investment report q1 2017 - fairtree private client · 2019. 9. 19. · investment report q1 2017...

INVESTMENT REPORT Q1 2017

P.O. BOX 3603 Durbanville, 7551 South Africa

t +27 (0)861 000 712 f +27 (0)866 559 333 www.fairtreeprivateclient.co.za

Reg. No. 2006/013535/07 VAT Reg. No. 4720217241 FSP No: 12179

“Creating wealth. With genuine, time-tested values.”

MARKET OVERVIEW

Global Outlook

This quarter was anything but normal, and we remain in a period of intense poli�cal and economic change around the world. We reached an economic and poli�cal �pping point in 2016. In a short

space of �me the poli�cal narra�ve shi�ed towards na�onalism and the policy framework suppor�ng economic growth has shi�ed from monetary to fiscal policy. We remain rela�vely op�mis�c on

global growth. The current economic expansion has entered its 8th year, the 3rd longest since 1970 and 2 years longer than the average expansion over this period. This recovery has been more

gradual, marked by low growth and defla�on.

Despite this mediocre growth environment, the global economy has remained resilient in the face of poli�cal challenges (Brexit, Trump); crashing commodity prices (oil, base metals); growth concerns

(US, China, BRICs); and global currency devalua�ons (CNY, EUR, EM) during the quarter. The defla�onary pressures that persisted over the last few years have faded. Global demand is on the rise while

excess supply has reduced meaningfully, par�cularly in China and commodity markets. We believe the global economy has turned the corner and that we are heading for a period of refla�on and have

seen evidence of this during the quarter.

Poli�cs will play a bigger role in the future. Brexit and Trump have challenged the prevailing global poli�cal narra�ve. A�er years of growing globalisa�on, inequality and immigra�on; the reversal of

these trends have become a reality and are replaced with na�onalism, isola�onism and protec�onism. Poli�cians who sympathise with an�establishment a�tudes are rewarded with poli�cal power,

even if they do so at the expense of the truth or fact.

Trump’s elec�on as US President and his a�tude towards progrowth fiscal policies have reinforced our upbeat expecta�ons. Labour market growth con�nue to support consump�on in the US with

economy close to full employment and wages to con�nue rising. However, Trump was not the catalyst to our posi�ve sen�ment, as the global economy had already accelerated by mid2016, due to

stronger China manufacturing growth, higher commodity prices and refla�onary trends emerging out of Europe.

The poli�cal shocks of 2016 con�nue to shi� the ground under our feet. The new US president keeps on upse�ng geopoli�cs, while the UK premier, Theresa May, recently triggered Ar�cle 50, bringing

the UK a step closer to formally exi�ng the EU. The weak EUR and easy monetary policy has injected refla�on into the economy. However, throughout the world, ordinary people are expressing their

discontent with the established world order.

Emerging Markets have outperformed the Developed Markets for the first quarter of 2017.

SA Market

Locally during the first quarter the midnight hour cabinet reshuffle at the end of March dented confidence and triggered ra�ngs downgrades, the effects of which will be felt for years to come. The

reac�on of two of the global ra�ngs agencies to these changes has been quick and painful. During the quarter our foreign debt ra�ngs have been cut to sub investment grade (junk), with immediate

impact on the cost of our funding. This is not something only affec�ng the world of finance, but also has real effects on every South African. As the cost of funding our debt goes up, it takes away

valuable resources that could be used to fund healthcare and educa�on as well as improve social services which we so badly need in our country. It also results in a decline in the value of exis�ng SA

bonds, impac�ng millions of pensioners. We expect the remaining ra�ngs agency (Moody’s) to cut our foreign debt ra�ng in the next few months.

The real concern is if Moody’s and Standard & Poor's downgrade our local currency bonds to junk status, we will be ejected from the Ci� World Government Bond Index, triggering the forced sale of

some R193 billion from the bond market (At current exchange rate). A�aining investment grade credit ra�ngs 17 years ago was a significant achievement secured through great discipline.

