Peter Brooke 00:00
Good day, I'm Peter Brooke, a Portfolio Manager at the Old Mutual Investment Group. This is week 35 of 2021, and I thought there were some very interesting trends in the August performance numbers that I wanted to put some perspective on.
00:13
Firstly, in a South African context, there were some really large dispersions. Even on an overall index level, the All Share index was down 1.7%, while the Capped SWIX was up 2%. Remember, the Capped SWIX is what most asset managers use, and it caps the exposure to individual shares at 10% of equity. And in this instance, it kept the weight to Naspers down.
But it was below the surface that we saw some big differences. For instance, large cap shares were down 2.4%, while small cap shares were up 7%. There was also very strong bias towards South Africa, with resources down 5.3%, rand hedge shares down 9.3%, mainly due to the 12% decline in Naspers, while SA Inc. was up 11.7%. So, a really strong dispersion of roughly 17%. And the SA winning was predominantly led by banks, which were up 15.7%.
01:18
I think this would surprise most South Africans, as last month we experienced the looting and rioting in KZN. Once again, we get another lesson on sticking to your plan and not panicking on the news flow. And August was not just playing catch up, as it was a continuation of a trend. The top three sectors in the last year have been clothing retail, up 105%, telcos up 78%, and banks up 75%. This dispersion between returns has been a big opportunity for active managers to add value, or to destroy value.
Looking at major funds, and here I'm talking about our key competitors as opposed to the entire universe, and we're looking over the last year. In the South African general equity category, the dispersion between the winners, who gained 41%, and the losers who gained 10%, was a 30% swing. In the flexible category, where asset allocation is added in, the one year dispersion was even wider at 80%, with the winner gaining 75% in the year while the loser declined by 5%.
02:30
Generally, our funds have enjoyed a very good August and the 12 months - and the last year, in line with our positioning to increase equity, to increase SA Incorporated shares, and to increase smaller companies, all at the expense of Naspers and cash.
However, the sad news of this, is that the opportunities are decreasing. The market has repriced the obvious mistakes, making it harder to deliver such high returns into the future. This is also true globally, with the world equity market delivering another two and a half percent dollar return in the last month. However, I will unpack that in another podcast.
I hope you enjoyed this perspective. Until next week.