Tuesday, 14 May 2013 - 20:00
Charts
?Smart Beta? Tracking Funds Globally there is an increase in index tracking unit trusts (also known as mutual funds). According to Morningstar’s latest global flow report, passive products captured 41% of estimated net flows – USD 355 billion – worldwide in 2012, with 22% of the world’s mutual fund and ETF assets already invested in passive strategies. Index funds grew faster than active funds in almost every geographic region in 2012, including Asia, Europe and the US.
In the US, passive strategies grew by 10% last year, and now cover a quarter of total assets under management.
A traditional index such as the JSE All Share index (ALSI) or the Top 40 index is constructed using the market capitalisation weight of the shares in the investment universe – i.e. a company such as SAB Miller (with a market capitalisation of R840billion) has a weight of 11.6% in the Top 40 index, while Woolies (with a market capitalisation of R63 billion) has a weight of just 1.3%. The difference in the weights has everything to do with the relative sizes of the two companies and nothing at all to do with the relative investment merits.
Be that as it may, this typical approach to tracker fund construction has been widely used and enjoys investor acceptance because so many “active” fund managers fail to consistently beat the index.
But a fund that tracks such an index does have its drawbacks. For example as shares and the sectors in which they are classified become more expensive, so the index tracker funds are forced to include them at larger weightings. Conversely a share may fall in price (with a probable increase in its value) and therefore constitute a smaller weighting in the portfolio, forcing a market capitalisation tracker fund to disinvest.
Relative price movements can be seen in the main sector weights of the ALSI, which is what a typical tracker fund would try and replicate. At the peak of the commodity cycle in 2008, local resource shares comprised over half of the weight of the ALSI. A typical market capitalisation weighted tracker fund would be forced to replicate this index, despite there being better value in the other sectors.
There are, however, other ways to construct an index and increasingly these, so called “smart beta” funds, are gaining more and more acceptance. Instead of using traditional market capitalisation weights, an index of shares can be constructed using a range of fundamental factors. For example when constructing a value portfolio one may look for factors such as the price to earnings ratio, the dividend yield, cash flow or price to book information.
In this way, smart beta funds do not track traditional market capitalisation indices, but are developed to track specific desirable features of shares in the investment universe. Smart beta funds are therefore designed to outperform traditional indices.
The Seed Equity Fund
On 30 April 2013, Seed launched the Seed Equity Fund, which invests directly into local equities and listed property under advice from Paul van Rensburg, professor of finance at UCT. Paul, who is also portfolio manager and founder of SalientQuants, has an excellent long term track record managing quant-based portfolios.
The Fund consists of two smart Beta building blocks constructed using fundamental factors – a Value portfolio and a Momentum portfolio. The Value component aims to capture the value effect in markets by purchasing shares that are under-priced relative to earnings, book value and dividends. Conversely, the Momentum component endeavours to capture the momentum effect in markets by purchasing shares that display strong recent price and earnings momentum.
The sector breakdown reveals a Fund that is constructed very differently from the ALSI, with 16.4% in resources, 32.7% in industrials, and 50.8% in financials and property. Because of the construction of the portfolio on fundamental factors, there is an expectation that such a fund outperforms a simple market capitalisation method over time and this has been the case, as depicted in the chart below.
Performance
*Value Portfolio and Momentum Portfolio returns are simulated up to Dec 2009 and live thereafter, including a 1.00% pa management fee. Seed Equity Fund returns are simulated using a 50/50 split between Value and Momentum, including a 1.00% management fee.
If you would like to learn more about index funds and specifically the Seed Equity Fund, please do not hesitate to contact us.
Kind regards,
Ian de Lange
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 14 May 2013
Top News
South African stocks rose on Tuesday, following in the footsteps of major overseas markets, but mining shares restricted the upside momentum due to fresh worries about a union turf war that has slowed production at gold and platinum mines. Full story
Revenue rose 1% to R1.13 billion (R1.12 billion). Net attributable profit was 11.5% lower at R29.7 million (R33.6 million). In addition, headline earnings per share was also down 11.5% to 138.6cps (156.7cps).