Government’s commitment to fiscal discipline benefited all South Africans. Recent poli�cal choices make it likely that at least some of these benefits will be lost. Stateowned enterprises (SOEs), which

have been mismanaged and have consumed billions of rands over the past decade, are likely to be topped up by a newly compliant Treasury. Over and above all of this, the mooted project to build six

to eight nuclear reactors, with a projected cost exceeding R1 trillion, appears to be on track again. Under Gordhan, the Na�onal Treasury had been steadfastly blocking this project as unnecessary and

unaffordable. Post his removal, Treasury is now suppor�ve of it progressing, despite SA now having significant surplus power capacity.

Risk unfortunately is firmly to the downside, but despite this, there is s�ll sufficient momentum, as seen during the quarter, to suggest this year will, indeed, produce be�er growth than last year.

The Barclays Purchasing Managers' Index (PMI) remained elevated at 52.2, from 52.5 and 50.9 in the previous two months. This is a signal of stronger manufacturing output in coming months. New

passenger car sales were up 2.1% year on year off a weak base, but on balance the quarter is sequen�ally the strongest in two years. The crop es�mates commi�ee forecasted that SA’s total maize

harvest could almost double last year’s produc�on. This should give a meaningful boost to growth from agriculture, and will also help lower prices of cereals and feed, curbing food infla�on. While tax

increases announced in the Budget will offset some of the posi�ve impact of lower infla�on on household spending, cooling prices should help raise the real incomes of households, especially the

poor.

Quarterly data emphasises that growth remains the single most important ingredient in fiscal sustainability, in poverty eradica�on, and in genera�ng and suppor�ng ins�tu�ons that protect the

vulnerable. For an economy to grow, it needs to create jobs, invest in capacity and improve produc�vity. Job crea�on and investment only happen when households and businesses are confident about

the prospects of the economy. We need to be vigilant and find those who are able to the see through the noise and find value and growth for the client, whilst considering all poten�al risks involved.

Fixed Income

At Fairtree Idea genera�on flows from jointly formula�ng macro views of global and local South African macro parameters. During the quarter we spent our �me thinking about key variables that we

believe will impact longterm bond returns. Two of these are South Africa’s longterm infla�on and the real return required to make South African bonds a�rac�ve to investors.

Bond returns are less vola�le than equity returns, most of the �me. This is posi�ve for investors who value stability, such as re�rees. It is nega�ve for investors with long �me horizons since higher risk

investments, such as equi�es, typically outperform over long �me periods.

Our view is that global infla�on is likely to rise as some of the disinfla�onary trends of the last few decades moderate, such as global trade, fiscal prudence and excess savings. Since much of South

Africa’s costs are imported, this will place upward pressure on South Africa’s infla�on. Even if we are wrong, it is unlikely that SA infla�on will fall sustainably below current levels while we remain an

open economy with below average produc�vity and above average wage pressure.

The diversifica�on benefits of bonds during the quarter made them relevant to many investors. They tend to perform well when equi�es perform poorly, and vice versa. It is prudent to maintain bond

exposure within diversified investment por�olios, and vary this according to your objec�ves and your view on rela�ve risk and return. This principle underlies our mul�asset class unit trusts, in which

bonds typically have a material weigh�ng and are a meaningful contributor to performance.

Por�olio Breakdown and Commentary

P.O. Box 4124

Tyger Valley

7536

Ground Floor, Willowbridge Place

Cnr Carl Cronje drive & Old Oak road

Bellville

Fairtree Private Client (Pty) Ltd

FSP No: 12179

Tel: 0861 000 712

Fax: 0866 559 320

www.fairtreeprivateclient.com

Indices 3 M

FTSE/JSE All Share TR ZAR

FTSE/JSE SA Listed Property TR ZAR

Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World

(ASISA) South African EQ Industrial

(ASISA) South African EQ Resources

(ASISA) South African EQ Financial

3.78

1.37

2.49

1.86

4.30

4.88

6.64

1.95

Market update Q1 2017

Indices 1 M 3 M 6 M 12 M 36 M YTD



Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




2.68

0.11

0.40

0.63

3.61

2.76

2.40

1.03

1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30

Market update Trailing Returns Q1 2017

Q1 2017

Wrap / House View 3 M 6 M 12 M 36 M YTD

Fairtree Cau�ous Por�olio (Momentum & Glacier)

Fairtree Cau�ous MM Por�olio (Investec & Stanlib)

Fairtree Cau�ous Por�olio (PPS)

Fairtree Cau�ous MM Por�olio (Allan Gray)

