Tuesday, 03 September 2013 - 20:00
Charts
Seed weekly - Active and Passive Investment Strategies
Monday’s Business Day had an article on passive investing, with the headline “passive investment relies on getting a free ride from active managers.” The basic emphasis of the article was - only because active investors are performing an invaluable service of price discovery, can passive investors essentially ride on their coat-tails. The article points out, and quite rightly so, that “If the whole world were investing passively, prices would not move.”
Let’s take a cursory view of active, passive, and smart beta managers.
Active Management
Investopedia defines active management as the use of human element to actively manage an investment portfolio, through the use of analytical research, forecasts, judgement and experience, deciding which shares to buy, hold and sell and in what proportions.
The underlying premise that drives active management, is that market prices are not absolutely efficient and so, by employing human skill and ingenuity, a portfolio of shares can be constructed which will outperform a simple index. Investors making use of active management want to capture both beta (i.e. the market returns) and alpha (the additional performance that the manager is able to achieve).
Passive Management
A passive investment management strategy is one where a portfolio of shares is constructed by mirroring an index. Two further subsets of this strategy are – Market Cap Weighted and Smart Beta.
Market Cap
The traditional index – such as the FTSE/JSE All Share index is constructed on the basis of market capitalisation, or relative size of the underlying companies, so that a large company such as Billiton has an 11.8% weight in the index, while a smaller company such as Goldfields has a 0.74% weight in the same index.
The underlying premise that drives investors to make use of market cap weighted index tracking portfolios is the belief that market prices are efficient and therefore over longer periods of time it is impossible for active managers to outperform, especially after taking their higher costs into account. Investors into these passive strategies want to only capture market performance, known as beta, but at low cost.
Smart Beta
Somewhere between a pure index passive and the active management is smart beta. By constructing an index in a different manner to purely the relative sizes of the companies, a smart beta portfolio aims to provide investors with market exposure (i.e. beta) plus the ability to outperform – i.e. some alpha as well.
There are many ways in which smart beta portfolios can be constructed. Three methodologies used include:
• Equally weighted approach – this removes the link between share prices and their weights. Shares in a given universe are weighted equally in a portfolio.
• Economic weighted – here certain fundamental factors are used to weight the shares. These can include sales, earnings, dividends etc.
• Factor tilts – here the weights in the portfolio are constructed by looking at specific return drivers that are typically used by active managers when compiling their portfolios. These would include value factors such as earnings yield and dividend yield, and perhaps also momentum factors such as earnings upgrades.
Over time certain smart beta strategies have shown to deliver superior performance when compared to the pure market cap passive (read FTSE/JSE All Share index) and indeed when when compared against many active managers. All investors looking to generate returns above the benchmark, but at lower costs, should be considering a smart beta component.
The Seed Equity fund is a unit trust that tracks value and momentum factors on a passive approach (i.e. a smart beta fund). If you would like to find out more, please don’t hesitate to give us a call.
Kind regards,
Ian de Lange
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 03 Sep 2013
Top News
Safe-haven buying lifted the
price of gold on Tuesday after an Israeli missile test ahead of
