Out Outcom ome Mat Matter ers November 2019
Jako de Jager Head of Retail Portfolio Solutions Back to basics: Portfolio delivery and positioning
AGENDA 01 | The importance of setting a strategic asset allocation 02 | Understanding the market environment 03 | Fund delivery and positioning 04 | Managing towards your objectives 05 | Incorporating responsible investing principles 06 | Closing Momentum Investments | 2019 Page | 39 Page | 39
The importance of setting a strategic asset allocation
Asset allocation framework 15% 8% 70% 7% Investment Investment Asset allocation Other strategy mandate • Asset allocation views are devised and implemented in an outcome ‐ based solution for the following reasons: o To determine the asset class exposure to deliver on the longer ‐ term client objectives o To inform the dynamic direction of asset class returns that will influence the path to the client objective o To inform shorter ‐ term anomalies in the market to inform a risk management overlay on the fund • Asset allocation views are implemented within funds in relation to the objectives and influence delivery and success
Asset allocation framework Strategic Long ‐ term perspective asset Strategic view and departure point (10 years) allocation Not influenced by current valuations Dynamic Medium ‐ term perspective asset Dynamic asset allocation views (three to five years) allocation Influenced by valuations – Scenario based views and analysis Tactical Provides a shorter ‐ term perspective asset Tactical asset allocation views (one year) allocation Strongly influenced by valuations – Macro and micro risks Page | 42
LISTED PROPERTY Market delivery INVESTMENT TEAM Philosophy and process
Asset class returns One year to October 2019 25% 21.9% 20% 16.1% 13.0% 15% 11.2% 6.1% 8.1%10.1% 10% 7.3% 7.7% 7.4% 7.3% 6.0% 5% 0.8% 2.4% 0% CPI +2% CPI +4% CPI +6% Local Equity Local Property Local ILB Local Bond Local Cash Global Equity Global Bonds Global Property (ASISA) MA High (ASISA) MA Medium (ASISA) MA Low Equity Equity Equity Sources: Momentum Investments, Morningstar, Iress, msci.com, yieldbook.com, ft.com
Real returns achieved One year to October 2019 20% 17.8% 15% 12.0% 8.9% 10% 7.1% 5% 3.2% 1.9% 0% ‐ 1.7% ‐ 5% ‐ 3.3% Local Local Local ILB Local Local Global Global Global Equity Property Bond Cash Equity Bonds Property Real Return Achieved (12m) Long Term Real Return Expectation Sources: Momentum Investments, Morningstar, Iress, msci.com, yieldbook.com, ft.com
Asset class returns Three years to October 2019 16% 15.0% 13.9% 14% 10.7% 12% 8.7% 8.5% 7.4% 10% 6.7% 8% 6.2% 5.3% 5.6% 6.1% 6% 3.2% 4% 1.3% 2% 0% ‐ 2% ‐ 4% ‐ 3.1% CPI +2% CPI +4% CPI +6% Local Equity Local Property Local ILB Local Bond Local Cash Global Equity Global Bonds Global Property (ASISA) MA High (ASISA) MA Medium (ASISA) MA Low Equity Equity Equity Sources: Momentum Investments, Morningstar, Iress, msci.com, yieldbook.com, ft.com
Asset class returns Five years to October 2019 16% 14.5% 13.8% 14% 11.0% 12% 9.0% 10% 8.2% 7.5% 7.2% 7.0% 8% 5.4% 5.4% 6.2% 6% 3.5% 2.3% 3.2% 4% 2% 0% CPI +2% CPI +4% CPI +6% Local Equity Local Property Local ILB Local Bond Local Cash Global Equity Global Bonds Global Property (ASISA) MA High (ASISA) MA Medium (ASISA) MA Low Equity Equity Equity Sources: Momentum Investments, Morningstar, Iress, msci.com, yieldbook.com, ft.com
Our commitment to Fund delivery TRANSFORMATION and positioning
Contributors and detractors from returns Actions and positioning that Actions and positioning that contributed to returns detracted from returns Increased global allocation after strategic asset Subdued asset class returns from domestic growth asset classes allocation changes in the second and third quarters of 2018 Active underperformance from global building Tactical overweight to local equities compared to local property blocks compared to market benchmarks, but positive in nominal terms and vs peers Active underperformance from SA Flexible Fixed Tactical overweight to cash compared to local inflation ‐ linked bonds Interest Fund in short term Active outperformance from most local building blocks compared to market benchmarks Lower global allocation in more conservative fund (Focus 3 and Target 3) Inclusion on global listed real estate Currency hedge overlays Page | 49