2.10 4.90 8.062.25 2.25

3.23 5.98 9.522.59 2.59

1.94 3.82 8.012.38 2.38

2.29 4.80 8.512.38 2.38

Fairtree Cau�ous Solu�ons underlying funds Trailing Returns

Fund 3 M 6 M 12 M 36 M YTD

Allan Gray Stable C

Catalyst Glbl Real Estate Prescient FF A

Corona�on Balanced Defensive P

Corona�on Strategic Income P

Efficient BCI African Flexible Income A

Fairtree Equity Prescient A2

Fairtree Flex Balanced Prescient A1

Fairtree Smart Beta Prescient A1

Foord Flexible FoF B2

Investec Cau�ous Managed H

Fairtree Flex Income Plus Prescient B1

Nedgroup Inv Core Guarded B

Nedgroup Inv Stable A2

Pruden�al Enh SA Prop Tracker D

Pruden�al Infla�on Plus B

PSG Flexible E

Reitway BCI Global Property A

Satrix MSCI World Equity Index FF B2

STANLIB Income R

Truffle MET Flexible C

0.58 2.35 9.581.63 1.63

1.86 1.862.61 5.53 8.89

2.70 2.70

3.28 3.28

2.22 2.22

2.21 2.21

1.89 1.89

2.44

2.80

1.64

1.02

1.21

5.61

3.65

4.49

1.71

3.84

7.77

7.61

8.07

6.96

8.68

0.33

0.64

0.72

2.67

4.02

9.08

2.22 2.22

2.66 2.66

2.46 2.46

4.47 4.47

2.20 2.20

2.49 2.49

1.61 1.61

4.35

13.84

9.48

5.08

3.42

0.72

0.92

9.96

1.71 1.712.96 2.47

12.99

8.75

9.75

9.11

10.19

15.50

4.60

12.08 11.532.49 2.497.42

9.120.88 0.887.52 12.97

4.30 4.306.24 3.97 14.04

2.42 2.424.58 9.18 7.22

4.55 4.550.79 2.14 11.18

Fairtree Cau�ous Solu�ons Trailing Returns

Time Period: 2015/04/01 to 2017/03/31

1 2 3 4 5 6 7 8

1.00

0.50 1.00

0.11 0.56 1.00

0.71 0.46 0.13 1.00

0.80 0.29 0.17 0.71 1.00

0.77 0.24 0.23 0.67 0.99 1.00

0.67 0.00 0.39 0.48 0.93 0.95 1.00

0.83 0.31 0.18 0.75 0.98 0.98 0.92 1.00

1 FTSE/JSE All Share TR ZAR

2 FTSE/JSE SA Listed Property TR ZAR

3 Beassa ALBI TR ZAR

4 MSCI World NR USD

5 Fairtree Cau�ous Por�olio (Momentum & Glacier)

6 Fairtree Cau�ous MM Por�olio (Investec & Stanlib)

7 Fairtree Cau�ous Por�olio (PPS)

8 Fairtree Cau�ous MM Por�olio (Allan Gray)

1.00 to 0.80 0.80 to 0.60 0.60 to 0.40 0.40 to 0.20 0.20 to 0.00

0.00 to 0.20 0.20 to 0.40 0.40 to 0.60 0.60 to 0.80 0.80 to 1.00

Fairtree Cau�ous MM wrap (Allan Gray)

Correla�on Matrix

Indices 3 M 6 M 12 M 36 M YTD



Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




CPI+2%

1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30

4.17 8.39 7.862.61 2.61

Market Update Trailing Returns

The Por�olio performed well for the first quarter of 2017 and met the CPI+2% objec�ve. With 44% e xposure to income funds. Bond returns normalized and the All Bond Index saw a return of

2.49% for the first quarter. With the risk of credit ra�ngs and the down grade, we have experienced a bit of a shi� from local bonds to foreign bonds, as the foreign bond exposure increased by a

slight 3.26%. With fair exposure to growth assets, equi�es at 39.68% and property at 12.51%, protected with a high cash and bond exposure. In an a�empt to add value for clients we also

replaced the Satrix MSCI World Wide Equity FF with the Fairtree Global Smart Beta Prescient fund.