a possible U.S. strike on Syria, while investors shrugged off
strong U.S. economic data and awaited a non-farm report later in
the week. Full story
South African stocks put in a second straight day of gains on Tuesday, coming within striking distance of recently scaled peaks after global markets overcame a jolt from a U.S.-Israel missile test near Syria. Full story |
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President Barack Obama urged Congress on Tuesday to approve U.S. strikes on Syria soon as the United Nations said two million Syrians had fled a conflict that posed the greatest threat to world peace since the Vietnam war. Full storyU.S. President Barack
Obama won the backing of two top Republicans in Congress in his
call for limited U.S. strikes on Syria to punish President
Bashar al-Assad for his suspected use of chemical weapons
against civilians. Full story |
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Markets | U.S. stocks advanced modestly
on Tuesday as an early rally faded after two top Republicans
voiced support for U.S. President Barack Obama's call. . . Full story | | World equity markets were
higher on Tuesday but pared gains after U.S. Congressional
leaders voiced support for military intervention in Syria, while
bond yields. . . Full story | | European stocks' week-long rally
paused on Tuesday, renewed worries over Syria overshadowing a 34
percent surge in Nokia after Microsoft
agreed to buy. . . Full story | | Britain's top share index fell on
Tuesday, weighed down telecoms giant Vodafone disappointing with
the terms of a sale deal with partner Verizon. . . Full story |
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| U.S. stocks pared gains in late
morning trading on Tuesday after Republican leaders in the House
of Representatives voiced support for a U.S.. . . Full story | | U.S. stocks rose at the open on
Tuesday after U.S. President Barack Obama opted to seek
congressional authorization for military action against Syria,. . . Full story | | Heavyweight Vodafone, the UK's
fifth largest stock by market capitalisation, led British shares
lower on Tuesday after the terms of its sale deal. . . Full story | | Hong Kong shares posted a
fourth straight daily gain, as Chinese cyclical counters rose
again on Tuesday after favourable economic data, helping
benchmark indexes. . . Full story |
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SA Business | Business confidence in South Africa edged lower to 90.5 in August from 90.7 in July as labour unrest, fragile economic growth, rising inflation and a weaker rand have hit sentiment, a business chamber said on Tuesday.. . . Full story | | South Africa's rand was steady against the dollar on Tuesday ahead of a strike in the gold sector and a week of key data releases in the United States.. . . Full story |
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| Vodafone's plan to
boost investment in broadband and superfast mobile networks
after its $130 billion deal with Verizon could force its
European competitors to increase their own spending and even
prompt further deal-making.. . . Full story | | South Africa's Treasury sold a total 2.35 billion rand of its 2037, 2041 and 2048 government bonds on Tuesday.. . . Full story | | Discovery Holdings, South Africa's largest health insurer, posted a 19 percent rise in full-year earnings on Tuesday after writing new business.. . . Full story |
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Company News | The directors of Adrenna announced the appointment of Mr Robert Sephton Watson as an independent non-executive director of the company with. . . Full story | | Further to the announcement released by Evraz on SENS on 22 August 2013 on its group unaudited results for the six. . . Full story | | Further to the cautionary announcement released by Evraz. ("the company") on SENS on 27 March 2013, the further cautionary announcement dated. . . Full story | | Shareholders are advised that the annual report for the year ended 30 June 2013, has been dispatched to shareholders and contains. . . Full story |
