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 The Sharenet Daily 
Wednesday, 18 May 2016 - 20:00
Top News
SA Business
Company News
Company Results
World Markets (Spot Prices)
JSE Today
JSE Trading Statistics
Major Moves
Index Summary
Latest Consensus Changes / Results Expected
Recent Dividends / Ex Div
Upcoming AGMs
Stock Exchange News Service (SENS)

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Seed Weekly - Passive vs Active Investment Management

The age old debate pitting passive vs active investment management has raged on for decades, proliferating recently. This comes as a result of the struggles that active managers have faced in trying to outperform index benchmarks, particularly over the last five years. The trend is common on a global scale as well as in a South African context.

The conflicting views, proponents of either strategy have, attempt to explain the benefits and drawbacks of both strategies. A critical point, and to the fore of the passive argument, is the fact that over time, active managers have been shown to be unable to consistently deliver “higher returns” than the index. Given that active managers charge a “higher fee” for their active management skill, failure to outperform the index over the long term questions whether the fee is justified – i.e. should we be allocating money to active managers?

As a multi-manager, allocating money to different strategies in our funds, it is important to get this call right so that our clients can fully benefit from having the right strategies within our funds. Critical to this is understanding the merits of either passive or active investing without putting emotion into it or being married to any of the styles. Our aim is to always pick the strategy that fits best from an overall portfolio perspective, allowing us to deliver on our mandate with our clients. Factors like cost, the ability to outperform, minimising risk and capital protection are central to our analysis.

The “Passive” Argument

The benefits of passive investments are well documented in literature. What is likely most appealing from these reports is the low cost and the ability of these strategies to outperform most active managers. The Lipper survey using data up to December 2012, showed only 20% of active managers outperform the MSCI World Index over 5 and 10 year periods. Figures from the South African S&P Indices Versus Active (SPIVA) scorecard suggest that active South African fund managers, like their global counterparts, fall short when it comes to beating the index over 1, 3 and 5 year periods. A recent survey by Morningstar concluded that the expense ratio is the best predictor of future performance and with passive funds generally charging lower fees, they are expected to outperform.

Low cost funds shown to have subsequent higher 5 year Total Returns as at 31 December 2015
Source: Morningstar Research

The “Active” Argument

Proponents of active management argue that superior skill that certain managers possess can lead to outperformance over an index. Central to this is the ability of a manager to use her skill to manage downside risk. Active managers can make informed investment decisions based on their experiences, insights, knowledge and ability to identify opportunities that can translate into superior performance. Historical data suggests that active managers do better in down markets than up markets. Generally, passive investments tend to do better in more bullish markets but fall a lot more when the markets are under pressure as they realise the full downside of the markets. Furthermore, it is argued that passively managed funds have no chance of beating the index but will always lag their benchmarks by the amount of expenses and cash drag. Data used to analyse active managers is also perceived to be biased by some underperforming ‘closet’ benchmark huggers, particularly on a net-of-fee basis. These kind of managers appear more passive than active.

At points in time, there is a good percentage of active managers outperforming the index. Data from 1980 using the US market.
Source: Seed Research using Morningstar Direct

Putting it all together

Focusing on a snapshot of data at a specific point in time potentially has the danger of reaching conclusions influenced by the most recent market conditions. A sustained period of bullish markets, as experienced over the past 5 years, strongly supports the passive argument as passive strategies generally do well in bull markets. Similarly, the strength of the more skilled active managers becomes more apparent when markets face downside pressure or are moderately up. In this case, good stock selection and risk management should help to protect active portfolios from the full downside of the markets. Successful active managers therefore require both skill and breadth (number of independent active decisions made in constructing a portfolio) to outperform.

There is a place for both passive and active management, especially if one has the ability to identify skilled managers. It is clear that if passive management delivers superior or at the very least similar returns to active management, at a lower cost, there is a compelling argument to simply go this route. Depending on an investor’s needs and constraints, time horizon and market conditions, a strategy of passive, active or a combination of the two may be appropriate. The market rewards different factors at different times and it is important to deal with the facts in this regard and not just a watered-down version of what was true at some point in time in the past.

Kind regards,

Tawanda Mushore

Tel +27 21 914 4966
Fax +27 21 914 4912
Email info@seedinvestments.co.za

Seed is hiring: Visit the Seed Analytics and Seed Investment Consultants Linked In Profiles to view vacancies.