Commentary

P.O. Box 4124Tyger Valley7536

Ground Floor, Willowbridge PlaceCnr Carl Cronje drive & Old Oak roadBellville

Tel: 0861 000 712Fax: 0866 559 320www.fairtreeprivateclient.com

Fairtree Private Client (Pty) LtdFSP No: 12179

Fairtree Cau�ous wrap (Momentum & Glacier) Fairtree Cau�ous MM wrap (Investec & Stanlib) Fairtree Cau�ous house view (PPS)

REGULATION 28 SOLUTIONS: CAUTIOUS PORTFOLIOS

Fairtree Balanced Solu�ons underlying funds Trailing Returns






Fairtree Flex Balanced Prescient A1





PSG Flexible E



STANLIB Income R


Nedgroup Inv Core Diversified B

Satrix Equally Weighted Top 40 Index B2

Satrix Property Index B1

SIM Ac�ve Income B4

Investec Money Market R

Corona�on Strategic Income A

0.58 2.35 9.581.63 1.63

0.33

0.64

0.72

2.67

4.02

9.08

2.22 2.22

2.66 2.66

2.46 2.46

4.47 4.47

2.20 2.20

2.49 2.49

1.61 1.61

4.35

13.84

9.48

5.08

3.42

0.72

0.92

9.96

1.71 1.712.96 2.47

12.99

8.75

9.75

9.11

10.19

15.50

4.60

12.08 11.532.49 2.497.42

9.120.88 0.887.52 12.97

4.30 4.306.24 3.97 14.04

4.582.42 2.429.18 7.22

0.794.55 4.552.14 11.18

7.882.52 2.520.64 2.23

3.460.24 0.245.08

1.30 1.302.47 1.08

2.27 2.274.24 9.60 8.22

7.671.86 1.863.81 6.78

9.002.37 2.378.253.79


Fairtree Balanced Por�olio (Momentum & Glacier)

Fairtree Balanced MM Por�olio (Investec & Stanlib)

Fairtree Balanced Por�olio (PPS)

Fairtree Smart Beta Balanced (Investec)

Fairtree Balanced MM Por�olio (Allan Gray) 0.47 2.61 8.250.72 0.72

1.61 3.32 9.841.58 1.58

1.58 4.24 8.231.11 1.11

0.49 2.75 7.951.42 1.42

0.41 2.86 7.361.31 1.31

Fairtree Balanced Solu�ons Trailing Returns

Correla�on Matrix

Time Period: 2015/04/01 to 2017/03/31

1 2 3 4 5 6 7 8 9

1.00

0.50 1.00

0.11 0.56 1.00

0.71 0.46 0.13 1.00

0.87 0.38 0.07 0.79 1.00

0.86 0.36 0.11 0.75 0.99 1.00

0.86 0.46 0.08 0.81 0.98 0.97 1.00

0.82 0.46 0.07 0.75 0.93 0.94 0.92 1.00

0.88 0.36 0.12 0.79 0.98 0.98 0.96 0.96 1.00




4 MSCI World NR USD

5 Fairtree Balanced Por�olio (Momentum & Glacier)

6 Fairtree Balanced MM Por�olio (Investec & Stanlib)

7 Fairtree Balanced Por�olio (PPS)

8 Fairtree Smart Beta Balanced (Investec)

9 Fairtree Balanced MM Por�olio (Allan Gray)

1.00 to 0.80 0.80 to 0.60 0.60 to 0.40 0.40 to 0.20 0.20 to 0.00

0.00 to 0.20 0.20 to 0.40 0.40 to 0.60 0.60 to 0.80 0.80 to 1.00




Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




CPI+4%

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30

1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

5.18 10.52 9.983.10 3.10


The Balanced por�olio is built to op�mize returns whilst protec�ng clients on the downside, in o ther words have market par�cipa�on when the market is on the up and minimize

losses when the market is pulling back. The well diversified por�olio in terms of asset classes as well as manager has been doing this well over the investment horizon of 45 years

and has outperformed both the CPI+4 target and the JSE. The equity exposure has done par�cularly well in the first quarter leading the way is the Fairtree MET Equity with 4.47%

outperforming the market and its peers. The property market has been the cause of a bit of a drag in terms of performance for the first 3 months of the year. From a risk vs return

perspec�ve the por�olio is keeping up with what it is designed to do.

