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Wednesday, 01 February 2012 - 20:00
Charts
Core and Satellite Investing
Most investors know not to put all their eggs into one basket, but how about one medium-sized basket and a number of smaller, flashier baskets? The Core and Satellite approach is a clever combination of the two primary approaches to investment management: active and passive investing.
Passive management is a strategy followed by investors who believe that in principle markets are efficient and that it is not possible to outperform the market consistently after allowing for the risks taken on. In practice this approach involves investing in an appropriate index fund or a suitable, low-risk unit trust that closely follows its benchmark. These investors will never outperform the market or the stated benchmark, but management fees are very low and the portfolio will at least keep up with market returns.
In contrast, active investors believe that market inefficiencies can be exploited to achieve returns in excess of their benchmark or market indices. Active managers invest into assets that are undervalued in an attempt to make a profit as the market eventually corrects for the mispricing. Investors are able to outperform market indices or other benchmarks over time, but only if competent managers making the right investment decisions are selected. The negative to active management is the higher cost when compared to the passive management.
The Core and Satellite then is a blending of these two methods in order to achieve the best of both worlds – the possibility of outperformance at a lower overall cost.
Using this methodology, the Core portfolio forms the foundation of the total fund, and should be positioned to achieve stable returns at relatively low risk. It will usually comprise 40% - 60% of the total portfolio and in order for the overall strategy to be successful, the Core portfolio should have as low an overall cost as possible. Investment into a selection of index tracker funds or enhanced tracker funds should typically achieve this objective.
The Satellite portfolios are smaller amounts allocated to specific active investments, added purposely to enable the total portfolio to outperform its benchmark. These portfolios should be managed by skilled active managers who are able to outperform their benchmarks by investing very differently to the benchmark. Managers with different styles, e.g. value or growth, can be selected, as well as different themes such as commodities, emerging markets or small caps. It is important that these managers are aggressive enough in their approach to justify their higher management fees.
The resulting combination of the Core and Satellite portfolios offers the following advantages:
• Increased stability of returns:
The portfolio should deliver more stable returns more closely matching those of the benchmark, with the
added possibility of some outperformance if the active managers perform well.
• Reduced Management Cost:
The Core portfolio, with its lower management costs by design, will bring down the overall costs of the
portfolio. As the Core portfolio is often based on indexes that do no change often, there should be lower
transaction and rebalancing costs.
Overall, the Core and Satellite approach offers a flexible, cost-effective way to manage an investment portfolio.
Source: www.hottingerzurich.com
All the best,
Cor van Deventer
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966
Top News
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2012-02-01T072213Z_1_AJOE8100KH300_RTROPTP_3_OZABS-MARKETS-SAFRICA-RAND-20120201.JPG "A new five rand coin is displayed during its launch at the South African Mint.") South Africa's rand surged more than two percent against the dollar on Wednesday, touching a near-five month high in line with a stronger euro as hopes of a resolution to Greece's debt crisis helped to lift risk appetite globally. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton") South African stocks closed at a new lifetime high on Wednesday, gaining more the 1 percent as positive earnings statements and upbeat economic data from China helped lift resources firms such as Assore. Full story |
 Mitt Romney regained the lead in the Republican presidential nomination race with a big win in Florida, but drew criticism on Wednesday in what should have been his victory lap with remarks suggesting he was indifferent to America's poor. Full story  The U.S. military said in a secret report that the Taliban, backed by Pakistan, are set to retake control of Afghanistan after NATO-led forces withdraw, raising the prospect of a major failure of Western policy after a costly war. Full story  Russia said on Wednesday it would veto any U.N. resolution on Syria that it finds unacceptable, after demanding any measure rule out military intervention to halt the bloodshed touched off by protests against President Bashar al-Assad's rule. Full story |