Outlook
There are no positive signs that cost pressures on consumers will ease Full story |
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Russia expelled a U.S. diplomat
on Tuesday after saying he had been caught red-handed with
disguises, special equipment and wads of cash as he tried to
recruit a Russian intelligence agent to work for the CIA. Full storyWeary and caked in mud, the
first group of Kurdish militants to leave Turkey under a peace
plan to end three decades of war descended a mountain into Iraq
on Tuesday to be met with embraces from PKK comrades. Full storyGreek public sector workers
walked off the job on Tuesday to protest against a government
decision to ban a strike by high-school teachers, shutting down
several schools and reducing staff at hospitals to a minimum. Full story |
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Markets | Wall Street stocks rose to
record highs on Tuesday on hopes steady U.S. growth will extend
their stellar run, while the strengthening dollar. . . Full story | | Gold prices fell on
Tuesday, as economic optimism and another intraday record high
in U.S. equities sapped bullion's safe-haven appeal.. . . Full story | | European shares stretched to a
new five-year closing high on Tuesday, helped by a batch of
forecast-beating company results and renewed signs of. . . Full story | | U.S. stocks rose and extended a
recent rally on Tuesday, with the Dow and the S&P 500 hitting
new intraday highs as investors. . . Full story |
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| Britain's top share index scaled
fresh 5-1/2 year highs on Tuesday, taking heart from a handful
of upbeat earnings and with a bid. . . Full story | | U.S. stocks extended gains in
late-morning trading on Tuesday, led by gains in banks,
including Bank of America and Citigroup. Both the
Dow and. . . Full story | | U.S. stocks opened littled
changed on Tuesday, continuing a trend of sideways motion as
investors took a breather following three weeks of. . . Full story | | European shares steadied near
five-year highs on Tuesday after early losses, with charts
pointing to further upside and improving U.S. economic
fundamentals lifting the. . . Full story |
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SA Business | The IMF on Tuesday forecast economic growth of 5.4 percent in 2013 and 5.7 percent in 2014 for the economies of sub-Saharan Africa on the back of rising investment and booming. . . Full story | | South Africa's current account deficit is expected to average 6.2 percent of gross domestic product over the next three years, a National Treasury document presented to parliament on Tuesday said.. . . Full story | | South Africa's rand traded near three-week lows on Tuesday as workers at platinum producer Lonmin began a wildcat strike, rekindling fears of a repeat of last year's work stoppages.. . . Full story |
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| Zambia's Konkola Copper Mines, owned by London-listed Vedanta Resources, is restarting its Nchanga smelter, which halted production in April, the company. . . Full story | | Village Main Reef, one of South Africa's smaller gold producers, said on Tuesday it would shut "non-profitable" operations at its Buffelsfontein. . . Full story | | The IMF on Tuesday forecast
economic growth of 5.4 percent in 2013 and 5.7 percent in 2014
for the economies of sub-Saharan Africa. . . Full story | | South Africa's Treasury sold a total 2.35 billion rand of its 2023, 2031 and 2048 government bonds on Tuesday.. . . Full story |
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| South Africa's national airline will take delivery of twenty Airbus A320 aircraft valued at 10 billion rand starting in the next. . . Full story | | Platinum miner Lonmin, at
the centre of violent South African strikes last year, will tell