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| Unitholders are advised that independent non-executive directors Peter Cook and Mlungisi Hlongwane, having retired by rotation at the annual general meeting. . . Full story | | The table below provides guidance for the increases in the Group's HEPS, EPS and diluted normalised EPS. As previously communicated to. . . Full story | | Anglo announced the appointment to its Board of Dr Judy Dlamini as a non-executive director, with effect 1 January 2014.. . . Full story | | Shareholders were advised that caution is no longer required to be exercised by shareholders when dealing in Ansys's securities.. . . Full story |
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Company Results | Revenue grew to R20.5 billion (R18.1 billion) and gross profit rose to R6.7 billion (R6.1 billion). Profit from operations before exceptional. . . Full story | | The operating loss widened to GBP1.7 million (loss of GBP1.6 million). The net attributable loss was also larger at GBP1.9 million. . . Full story | | Revenue for the interim period plunged to R7 billion (2012: R18.8 billion). Earnings before interest, taxation, depreciation and amortisation lowered to. . . Full story | | Revenue from gold sales decreased to AUD185.8 million (AUD189.2 million). Gross profit declined to AUD10.8 million (AUD38.5 million). An operating loss. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 42892.25 | 166.55 | 0.39% | JSE Top 40 | 17:00 | 38513.85 | 167.60 | 0.44% | JSE Gold | 17:00 | 1297.65 | 12.55 | 0.98% | JSE Financial | 17:00 | 30532.45 | -5.31 | -0.02% | JSE Industrial | 17:00 | 55598.01 | 83.51 | 0.15% | JSE Indust 25 | 17:00 | 48729.55 | 34.34 | 0.07% | JSE Resource | 16:50 | 50848.33 | 575.04 | 1.14% | DJ Futures | 19:22 | 14770.00 | -135.00 | -0.91% | DJ Ind | 19:58 | 14783.82 | -26.49 | -0.18% | SP 500 | 19:58 | 1634.82 | 1.85 | 0.11% | Nasdaq | 19:58 | 3598.31 | 8.44 | 0.24% | FTSE 100 | 17:35 | 6468.41 | -37.78 | -0.58% | DAX | 18:10 | 8180.71 | -63.16 | -0.77% | CAC40 | 18:10 | 3974.07 | -31.94 | -0.80% | Nikkei | 08:48 | 13978.44 | 405.52 | 2.99% | Shanghai | 09:28 | 2123.11 | 24.66 | 1.18% | Hang-Seng | 10:28 | 22394.58 | 219.24 | 0.99% | All Ords | 08:45 | 5188.90 | 10.90 | 0.21% | NZSE 50 | 07:48 | 4606.71 | 10.35 | 0.23% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1414.80 | 21.85 | 1.57% | Gold R | 00:00 | 14275.92 | 24.59 | 0.17% | Gold R/kg | 19:58 | 468842 | 9314 | 2.03% | Silver $ | 19:59 | 24.3400 | .1850 | 0.77% | Platinum $ | 19:59 | 1534.00 | 19.80 | 1.31% | Palladium $ | 19:59 | 714.00 | 2.00 | 0.28% | R157 | 17:29 | 6.53 | .10 | 1.56% | R186 | 17:37 | 8.58 | .13 | 1.54% | R204 | 16:58 | 7.61 | .12 | 1.53% | R207 | 17:29 | 7.93 | .09 | 1.21% | Brent Crude | 19:58 | 115.77 | 1.76 | 1.54% | Rand / Dollar | 19:59 | 10.3071 | 0.0478 | 0.47% | Rand / Pound | 19:55 | 16.0180 | 0.0902 | 0.57% | Rand / Euro | 19:55 | 13.5776 | 0.0328 | 0.24% | Rand / NZD | 00:00 | 8.0377 | 0.0890 | 1.12% | Rand / AUD | 19:55 | 9.3301 | 0.0873 | 0.94% | Yen / Dollar | 19:59 | 99.2720 | -0.0950 | -0.10% | Euro / Dollar | 00:00 | 0.7580 | 0.0011 | 0.15% | Dollar / Euro | 19:59 | 1.3172 | -0.0022 | -0.17% | Pound / Dollar | 19:55 | 0.6420 | -0.0010 | -0.16% |
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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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03/09/2013 | 227 | 133 | 68 | 428 | 162,554,709 | R10,160,453,085 | 105975 | 1363301 | 02/09/2013 | 229 | 128 | 57 | 414 | 174,802,321 | R11,124,230,463 | 130988 | 1203284 | 30/08/2013 | 165 | 187 | 63 | 415 | 260,026,404 | R15,402,121,590 | 157600 | 984689 | 29/08/2013 | 203 | 133 | 76 | 412 | 220,955,896 | R14,033,411,338 | 153910 | 1511422 | 28/08/2013 | 95 | 261 | 61 | 417 | 215,209,254 | R13,730,883,452 | 167287 | 1357779 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 38,513.85 | 167.60 | 