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Markets |
U.S. stocks extended
January's rally, climbing more than 1 percent, on
Wednesday after upbeat global manufacturing data and as Greece
neared a long-delayed. . . Full story |
The euro rose on
speculation a Greek debt deal was close at hand on Wednesday,
and global equity markets surged on investor enthusiasm. . . Full story |
Bullish company earnings
reports and the prospect of Greece nearing a debt deal helped
lift Britain's FTSE 100 higher on Wednesday, while robust
manufacturing. . . Full story |
European shares hit
six-month highs on Wednesday as encouraging economic numbers
boosted sentiment, while Italian banks gained after the Italian
Central Bank made it. . . Full story | |||
Shares in European
steelmakers are in the cross-hairs of option traders and short
sellers following a brisk two-month rally, as doubts about
corporate earnings. . . Full story |
U.S. stocks rallied
on Wednesday, with all major indexes up more than 1
percent, as upbeat economic data from China and Germany. . . Full story |
Gold rallied for a second
day on Wednesday, supported by upbeat economic data from Germany
and the United States, with the precious metal. . . Full story |
European shares hit fresh
six-month highs on Wednesday after data showed the pace of
growth in the U.S. manufacturing sector picked up in. . . Full story | ||||
SA Business |
Mozambique capital Maputo is hotting up as a magnet for companies aspiring to be significant South African coal exporters, following a. . . Full story |
Impala Platinum, the world's second largest producer of the precious metal, said on Wednesday that 18,000 workers were now staying away. . . Full story |
South Africa's rand firmed more than 1.5 percent against the dollar on Wednesday, touching a fresh three-month high in line with. . . Full story |
. . . Full story | |||
South African labour arbitrators have ordered state power utility Eskom to boost a 7 percent wage offer to workers from the. . . Full story | Shares of Absa Group turned negative in afternoon trade on Wednesday after it said its veteran deputy chief executive would step. . . Full story | Zambia expects to have a power surplus of about 600 megawatts (MW) by 2016, which should help ease the electricity deficit. . . Full story | The European Commission
blocked the merger of Deutsche Boerse and NYSE
Euronext on Wednesday, saying the combined group would
have a stranglehold on the. . . Full story |
. . . Full story | South Africa's Purchasing Managers' Index rose to 53.2 in January, its highest level since June, rebounding from 49.4 in December, sponsors Kagiso Asset Management said on Wednesday.. . . Full story |
Company News |
Notification is hereby given that Mr. Uys Meyer ("Mr. Meyer") has resigned as non-executive director of GPI with effect from Tuesday,. . . Full story |
Sanyati shareholders are advised of the resignation of Mr R M Crowie as non-executive director from the board of directors of. . . Full story |
Implats advised that the majority of the mining workforce at its Impala Rustenburg operation failed to report for duty this morning,. . . Full story |
MICROmega Holdings Ltd has acquired a controlling interest in MIS Consulting (Pty) Ltd ("MIS"). MIS provides a unique customer to business,. . . Full story | |||
Absa advised that Louis von Zeuner, deputy group chief executive, will move to a non-executive role effective 1 January 2013. As a non-executive director, he will serve on the boards of. . . Full story |
Coal confirmed it has issued 200 000 ordinary shares ("shares") to employees of the company following an award by the remuneration committee. Application has been made for the 200 000 shares. . . Full story |
Shareholders were advised that Absa's headline earnings per share and diluted headline earnings per share for the year ended 31 December 2011 are expected to increase between 18% and 22% from. . . Full story | |||||
Company Results | The loss from operations narrowed by 63% to R12.5 million (loss of R33.9 million). A net attributable profit of R88.2 million (loss of R245.9 million) was recorded. In addition, headline earnings from continuing operations soared by 314% to 16.7c (loss of. . . Full story | Rental revenue rose significantly to R1.9 billion (R720.8 million) and profit attributable to ordinary shareholders increased to R1.6 billion (R976.4 million). However, headline earnings per unit dropped to 72.74cpu (75.6cpu).