Wed, 18 May 2016
Top News
South Africa's rand regained ground on Wednesday after tumbling more than 2 percent to within a whisker of the 16.00 mark given the declining chance of a rate hike locally and jitters over the Federal Reserve's next move.  Full story

Local markets On Wednesday, the JSE All Share rose 0.51%, with gains in financial and industrial shares offsetting losses in gold mining and resource shares.  Full story
After splitting wins in contests on Tuesday, Democrats Hillary Clinton and Bernie Sanders head into the final stretch of a longer than expected and sometimes acrimonious battle to represent their party in November's White House election.  Full story
A Nigerian teenager kidnapped by Boko Haram more than two years ago has been rescued, the first of more than 200 girls seized in a raid on their school in Chibok town to return from captivity in the insurgents' forest lair, officials said on Wednesday.  Full story
Two earthquakes struck Ecuador's coast on Wednesday, causing minor injuries and light damage in the same region where a magnitude 7.8 tremor killed more than 650 people last month.  Full story
SA Business
South Africa's retail sales grew below expectations by 2.8 percent year-on-year in March as rising interest rates and weak economic growth. . .  Full story
South Africa's mining minister Mosebenzi Zwane said on Wednesday he had spoken to local banks that have cut links with Oakbay. . .  Full story
South Africa's Chamber of Mines said on Wednesday about half of its members were in loss-making territory as a result of. . .  Full story
South Africa's competition watchdog aims to complete an investigation into the grocery market by the end of May 2017, it said. . .  Full story

The chief executive of Impala Platinum (Implats) will step down in December this year after six years at the helm, the. . .  Full story
Impala Platinum (Implats) said on Wednesday that two workers were missing after a shaft collapsed at its Rustenburg mine in South. . .  Full story
South Africa's Spar Group reported a slower rise in half-year profit than in the same period a year earlier, as weak. . .  Full story
South Africa is on track to rein in its budget deficit to 2.4 percent of GDP by 2018/19 although it will. . .  Full story

South Africa's National Union of Mineworkers (NUM) said on Wednesday it expects wage talks with power utility Eskom to fail after. . .  Full story
South Africa's Finance Minister Pravin Gordhan said on Wednesday he did not know whether a wealthy family with close ties to. . .  Full story
South Africa's headline consumer inflation slowed to 6.2 percent year-on-year in April from 6.3 percent in March, data from Statistics South. . .  Full story
South Africa's finance minister said on Tuesday that reports of his imminent arrest were "extremely distressing", calling them an attack on. . .  Full story
Company News
Implats announced to shareholders that after six years on the Implats board of directors (the ˘board÷), of which the initial two. . .  Full story
Shareholders are advised that Wescoal is in the process of finalising its results for the 12 month period ended 31 March. . .  Full story
As the major shareholder of Mapochs Mine (Pty) Ltd. ("Mapochs Mine"), Evraz hereby advises all shareholders and interested parties that on. . .  Full story
Shareholders are advised that Exchange Sponsors (2008) (Pty) Ltd. (ŠExchange SponsorsĂ) has been appointed as Sponsor to Miranda, effective from 18. . .  Full story

Shareholders are advised of the acquisition of Safari Lodge (˘the property÷) as a going concern by Orion Real Estate (˘the Purchaser÷) from Gmeiner Investment Holding (Pty) Ltd. (˘the Seller÷) for a consideration of R100 000 000. The effective date of the transaction will be the date of transfer of the property into the name of the Purchaser. The Seller is a related party to Orion Real Estate. Terms of the Acquisition The total consideration for the acquisition of the property is R1. . .  Full story
Company Results
Revenue for the interim period decreased to R2.067 billion (2015: R2.167 billion). Results from operating activities lowered to R1.050 billion (2015:. . .  Full story
Revenue for the period increased to R491.7 million (2015: R376.1 million). Gross profit widened to R144.3 million (2015: R67.9 million). Operating. . .  Full story
Revenue for the interim period increased by 16.8% to R42.484 billion (2015: R36.383 billion). Gross profit rose to R3.659 billion (2015:. . .  Full story
Total revenue for the interim period grew to R772.1 million (2015: R592.6 million). Net operating profit increased to R486.1 million (2015:. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0052797.23268.390.51%
JSE Top 4017:0046636.41243.030.52%
JSE Gold17:002206.11-19.05-0.86%
JSE Financial17:0040497.79515.941.29%
JSE Industrial17:0078925.07455.960.58%
JSE Indust 2517:0071319.06423.670.60%
JSE Resource17:0031937.98-223.43-0.69%
DJ Futures19:5217597.00108.000.62%
DJ Ind19:5817623.1593.170.53%
SP 50019:582059.3312.120.59%
FTSE 10017:036150.90-16.87-0.27%
All Ords08:405420.50-38.00-0.70%
NZSE 5009:026982.637.760.11%
NameTimeRPMove% Move
Gold $19:591272.80-5.22-0.41%
Gold R19:5920078.15133.420.67%
Gold R/kg19:5865248942850.66%
Silver $19:5917.1270-0.0710-0.41%
Platinum $19:581038.50-7.92-0.76%
Palladium $19:59578.10-4.40-0.76%
Brent Crude19:5849.470.501.02%
USD / ZAR19:5915.74160.14130.91%
GBP / ZAR19:5523.04450.50772.25%
EUR/ ZAR19:5517.80550.15200.86%
NZD/ ZAR19:5910.72000.09470.89%
AUD / ZAR19:5511.50940.07810.68%
USD / JPY19:59109.58000.43900.40%
EUR / USD19:591.1287-0.0026-0.23%
GBP / USD19:591.46300.01711.18%

