellville, 7530.Tel: 021 007 1500/1/2Fax: 086 502 5319Email: [email protected] Website: www.bcis.co.za
Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique Collective Investments Scheme, approved in terms of the Collective Investments Schemes Control Act, No 45 of 2002 and is a full member of the Association for Savings andInvestment SA. Collective Investment Schemes in securities are generally medium to long term investments. The value of participatory interests may go up or down and past performance is not necessarily an indication of future performance. The Manager does notguarantee the capital or the return of a portfolio. Collective Investments are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximum commissions is available on request. BCI reserves the right to close andreopen certain portfolios from time to time in order to manage them more efficiently. Additional information, including application forms, annual or quarterly reports can be obtained from BCI, free of charge. Performance fees are calculated and accrued on a daily basisbased upon the daily outperformance, in excess of the benchmark, multiplied by the share rate and paid over to the manager monthly. Performance figures quoted are from Moneymate, as at the date of this report for a lump sum investment, using NAV-NAV withincome reinvested and do not take any upfront manager’s charge into account. Income distributions are declared on the ex-dividend date. Actual investment performance will differ based on the initial fees charge applicable, the actual investment date, the date ofreinvestment and dividend withholding tax. Investments in foreign securities may include additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well aspotential limitations on the availability of market information. Boutique Collective Investments (RF) Pty Ltd retains full legal responsibility for the third party named portfolio. Although reasonable steps have been taken to ensure the validity and accuracy of theinformation in this document, BCI does not accept any responsibility for any claim, damages, loss or expense, however it arises, out of or in connection with the information in this document, whether by a client, investor or intermediary. This document should not beseen as an offer to purchase any specific product and is not to be construed as advice or guidance in any form whatsoever. Investors are encouraged to obtain independent professional investment and taxation advice before investing with or in any of BCI/theManager’s products.
Disclaimer