0.44% | Industrial | 55,598.01 | 83.51 | 0.15% | Mid Cap | 55,332.68 | 49.20 | 0.09% | Small Cap | 46,244.93 | 200.39 | 0.44% | Resource 20 | 50,848.33 | 575.04 | 1.14% | Industrial 25 | 48,729.55 | 34.34 | 0.07% | Financial 15 | 11,544.60 | 30.42 | 0.26% | Financial & Ind. 30 | 51,582.22 | 55.63 | 0.11% | All Share | 42,892.25 | 166.55 | 0.39% | Oil & Gas | 36,553.84 | 236.11 | 0.65% | Mining | 30,924.16 | 371.85 | 1.22% | Gold Mining | 1,297.65 | 12.55 | 0.98% | Platinum Mining | 48.86 | -.03 | -0.06% | GENERAL MINING | 8,898.54 | 125.50 | 1.43% | Oil & Gas Producers | 19,654.32 | 126.94 | 0.65% | Basic Materials | 27,337.49 | 337.20 | 1.25% | Chemicals | 22,251.18 | -42.34 | -0.19% | Forestry & Paper | 26,948.14 | 634.00 | 2.41% | Industrial Metals | 24,045.74 | 97.61 | 0.41% | Industrials | 41,554.65 | 110.13 | 0.27% | General Industrials | 123.77 | -.37 | -0.30% | Consumer Goods | 52,748.51 | -1.95 | -0.00% | Automobiles & Parts | 7,898.43 | -27.17 | -0.34% | Household Goods | 199.36 | 0 | 0.10% | Health Care | 68,816.32 | -254.63 | -0.37% | Beverages | 169.63 | -.27 | -0.16% |
| | Index Name | RP | Move | % Move | Food Producers | 68,237.77 | 207.36 | 0.30% | Personal Goods | 1,004.56 | .70 | 0.07% | Consumer Services | 9,438.63 | 17.25 | 0.18% | General Retailers | 58,899.11 | 45.81 | 0.08% | Travel & Leisure | 5,461.79 | -9.36 | -0.17% | Media | 188.67 | .76 | 0.40% | Support Services | 2,657.06 | 43.30 | 1.66% | Telecommunications | 8,688.27 | 13.31 | 0.15% | Financials | 30,532.45 | -5.31 | -0.02% | Banks | 51,795.09 | 430.68 | 0.84% | Non-life Insurance | 47,011.91 | -285.85 | -0.60% | Life Insurance | 29,094.61 | 116.57 | 0.40% | General Financial | 2,858.87 | -9.07 | -0.32% | Technology | 42,513.65 | 96.86 | 0.23% | SHARIAH TOP40 | 3,684.10 | 31 | 0.85% | FTSE/JSE SHARIAH ALL | 3,784.26 | 29 | 0.77% | COAL MINING | 20,756.38 | 18 | 0.09% | FTSE JSE Fledgling | 5,771.08 | 49 | 0.85% | FTSE/JSE Alt X | 1,026.18 | 0 | 0.02% | SA LISTED PROPERTY | 481.05 | | -1.93% | CAPPED PROPERTY | 403.59 | | -1.86% | RESOURCE | 27,805.85 | 308 | 1.12% | DIVIDEND PLUS | 204.37 | 1 | 0.32% | FTSE/JSE RAFI 40 | 8,512.89 | 50 | 0.59% | Capped Top 40 | 20,331.98 | 82 | 0.40% | Capped All Share | 21,701.79 | 80 | 0.37% | JSE TABACO | 6,693.63 | 5 | 0.07% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | SNT | SANTAM LTD | SELL | 02/09/2013 | GRT | GROWTHPOINT PROPERTIES LI... | SELL | 02/09/2013 | MUR | MURRAY AND ROBERTS HOLDIN... | HOLD | 30/08/2013 | IMP | IMPALA PLATINUM HOLDINGS ... | HOLD | 30/08/2013 | BVT | THE BIDVEST GROUP LIMITED | HOLD | 29/08/2013 |
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Results Expected** Expected | Company Name | Fin. Date | 04/09/2013 | AFGRI | June 2013 (Final) | 04/09/2013 | EQSTRA | June 2013 (Final) | 04/09/2013 | EQSTRADA | June 2013 (Final) | 04/09/2013 | EQSTRADB | June 2013 (Final) | 04/09/2013 | MUSTEK | June 2013 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | GRINDROD PREF | 02/09/2013 | 19/09/2013 | 30/09/2013 | R 3.7100 | PSGFIN PREF | 02/09/2013 | 19/09/2013 | 30/09/2013 | R 3.5706 | WBHO | 02/09/2013 | 11/10/2013 | 21/10/2013 | R 2.3300 | GRANPRADE | 02/09/2013 | 19/09/2013 | 30/09/2013 | R 0.1500 | GRINDROD | 02/09/2013 | 19/09/2013 | 30/09/2013 | R 0.2000 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | MTN GROUP | 14/08/2013 | 30/08/2013 | 09/09/2013 | R 3.7000 | STANBANK-P | 15/08/2013 | 30/08/2013 | 09/09/2013 | R 3.2456 | AECI | 24/07/2013 | 30/08/2013 | 09/09/2013 | R 1.0500 | BHPBILL | 20/08/2013 | 30/08/2013 | 25/09/2013 | R 0.5900 | FORTRESSA | 14/08/2013 | 30/08/2013 | 09/09/2013 | R 0.5601 |
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Upcoming AGMs** Code | Company Name | Date | Status | MRI | Mine Restoration Investments Ltd. | 04/09/2013 | Confirmed | CDZ | Cadiz Holdings Ltd. | 05/09/2013 | Confirmed | SSK | Stefanutti Stocks Holdings Ltd. | 06/09/2013 | Confirmed | DTC | Datatec Ltd. | 10/09/2013 | Confirmed |
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