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The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 ADCORP  165026919.48.%134980
2 ALARIS  1691912.67.%100
3 DIAMONDCP  1691711.18.%2500
4 WESCOAL  1731710.90.%1331549
5 MAZOR  175159.38.%17181
6 MONTAUK  20001508.11.%56224
7 TREMATON  315206.78.%30156
8 CARGO  1400755.66.%10
9 CAT  1400745.58.%313730
10 SPURCORP  31951354.41.%40529
11 HUDACO  107004504.39.%18938
12 PSG  187907794.33.%284313
13 BARWORLD  68072423.69.%2704577
14 CAPCO  77382723.64.%1610177
15 NEPI  183006183.50.%455289
16 MUSTEK  600203.45.%8500
17 BRAIT  155005163.44.%1347193
18 MRHLD  1220403.39.%367682
19 RAUBEX  1857573.17.%12322
20 MPACT  46081383.09.%123065

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Major Moves Down
SharenameSaleMove% MoveVolume
1 INDEQTY  1000-200-16.67.%1000
2 NIVEUS  2445-193-7.32.%4400
3 YORK  270-20-6.90.%1629501
4 NVEST  350-25-6.67.%2400
5 HUGE  500-35-6.54.%51446
6 AMECOR  315-20-5.97.%33
7 Zakhele   6200-300-4.62.%7690
8 ARGENT  419-18-4.12.%103175
9 ASSORE  17450-739-4.06.%97315
10 RBPLAT  4320-179-3.98.%75254
11 ITLTILE  1215-50-3.95.%3657
12 NET1UEPS  16457-642-3.75.%3080
13 LEWIS  4574-166-3.50.%300196
14 TRADEH  3000-100-3.23.%200
15 ANGLO  13908-457-3.18.%8383732
16 COMAIR  305-10-3.17.%208023
17 HOSP-B  310-10-3.12.%10124
18 CSG  126-4-3.08.%67418
19 GRINDROD  1176-37-3.05.%926997
20 Lodestone  680-20-2.86.%4078

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New Highs
SharenameSaleHighMove% MoveVolume
1 MAZOR  175175159.38.%17181
2 MONTAUK  200020001508.11.%56224
3 BATS  954709651114681.56.%682473

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New Lows
SharenameSaleLowMove% MoveVolume
1 CAPEVINH  83880530.36.%432355