unions to curb expectations of forthcoming wage talks,. . . Full story | | Ghana's bourse is up more than 50 percent so far this year, but the reluctance of key companies to list in. . . Full story | | Johannesburg-listed shares of Lonmin opened down more than five percent on Tuesday after workers embarked on a wildcat strike, shutting down. . . Full story |
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Company News | Muvoni received and accepted a firm intention to make an offer letter from Horizon Investment & Financial Services (Pty) Ltd. ("Horizon"). . . Full story | | Unitholders were referred to the circular dated 27 March 2013 (the "circular") posted to unitholders in respect of, inter alia:
*the adoption. . . Full story | | Shareholders were advised of the following changes to the board of directors and various committees of Mixtel:
*Enos Banda has been. . . Full story | | Shareholders are advised that Ansys is currently in the process of finalising its results for the year ended 28 February 2013.. . . Full story |
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Company Results | Revenue for the year ended 28 February 2013 jumped to R5.6 billion (2012: R5 billion). Gross profit shot up to R792.1. . . Full story | | Revenue increased by 5% to R4.2 billion (R4 billion). Profit before interest and tax declined 56% to R143.3 million (R323.5 million).. . . Full story | | Operating loss narrowed to GBP3.3 million (loss of GBP4.1 million). Loss attributable to ordinary shareholders also improved to GBP3.0 million (GB3.8. . . Full story | | Revenue for the interim period decreased to USD735 million (2012: USD751 million). EBITDA soared to USD168 million (2012: USD75 million), operating. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 40711.32 | 304.00 | 0.75% | JSE Top 40 | 17:00 | 36053.37 | 313.00 | 0.88% | JSE Gold | 17:00 | 1471.58 | 4.00 | 0.31% | JSE Financial | 17:00 | 32000.06 | 210.00 | 0.66% | JSE Industrial | 17:00 | 52629.35 | 672.00 | 1.29% | JSE Indust 25 | 17:00 | 45877.12 | 674.00 | 1.49% | JSE Resource | 17:00 | 45132.29 | -127.00 | -0.28% | DJ Futures | 10/05 | 15040.00 | -4.00 | 0.00% | DJ Ind | 19:58 | 15181.73 | 90.05 | 0.60% | SP 500 | 19:58 | 1648.18 | 14.41 | 0.88% | Nasdaq | 19:58 | 3464.08 | 25.29 | 0.74% | FTSE 100 | 17:35 | 6686.06 | 54.30 | 0.82% | DAX | 18:08 | 8339.11 | 59.82 | 0.72% | CAC40 | 18:08 | 3966.06 | 20.86 | 0.53% | Nikkei | 08:32 | 14758.42 | -23.79 | -0.16% | Shanghai | 09:28 | 2217.01 | -24.91 | -1.11% | Hang-Seng | 10:28 | 22930.28 | -59.53 | -0.26% | All Ords | 08:51 | 5202.50 | 7.70 | 0.15% | NZSE 50 | 07:48 | 4645.85 | -25.79 | -0.55% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1425.98 | -4.82 | -0.34% | Gold R | 19:58 | 13178.52 | 87.39 | 0.67% | Gold R/kg | 19:58 | 424044 | 3120 | 0.74% | Silver $ | 19:59 | 23.3930 | -.2310 | -0.98% | Platinum $ | 19:59 | 1500.00 | 21.00 | 1.42% | Palladium $ | 19:59 | 729.50 | 15.90 | 2.23% | R157 | 17:12 | 5.07 | .05 | 1.00% | R186 | 17:42 | 6.78 | .07 | 1.04% | R204 | 17:18 | 5.67 | .07 | 1.25% | R207 | 17:13 | 5.84 | .04 | 0.69% | Brent Crude | 19:58 | 102.71 | -1.02 | -0.98% | Rand / Dollar | 19:59 | 9.2393 | 0.0885 | 0.97% | Rand / Pound | 19:55 | 14.0480 | 0.0664 | 0.47% | Rand / Euro | 19:55 | 11.9576 | 0.0704 | 0.59% | Rand / NZD | 19:58 | 7.5782 | 0.0243 | 0.32% | Rand / AUD | 19:55 | 9.1455 | 0.0262 | 0.29% | Yen / Dollar | 19:59 | 102.2180 | 0.4920 | 0.48% | Euro / Dollar | 19:55 | 0.7723 | 0.0023 | 0.30% | Dollar / Euro | 19:59 | 1.2941 | -0.0037 | -0.29% | Pound / Dollar | 19:55 | 0.6558 | 0.0026 | 0.40% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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14/05/2013 | 198 | 158 | 70 | 426 | 224,747,577 | R13,908,167,285 | 175297 | 1393902 | 13/05/2013 | 197 | 144 | 69 | 410 | 179,285,007 | R12,305,991,748 | 158857 | 359250 | 10/05/2013 | 181 | 197 | 85 | 463 | 221,600,381 | R14,996,331,645 | 162241 | 902707 | 09/05/2013 | 225 | 152 | 67 | 444 | 223,571,213 | R13,788,551,372 | 174638 | 1491062 | 08/05/2013 | 268 | 107 | 60 | 435 | 271,288,511 | R13,924,923,546 | 178459 | 1407245 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 