Smart Beta Balanced

The por�olio saw a li�le increase in equity exposure form +45% equi�es to 49%, these are small �lts. The por�olio is not build to have a dynamic asset alloca�on play, but rather a

diversified asset alloca�on, achieved through low cos�ng index tracker type funds. There will always be a tracking of the market and niche tracker managers provide the possibility

of genera�ng some alpha for clients. The first quarter saw a steady but underperforming of the por�olio against the CPI+4%. The equity exposure of the por�olio has

underperformed the market over the first quarter and the mainly the reason for some of the drag.

Commentary

Fairtree Balanced wrap (Momentum & Glacier) Fairtree Balanced MM wrap (Investec & Stanlib)

Fairtree Smart Beta Balanced wrap (Investec) Fairtree Balanced house view (PPS) Fairtree Balanced MM wrap (Allan Gray)





REGULATION 28 SOLUTIONS: BALANCED PORTFOLIOS

Fairtree Growth Solu�ons underlying funds Trailing Returns


Catalyst Glbl Real Estate Prescient FF ACorona�on Strategic Income PEfficient BCI African Flexible Income AFairtree Equity Prescient A2Fairtree Flex Balanced Prescient A1Fairtree Smart Beta Prescient A1Foord Flexible FoF B2Fairtree Flex Income Plus Prescient B1Pruden�al Enh SA Prop Tracker DPSG Flexible EReitway BCI Global Property ASatrix MSCI World Equity Index FF B2STANLIB Income RTruffle MET Flexible CNedgroup Inv Core Diversified BSatrix Equally Weighted Top 40 Index B2Satrix Property Index B1SIM Ac�ve Income B4Investec Money Market RCorona�on Strategic Income A

0.58 2.35 9.581.63 1.630.33

0.64

0.722.674.02

9.08

2.22 2.222.66 2.66

2.46 2.464.47 4.47

2.20 2.202.49 2.49

1.61 1.61

4.35

13.849.485.083.420.72

0.929.96

1.71 1.712.96 2.47

12.998.759.75

9.1110.1915.50

4.60

12.08 11.532.49 2.497.429.120.88 0.887.52 12.97

4.30 4.306.24 3.97 14.044.582.42 2.429.18 7.220.794.55 4.552.14 11.18

7.882.52 2.520.64 2.233.460.24 0.245.08

1.30 1.302.47 1.082.27 2.274.24 9.60 8.221.86 1.867.673.81 6.78

9.002.37 2.378.253.79


Fairtree Pruden�al Growth Por�olio (Momentum & Glacier)

Fairtree Growth MM Por�olio (Investec & Stanlib)

Fairtree Growth Por�olio (PPS)

Fairtree Smart Beta Growth (Investec)

Fairtree Growth MM Por�olio (Allan Gray)

1.27 2.79 8.212.94 2.94

1.56 3.16 8.261.81 1.81

1.92 2.84 9.062.56 2.56

1.22 2.48 8.343.07 3.07

1.51 2.86 10.492.06 2.06

Fairtree Growth Solu�ons Trailing Returns

Time Period: 2015/04/01 to 2017/03/31

1 2 3 4 5 6 7 8 9

1.00

0.50 1.00

0.11 0.56 1.00

0.71 0.46 0.13 1.00

0.91 0.46 0.02 0.80 1.00

0.90 0.43 0.02 0.77 0.99 1.00

0.89 0.50 0.04 0.80 0.97 0.98 1.00

0.86 0.53 0.02 0.77 0.90 0.92 0.94 1.00

0.89 0.39 0.09 0.80 0.96 0.97 0.97 0.96 1.00




4 MSCI World NR USD

5 Fairtree Pruden�al Growth Por�olio (Momentum & Glacier)

6 Fairtree Growth MM Por�olio (Investec & Stanlib)

7 Fairtree Growth Por�olio (PPS)

8 Fairtree Smart Beta Growth (Investec)

9 Fairtree Growth MM Por�olio (Allan Gray)

1.00 to 0.80 0.80 to 0.60 0.60 to 0.40 0.40 to 0.20 0.20 to 0.00

0.00 to 0.20 0.20 to 0.40 0.40 to 0.60 0.60 to 0.80 0.80 to 1.00

Correla�on Matrix




Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




CPI+6%

1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30

6.18 12.64 12.093.58 3.58


Looking at the Growth Por�olio much focus will be shi�ed to the equity aspect of the markets and looking at the risk adjusted return the por�olio is right on par, keeping upwith