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Index Summary
Index NameRPMove% Move
Top 4046,636.41243.030.52%
Mid Cap74,206.22352.190.48%
Small Cap60,272.74174.000.29%
Resource 2031,937.98-223.43-0.69%
Industrial 2571,319.06423.670.60%
Financial 1514,676.05221.171.53%
Financial & Ind. 3073,606.22625.520.86%
All Share52,797.23268.390.51%
Oil & Gas 7,
Mining 22,713.66-280.15-1.22%
Gold Mining2,206.11-19.05-0.86%
Platinum Mining26.98.260.97%
GENERAL MINING5,660.40-95.97-1.67%
Oil & Gas Producers 38,689.88.000.00%
Basic Materials 22,638.66-128.91-0.57%
Chemicals 23,252.20239.271.04%
Forestry & Paper 52,839.69143.790.27%
Industrial Metals 6,987.5269.801.01%
Industrials 41,503.89694.431.70%
General Industrials 154.483.362.22%
Consumer Goods 81,959.011435.171.78%
Automobiles & Parts 5,047.48110.962.25%
Household Goods595.9650.80%
Health Care 9,149.778.040.09%
Beverages 327.948.032.51%
Index NameRPMove% Move
Food Producers 8,992.3620.910.23%
Personal Goods 982.2813.481.39%
Consumer Services 17,253.26-249.64-1.43%
General Retailers 7,458.38-52.09-0.69%
Travel & Leisure 5,498.3852.280.96%
Media 444.08-8.32-1.84%
Support Services 2,091.26115.635.85%
Telecommunications 7,108.6014.580.21%
Financials 40,497.79515.941.29%
Banks 6,020.3469.001.16%
Non-life Insurance 57,424.97765.671.35%
Life Insurance 37,816.33688.171.85%
General Financial 4,556.9382.631.85%
Technology 48,299.74-21.71-0.04%
SHARIAH TOP40 3,076.72-7-0.21%
FTSE/JSE SHARIAH ALL3,390.92-3-0.10%
COAL MINING8,606.51100.12%
FTSE JSE Fledgling 7,108.12-8-0.11%
FTSE/JSE Alt X 1,493.25-10-0.65%
SA LISTED PROPERTY 637.824.390.69%
RESOURCE 18,063.35-103-0.57%
DIVIDEND PLUS199.6210.60%
FTSE/JSE RAFI 409,437.61330.35%
Capped Top 4024,793.161290.52%
Capped All Share26,895.711330.50%
JSE TABACO 12,199.391881.56%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
19/05/2016AFRIMATFebruary 2016 (Final)
19/05/2016CARFebruary 2016 (Final)
19/05/2016E MEDIAMarch 2016 (Final)
19/05/2016E MEDIA-NMarch 2016 (Final)
19/05/2016IAPFMarch 2016 (Final)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
CORONAT17/05/1603/06/1613/06/16ZAR 2.2900
DELPROP16/05/1603/06/1613/06/16ZAR 0.4791
VODACOM16/05/1617/06/1627/06/16ZAR 4.0000
ASTRAL16/05/1603/06/1613/06/16ZAR 3.9000
MAZOR16/05/1609/06/1620/06/16ZAR 0.0850
Ex Div**
Share NameDec-DateLDTPay-DateAmount
PHUMELELA15/04/1613/05/1623/05/16ZAR 0.3400
KAYDAV29/03/1613/05/1623/05/16ZAR 0.0550
BLACKSTAR23/03/1613/05/1613/06/16ZAR 0.0374
FINBOND20/04/1613/05/1623/05/16ZAR 0.0340
RIPLC26/04/1618/05/1606/06/16GBP 0.0163

Upcoming AGMs**
CodeCompany NameDateStatus
GFIGold Fields Ltd.18/05/2016Confirmed
GFPPGold Fields Ltd.18/05/2016Confirmed
RNGRandgold - Exploration Co Ltd.18/05/2016Confirmed
GBIGold Brands Investments Ltd.18/05/2016Unconfirmed
KDVKayDav Group Ltd.19/05/2016Confirmed