Dividend
A cash distribution of 34.27cpu, being number 57, has been declared. . . Full story |
World Markets (Spot Prices)
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The JSE Today
Trading Statistics| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 01/02/2012 | 229 | 124 | 80 | 433 | 280,103,124 | R17,562,478,927 | 116723 | 2665124 |
| 31/01/2012 | 227 | 139 | 85 | 451 | 323,726,083 | R20,029,881,823 | 128319 | 2221949 |
| 30/01/2012 | 132 | 228 | 83 | 443 | 264,537,021 | R13,537,867,118 | 104364 | 2397787 |
| 27/01/2012 | 172 | 172 | 87 | 431 | 236,089,520 | R12,736,518,082 | 103386 | 2430322 |
| 26/01/2012 | 252 | 106 | 83 | 441 | 290,760,091 | R17,466,603,685 | 134036 | 2379644 |
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Index Summary
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Stock Exchange News Service
| Date | Time | Headline |
| 01/02/2012 | 17:36 | Redefine Properties International Limited - Notification of Transactions |
| 01/02/2012 | 17:35 | Redefine Properties International Limited - Notification of major |
| 01/02/2012 | 17:15 | MWNT - Mine Waste Solutions (Proprietary) Limited - News Release |
| 01/02/2012 | 17:15 | First Uranium Corporation - News release - 1 February 2012 |
| 01/02/2012 | 17:06 | William Tell Holdings Limited - Changes to the board of directors |
| 01/02/2012 | 17:05 | Capital Property Fund - Condensed audited consolidated financial |
| 01/02/2012 | 16:30 | British American Tobacco p.l.c. - British American Tobacco p.l.c. (the |
| 01/02/2012 | 16:26 | Grand Parade Investments Limited - Change to the board of directors |
| 01/02/2012 | 16:22 | Labat - Change to the Board of Directors |
| 01/02/2012 | 16:20 | Sanyati Holdings Limited - Resignation of director |
| 01/02/2012 | 16:03 | Nampak - Results of the 44th Annual General Meeting |
| 01/02/2012 | 16:00 | Anooraq Resources Corporation - Anooraq, Anglo American Platinum |
| 01/02/2012 | 15:43 | ACL149 - Absa Bank Limited - New Financial Instrument Listing |
| 01/02/2012 | 14:35 | Capital Shopping Centres Group Plc - Notification of major interests |
| 01/02/2012 | 14:12 | Ellies Holdings Limited - Dealing in securities |
| 01/02/2012 | 13:43 | Vunani Property Investment Fund Limited - Results of General Meeting |
| 01/02/2012 | 13:30 | Impala Platinum Holdings Limited - Update on work stoppage at Impala |
| 01/02/2012 | 13:18 | MICROmega Holdings Limited - MICROmega acquires controlling interest |
| 01/02/2012 | 13:11 | Pan African Resources plc - Approval granted for Phase One of the |
| 01/02/2012 | 12:23 | ASA/ABSP - ABSA Group/ABSA Bank - New role for ABSA`s Deputy Group Chief |
| 01/02/2012 | 12:00 | Comair Limited - Change to the board of directors |
| 01/02/2012 | 11:57 | Trustco Group Holdings Limited - Dealing in Securities of Trustco Group |
| 01/02/2012 | 11:00 | Anglo American plc - Total voting rights |
| 01/02/2012 | 10:30 | SCIB/KIOSTE - The Standard Bank of South Africa Limited - Notice of expiry of |
| 01/02/2012 | 10:02 | Winhold Limited - Results of Annual General Meeting |
| 01/02/2012 | 09:35 | Metrofile Holdings Limited - Trading Statement |
| 01/02/2012 | 09:15 | IV017 - Investec Bank Limited - New Financial Instrument Listing |
| 01/02/2012 | 09:02 | BIIVU - iVuzi Investments Limited - Full Capital Redemption |
| 01/02/2012 | 09:00 | Petmin Limited - Petmin appoints Macquarie as Nominated Adviser (NOMAD) |
| 01/02/2012 | 09:00 | Redefine Properties International Limited - Placing and admission of |
| 01/02/2012 | 09:00 | ZCI Limited - Additional Loan Facility Between ZCI And African Copper Plc |
| 01/02/2012 | 08:48 | BHP Billiton Plc - Divestment of interest in Richards Bay Minerals |
| 01/02/2012 | 08:00 | Mvelaphanda Group Limited - Unaudited results of Mvela Group and its |
| 01/02/2012 | 07:30 | Italtile Limited - Trading Statement for the six months ended 31 |
| 01/02/2012 | 07:10 | Anglo American plc - Treasury Shares - Transfers |
| 01/02/2012 | 07:06 | Coal of Africa Limited - Issue of shares and secondary trading notice |
| 01/02/2012 | 07:06 | ABSA Group Limited - ABSA Group Trading statement in respect of the year |
| 01/02/2012 | 07:05 | Sacoil Holdings Limited - Issue of Equity (AIM) |
| 01/02/2012 | 07:05 | Coal of Africa Limited - 3B Appendix new issue announcement, application |
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