the market and keeping tact with CPI+6 objec�ve. The flexible mandate of the flexible managers saw a �lt to foreign bonds rather than local bonds to the end of the first quarter. As

the nature of the growth por�olio is to have high equity exposure, what happens in the market plays a significant part in the performance of the por�olio. As Naspers kept

delivering for the first quarter, it drove the market performance, this just shows evidence of how a few stocks in the JSE can drive performance or create a lag. This amplifies

manager choice and diversifica�on to really protect on the downside.

Smart Beta Growth

The por�olio consists of about 51% local equi�es and 15% foreign equi�es. On the local side there is a drag and this can be prescribed to some large market cap share, especially

Naspers that performed excep�onally well in the first quarter, the effect it has on the JSE is mass ive as our market is pre�y much driven by a few large listed companies. The Smart

Beta Fund is designed to not be bias or have a big �lt to any specific share and there will never p ar�cipate in such a large share rally. However over a period this way of inves�ng

into the market has proven that it can generate the outperformance of the JSE over a longer period. This is shown when looking at the 1 year and especially the 3 year

performance. The risk adjusted return from a por�olio point of view proves that there is much value in diversifying asset classes.

Commentary

Fairtree Pruden�al Growth wrap (Momentum & Glacier) Fairtree Growth MM wrap (Investec & Stanlib)

Fairtree Smart Beta Growth wrap (Investec) Fairtree Growth house view (PPS) Fairtree Growth MM wrap (Allan Gray)





REGULATION 28 SOLUTIONS: GROWTH PORTFOLIOS

Fairtree High Growth Solu�ons underlying funds Trailing Returns










PSG Flexible E




Satrix Equally Weighted Top 40 Index B2

Satrix Property Index B1

Corona�on Top 20 P

Foord Equity B2

Foord Interna�onal FF B2

Nedgroup Inv Global Flexible FF B2

PSG Equity F

Foord Equity B4

0.58 2.35 9.581.63 1.63

1.90 1.90

2.52 2.52

0.30 0.30

3.56 3.56

1.58 1.58

2.185.72 5.72

0.57

0.44

4.44

11.18

1.12

9.87

0.28

3.07

19.08

1.49

4.97

5.58

10.74

13.08

10.18

4.70

3.81

0.64

0.72

2.67

4.02

9.08

2.22 2.22

2.66 2.66

4.47 4.47

2.20 2.20

2.49 2.49

1.61 1.61

4.35

13.84

9.48

5.08

3.42

0.92

9.96

1.71 1.712.96 2.47

12.99

8.75

9.75

9.11

10.19

15.50

12.08 11.532.49 2.497.42

0.88 0.889.12 7.52 12.97

4.30 4.306.24 3.97 14.04

4.55 4.550.79 2.14 11.18

0.24 0.243.46 5.08

1.30 1.302.47 1.08


Fairtree High Growth Por�olio (Momentum & Glacier)

Fairtree High Growth Por�olio (PPS)

Fairtree Tax Free Savings MM Por�olio (Investec)

1.21 2.58 8.603.07 3.07

2.05 2.32 9.462.30 2.30

1.19 0.692.17 2.17

Fairtree High Growth Solu�ons Trailing Returns

Time Period: 2015/04/01 to 2017/03/31

1 2 3 4 5 6 7

1.00

0.50 1.00

0.11 0.56 1.00

0.71 0.46 0.13 1.00

0.81 0.28 0.20 0.75 1.00

0.78 0.21 0.31 0.67 0.94 1.00

0.79 0.28 0.22 0.74 0.95 0.97 1.00




4 MSCI World NR USD

5 Fairtree High Growth Por�olio (Momentum & Glacier)

6 Fairtree High Growth Por�olio (PPS)

7 Fairtree Tax Free Savings MM Por�olio (Investec)

1.00 to 0.80 0.80 to 0.60 0.60 to 0.40 0.40 to 0.20 0.20 to 0.00

0.00 to 0.20 0.20 to 0.40 0.40 to 0.60 0.60 to 0.80 0.80 to 1.00

Correla�on Matrix




Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




CPI+6%

1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

6.18 12.64 12.093.58 3.58

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30


Having to bounce back from the Brexit shock, the por�olio has performed reasonable in the last qua rter. As higher risk instruments driven by the equity exposure brings forth the