Stock Exchange News Service
18/05/201617:32REX TRUEFORM CLOTHING COMPANY LIMITED - Update in respect of the mandatory and c...
18/05/201617:30SUN INTERNATIONAL LIMITED - Settlement of Obligation under the Lapsed Peermont G...
18/05/201617:30CONSOLIDATED INFRASTRUCTURE GRP LTD - Dealings in securities by a director of a ...
18/05/201617:30AFRICAN AND OVERSEAS ENTERPRISES LD - Update in respect of the mandatory and com...
18/05/201617:15IMPALA PLATINUM HOLDINGS LIMITED - Resignation of Mr Terence Goodlace as Chief E...
18/05/201617:00CLIENTELE LIMITED - Dealing in Clientele shares
18/05/201617:00AFRICAN RAINBOW MINERALS LIMITED - Dealings in securities by a director of ARM
18/05/201616:40Bnp Paribas Arbitrage Issuance B.v. - Redemption On Certificates Relating To Cad...
18/05/201616:30WILSON BAYLY HOLMES-OVCON LIMITED - Acquisition of securities by clients of Alla...
18/05/201616:13BNP PARIBAS ARBITRAGE ISSUANCE B.V. - Publication of annual report
18/05/201616:12GREENHOUSE FUNDING III (RF) LIMITED - GH31A1 - Partial Redemption Notice
18/05/201616:03IMBALIE BEAUTY LIMITED - Renewal of cautionary announcement
18/05/201615:56VISUAL INTERNATIONAL HOLDINGS LIMITED - Status Update on Negotiations, Going Con...
18/05/201615:28WESCOAL HOLDINGS LIMITED - Trading Statement
18/05/201615:25CAPITEC BANK LIMITED - Publication Of The Annual Financial Results For Year Ende...
18/05/201615:15SABMILLER PLC - Directorate change
18/05/201614:15DELTA AFRICA PROPERTY HOLDINGS LIMITED - Dealing In Delta Africa Shares By a Dir...
18/05/201614:00PAN AFRICAN RESOURCES PLC - TR-1: Notification of major interest in shares
18/05/201614:00SANTOVA LIMITED - Preliminary audited results for the year ended 29 February 201...
18/05/201613:52THE THEKWINI FUND 13 (RF) LIMITED - Partial Capital Redemption
18/05/201613:50THE THEKWINI FUND 12 (RF) LIMITED - Partial Capital Redemption
18/05/201613:10OLD MUTUAL PLC - Form 8.3 - Public Opening Position Disclosure - Sainsbury (J) P...
18/05/201613:00RANDGOLD & EXPLORATION COMPANY LIMITED - Results Of The Annual General Meeting O...
18/05/201613:00OLD MUTUAL PLC - Form 8.3 - Public Opening Position Disclosure Home Retail Grou...
18/05/201612:55OLD MUTUAL PLC - Form 8.3 - Public Opening Position Disclosure - Deutsche Boerse...
18/05/201612:51CAPITAL & COUNTIES PROPERTIES PLC - Notification of Major Interests in Shares
18/05/201612:50CAPITAL & COUNTIES PROPERTIES PLC - Notification of Major Interests in Shares
18/05/201612:39LODESTONE REIT LIMITED - Dealings in securities by an associate of a director of...
18/05/201612:30CAPITEC BANK LIMITED - Interest Rate Reset Announcement - CBL23
18/05/201612:20CALGRO M3 HOLDINGS LIMITED - Notification in terms of section 122(3) of the Comp...
18/05/201611:56EVRAZ HIGHVELD STEEL & VANADIUM LTD - Provisional liquidation of Mapochs Mine (P...
18/05/201611:45MIRANDA MINERAL HOLDINGS LIMITED - Appointment of Sponsor
18/05/201611:40GOODERSON LEISURE CORPORATION LIMITED - Sale of the Fabz Garden Hotel & Conferen...
18/05/201611:00THE THEKWINI FUND 10 (RF) LIMITED - Moody's Recalibrates South Africa's National...
18/05/201610:55THE THEKWINI FUND 9 (RF) LIMITED - Moody's Recalibrates South Africa's National ...
18/05/201610:33ADCORP HOLDINGS LIMITED - Voluntary Trading Statement for the year ended 29 Febr...
18/05/201610:25REAL PEOPLE INV HOLDINGS LIMITED - Moody's Investors Service repositions the Nat...
18/05/201610:19STANDARD BANK OF SOUTH AFRICA LD - SCIB: Issue of Stock Warrants
18/05/201610:01ORION REAL ESTATE LIMITED - Ann re the Acq of Safari Lodge, a Specific Issue of ...
18/05/201610:00ATLANTIC LEAF PROPERTIES LIMITED - Dealings In Securities By Directors And By As...
18/05/201609:50ZEDER INVESTMENTS LIMITED - Farm-Ag And Zaad Join Forces
18/05/201609:35ARGENT INDUSTRIAL LIMITED - Changes to the Board: Non-Executive Directors
18/05/201609:00SABMILLER PLC - Rule 2.10 announcement
18/05/201608:25IVUZI INVESTMENTS LIMITED - IVA621 - Full capital redemption
18/05/201608:19INDWA INVESTMENTS LIMITED - INA621 - Full capital redemption
18/05/201608:08DELRAND RESOURCES LIMITED - Management discussion & analysis of financial condit...
18/05/201608:05DELRAND RESOURCES LIMITED - Interim condensed consolidated financial statements ...
18/05/201608:00TAWANA RESOURCES NL - Non-Renounceable Rights Issue Offer Document Dispatched
18/05/201608:00SABMILLER PLC - Preliminary results for the 12 months ended 31 March 2016
18/05/201607:50ALLIED ELECTRONICS CORPORATION LIMITED - Preliminary Audited Summarised Consolid...
18/05/201607:05ARROWHEAD PROPERTIES LIMITED - Unaudited condensed consolidated interim results ...
18/05/201607:05THE SPAR GROUP LIMITED - Unaudited Interim Results for the six months ended 31 M...

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