Focus Fund of Funds: Outcomes One year to October 2019 1.5% 1.0% 0.9% 0.8% 1.0% 0.7% 0.7% 0.3% 0.5% 0.3% 0.1% 0.0% ‐ 0.5% ‐ 0.3% ‐ 1.0% ‐ 0.9% Momentum Momentum Momentum Momentum Momentum Focus 7 Fund of Focus 6 Fund of Focus 5 Fund of Focus 4 Fund of Focus 3 Fund of Funds B2 Funds C Funds B2 Funds C Funds B2 Relative to Strategic Asset Allocation Relative to Asisa Peer Group Average CIS disclosure Collective investment schemes in securities are generally medium ‐ to long ‐ term investments. The value of participatory interests or the investment may go down as well as up. Past performance is not necessarily a guide to future performance. Momentum Collective Investments (RF) (Pty) Ltd (the manager) does not provide any guarantee, either with respect to the capital or the return of a portfolio. For certain portfolios the manager has the right to close these portfolios to new investors to manage them more efficiently, in accordance with their mandates. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. The collective investment scheme may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Different classes of participatory interests apply to these portfolios and are subject to different fees and charges. A schedule of fees, charges and maximum commissions is available on request from the manager, or is available on the website (www.momentum.co.za/collectiveinvestments).Forward pricing is used. Source: Morningstar, Momentum Investments
Target Fund of Funds: Outcomes One year to October 2019 3.5% 2.9% 2.8% 3.0% 2.5% 2.0% 1.9% 1.8% 2.0% 1.5% 1.5% 1.1% 0.8% 0.7% 1.0% 0.3% 0.5% 0.0% Momentum Momentum Momentum Momentum Momentum Target 7 Fund of Target 6 Fund of Target 5 Fund of Target 4 Fund of Target 3 Fund of Funds C Funds C Funds C Funds C Funds C Relative to Strategic Asset Allocation Relative to Asisa Peer Group Average CIS disclosure Collective investment schemes in securities are generally medium ‐ to long ‐ term investments. The value of participatory interests or the investment may go down as well as up. Past performance is not necessarily a guide to future performance. Momentum Collective Investments (RF) (Pty) Ltd (the manager) does not provide any guarantee, either with respect to the capital or the return of a portfolio. For certain portfolios the manager has the right to close these portfolios to new investors to manage them more efficiently, in accordance with their mandates. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. The collective investment scheme may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Different classes of participatory interests apply to these portfolios and are subject to different fees and charges. A schedule of fees, charges and maximum commissions is available on request from the manager, or is available on the website (www.momentum.co.za/collectiveinvestments).Forward pricing is used. Source: Morningstar, Momentum Investments
Focus Fund of Funds: Outcomes Average rolling returns 14% 12.5% 12% 10.2% 10% 8.3% 10.0% 9.6% 8% 7.8% 6% 4% 2% 0% Momentum Focus 3 FoF B2 Momentum Focus 5 FoF B2 Momentum Focus 7 FoF B2 CPI + objective Momentum Focus FoF ASISA peer group CIS disclosure Collective investment schemes in securities are generally medium ‐ to long ‐ term investments. The value of participatory interests or the investment may go down as well as up. Past performance is not necessarily a guide to future performance. Momentum Collective Investments (RF) (Pty) Ltd (the manager) does not provide any guarantee, either with respect to the capital or the return of a portfolio. For certain portfolios the manager has the right to close these portfolios to new investors to manage them more efficiently, in accordance with their mandates. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. The collective investment scheme may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Different classes of participatory interests apply to these portfolios and are subject to different fees and charges. A schedule of fees, charges and maximum commissions is available on request from the manager, or is available on the website (www.momentum.co.za/collectiveinvestments).Forward pricing is used. Source: Morningstar, Momentum Investments
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