returns we are looking for, it also hold short term market vola�lity risks. With an outperformance over the JSE All Share over the quarter as well as the year to date period, the

por�olio has performed well in terms of limited space to earn the wanted (desired) returns. The offshore exposure has increased due to the flexible mandate of the core fund

managers within the por�olio construc�on. Asset alloca�on will stay key and we feel that the necessary diversifica�on will over the investment horizon yield the returns needed to

meet the benchmark.

Smart Beta Growth

With a slightly bigger alloca�on to local property than most of our regula�on 28 por�olios, the diversified tracking por�olio has proven to perform in line with peers. A year marked

with difficult circumstances especially in the last quarter, with Brexit noise that led to great instability in global markets. We are awai�ng the US elec�on to play its part in this year

that seem to be marked as the perfect storm as well as US Fed hikes, there is s�ll much uncertainty that needs to play out. The offshore exposure had a difficult last month for the

3�� quarter, with the Rand strengthening. The focus needs to shi� to the term within which the por�olio is set to reach its benchmark and therefore we are fairly confident in the

asset alloca�on to reach the set benchmark.

Tax Free Savings Account

The Tax Free Savings Por�olio has been constructed with a long term view. It mainly focusses on asset alloca�on, with a good blend of offshore and local exposure. Unlike our

regula�on 28 por�olios, we can allocate a bigger por�on to our offshore assets. By making use of tracking funds we can keep the cost down which can add to the performance of

the por�olio over the long term. The por�olio was under pressure because of the Rand strengthening in the last quarter, although there is much to be played out in the last quarter

that can change that. The vola�lity of the offshore market has made for an interes�ng turn of events in the offshore exposure, although we do believe that the Rand might just

weaken a�er all the dust has se�led and the global markets return to normal, which will give back some of what it has taken from the last quarter in performance. With eyes on the

long term the benchmark doesn’t seem out of reach even if the current environment paints somewhat of a different picture.

Commentary





Fairtree High Growth wrap (Momentum & Glacier) Fairtree High Growth house view (PPS)Fairtree Tax Free Savings wrap (Investec)

NONREGULATION 28 SOLUTIONS: HIGH GROWTH PORTFOLIOS

Fairtree Note Solu�ons underlying funds Trailing Returns


Efficient BCI African Flexible Income AReitway BCI Global Property AFairtree Assegai Long Short Equity FundFairtree Select Equity + AlphaWild FigWoodland (leveraged)Fairtree Met Equity B2 + AlphaFoord Flexible FoF RCorona�on Balanced Plus APSG FlexibleThink.Capital GrowthBridge Global Property Income FF AFoord Interna�onal FF RSTANLIB SA Property ETFCorona�on Strategic Income ACashFairtree Select EquityCorona�on Balanced Defensive APruden�al Infla�on Plus ANedgroup Inv Stable ATop 40 Index + AlphaMid Cap + AlphaFoord Interna�onal FF B1Corona�on Global Opp Eq [ZAR] FF AAshburton Global Flexible AFoord Flexible FoF B1Woodland