36,053.00 | 313.00 | 0.88% | Industrial | 52,629.00 | 672.00 | 1.29% | Mid Cap | 56,684.00 | 91.00 | 0.16% | Small Cap | 45,126.00 | 119.00 | 0.26% | Resource 20 | 45,132.00 | -127.00 | -0.28% | Industrial 25 | 45,877.00 | 674.00 | 1.49% | Financial 15 | 11,929.00 | 106.00 | 0.90% | Financial & Ind. 30 | 49,418.00 | 649.00 | 1.33% | All Share | 40,711.00 | 304.00 | 0.75% | Oil & Gas | 31,254.00 | 167.00 | 0.54% | Mining | 27,654.00 | -104.00 | -0.38% | Gold Mining | 1,471.00 | 4.00 | 0.31% | Platinum Mining | 38.00 | -1.00 | -4.82% | GENERAL MINING | 7,840.00 | 4.00 | 0.05% | Oil & Gas Producers | 16,804.00 | 89.00 | 0.54% | Basic Materials | 24,364.00 | -80.00 | -0.33% | Chemicals | 19,730.00 | 159.00 | 0.81% | Forestry & Paper | 21,457.00 | 150.00 | 0.71% | Industrial Metals | 25,029.00 | -388.00 | -1.53% | Industrials | 43,012.00 | -60.00 | -0.14% | General Industrials | 130.00 | .00 | 0.19% | Consumer Goods | 49,262.00 | 721.00 | 1.49% | Automobiles & Parts | 8,036.00 | 281.00 | 3.63% | Household Goods | 158.00 | 1 | 0.92% | Health Care | 65,932.00 | 644.00 | 0.99% | Beverages | 175.00 | 4.00 | 2.50% |
| | Index Name | RP | Move | % Move | Food Producers | 72,391.00 | 501.00 | 0.70% | Personal Goods | 773.00 | 11.00 | 1.48% | Consumer Services | 86,974.00 | 1594.00 | 1.87% | General Retailers | 65,483.00 | 787.00 | 1.22% | Travel & Leisure | 5,469.00 | -9.00 | -0.18% | Media | 144.00 | 3.00 | 2.63% | Support Services | 2,367.00 | 4.00 | 0.21% | Telecommunications | 84,658.00 | 1563.00 | 1.88% | Financials | 32,000.00 | 210.00 | 0.66% | Banks | 52,321.00 | -70.00 | -0.13% | Non-life Insurance | 50,276.00 | 1248.00 | 2.55% | Life Insurance | 30,392.00 | 446.00 | 1.49% | General Financial | 2,883.00 | 16.00 | 0.59% | Technology | 38,439.00 | 742.00 | 1.97% | SHARIAH TOP40 | 3,271.00 | 14 | 0.43% | FTSE/JSE SHARIAH ALL | 3,415.00 | 12 | 0.37% | COAL MINING | 17,685.00 | -61 | -0.34% | FTSE JSE Fledgling | 5,825.00 | 21 | 0.37% | FTSE/JSE Alt X | 941.00 | 11 | 1.27% | SA LISTED PROPERTY | 580.00 | | 0.04% | CAPPED PROPERTY | 465.00 | | 0.44% | RESOURCE | 24,679.00 | -56 | -0.23% | DIVIDEND PLUS | 212.00 | 0 | 0.14% | FTSE/JSE RAFI 40 | 8,083.00 | 36 | 0.45% | Capped Top 40 | 19,047.00 | 162 | 0.86% | Capped All Share | 20,626.00 | 153 | 0.75% | JSE TABACO | 6,734.00 | 41 | 0.61% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | DLT | DELTA PROPERTY FUND LTD | HOLD | 13/05/2013 | OML | OLD MUTUAL PLC | BUY | 10/05/2013 | PIK | PICK N PAY STORES LIMITED | HOLD | 09/05/2013 | SGL | SIBANYE GOLD LIMITED | BUY | 08/05/2013 | ANG | ANGLOGOLD ASHANTI LIMITED | HOLD | 08/05/2013 |
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Results Expected** Expected | Company Name | Fin. Date | 15/05/2013 | BIOSCI | December 2013 (Interim) | 15/05/2013 | DATATEC | February 2013 (Final) | 15/05/2013 | HOLDSPORT | February 2013 (Final) | 15/05/2013 | HWANGE | December 2012 (Final) | 15/05/2013 | HWANGE-A | December 2012 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | ANGLD | 13/05/2013 | 24/05/2013 | 14/06/2013 | R 0.5000 | RAUBEX | 13/05/2013 | 31/05/2013 | 10/06/2013 | R 0.3500 | CLOVERPREF | 10/05/2013 | 24/05/2013 | 03/06/2013 | R 0.0448 | OCEANA | 09/05/2013 | 21/06/2013 | 01/07/2013 | R 1.0000 | FPT | 09/05/2013 | 24/05/2013 | 03/06/2013 | R 0.2611 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | OCTODEC | 25/04/2013 | 10/05/2013 | 20/05/2013 | R 0.7870 | PREMIUM | 25/04/2013 | 10/05/2013 | 20/05/2013 | R 0.6620 | DCENTRIX | 16/04/2013 | 10/05/2013 | 20/05/2013 | R 0.1202 |
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Upcoming AGMs** Code | Company Name | Date | Status | PIK | Pick n Pay Stores Ltd. | 15/05/2013 | Unconfirmed | LBHP | Liberty Holdings Ltd. | 17/05/2013 | Confirmed | LBHP1 | Liberty Holdings Ltd. | 17/05/2013 | Confirmed | LBHP2 | Liberty Holdings Ltd. | 17/05/2013 | Confirmed | LBH | Liberty Holdings Ltd. | 17/05/2013 | Confirmed |
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