0.413.85 3.852.54 2.540.46

3.008.65

1.11 6.84

0.582.45 2.454.08 10.642.431.27 1.271.44 14.69

0.842.21

1.70 1.702.58 2.585.14

3.087.297.88

9.84

7.28

1.53 1.53

2.42 2.4211.79

9.97

11.25

14.04

2.672.20 2.205.08 9.759.120.88 0.887.52 12.97

9.002.37 2.378.253.79

1.562.48 2.482.60 7.23

0.502.49 2.493.92 10.70

1.10 8.592.62 2.628.921.29 1.29

0.563.230.75

2.284.80 4.800.46 12.61

0.45 0.55 11.244.35 4.35

3.91 5.45 18.004.45 4.45

1.19 5.55 9.652.05 2.052.21

3.33

4.88

6.98

9.00

8.97

2.79 2.79

2.49 2.49

0.69 0.89 11.224.56 4.56

1.12 3.73 10.164.36 4.36

3.75 7.56 6.771.86 1.86

1.36 4.641.18 1.18

0.88 2.29 4.273.86 3.860.51 5.05 11.431.18 1.18


Fairtree Aggressive GrowthFairtree Alterna�ve EquityFairtree Balanced Mul� ManagerFairtree Best Ideas Balanced GrowthFairtree Best Ideas Cau�ousFairtree Best Ideas GrowthFairtree Capital GuaranteeFairtree Cau�ous Mul� ManagerFairtree Equity Index + AlphaFairtree Expo GrowthFairtree GlobalFairtree Aggressive Growth Mul� ManagerFairtree High GrowthFairtree Select Equity

2.56 2.74 8.073.12 3.12

0.31 1.39 9.081.99 1.990.62 1.09 6.841.95 1.95

2.46 4.91 12.164.61 4.61

1.46 0.47 7.832.73 2.731.87 5.77 8.692.21 2.21

2.95 6.49 8.762.38 2.38

1.88 4.51 4.234.49 4.49

4.26 10.61 8.870.66 0.661.38 0.14 6.672.35 2.35

1.06 4.52 8.582.28 2.28

2.11 3.06 7.492.73 2.73

0.45 0.55 11.244.35 4.35

1.70 2.28 6.872.64 2.64

Fairtree Note Solu�ons Trailing Returns

Time Period: 2016/04/01 to 2017/03/31

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1.00

0.11 1.00

0.20 0.81 1.00

0.44 0.36 0.04 1.00

0.77 0.28 0.08 0.58 1.00

0.83 0.22 0.03 0.63 0.98 1.00

0.68 0.45 0.70 0.45 0.55 0.66 1.00

0.74 0.07 0.28 0.56 0.89 0.91 0.82 1.00

0.63 0.02 0.27 0.46 0.79 0.79 0.70 0.92 1.00

0.70 0.18 0.02 0.56 0.95 0.91 0.60 0.95 0.91 1.00

0.51 0.16 0.05 0.50 0.80 0.75 0.51 0.87 0.93 0.94 1.00

0.72 0.38 0.60 0.38 0.59 0.68 0.92 0.80 0.76 0.63 0.52 1.00

0.89 0.32 0.01 0.69 0.93 0.96 0.64 0.87 0.78 0.89 0.74 0.69 1.00

0.74 0.01 0.25 0.59 0.89 0.90 0.77 0.99 0.95 0.97 0.92 0.77 0.89 1.00

0.51 0.61 0.82 0.26 0.40 0.50 0.94 0.71 0.67 0.47 0.42 0.89 0.46 0.66 1.00

0.79 0.26 0.50 0.50 0.78 0.85 0.94 0.95 0.85 0.81 0.70 0.92 0.81 0.91 0.86 1.00

0.51 0.23 0.00 0.51 0.80 0.75 0.46 0.84 0.93 0.94 0.99 0.50 0.75 0.90 0.38 0.66 1.00

0.82 0.20 0.10 0.72 0.90 0.96 0.71 0.86 0.67 0.82 0.63 0.67 0.93 0.83 0.51 0.84 0.62 1.00




4 MSCI World NR USD

5 Fairtree Aggressive Growth

6 Fairtree Alterna�ve Equity

7 Fairtree Balanced Mul� Manager

8 Fairtree Best Ideas Balanced Growth

9 Fairtree Best Ideas Cau�ous

10 Fairtree Best Ideas Growth

11 Fairtree Capital Guarantee

12 Fairtree Cau�ous Mul� Manager

13 Fairtree Equity Index + Alpha

14 Fairtree Expo Growth

15 Fairtree Global

16 Fairtree Aggressive Growth Mul� Manager

17 Fairtree High Growth

18 Fairtree Select Equity

1.00 to 0.80 0.80 to 0.60 0.60 to 0.40 0.40 to 0.20 0.20 to 0.00

0.00 to 0.20 0.20 to 0.40 0.40 to 0.60 0.60 to 0.80 0.80 to 1.00

Correla�on Matrix (1 year)




Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




CPI+6%

1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

6.18 12.64 12.093.58 3.58

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30


The first quarter of 2017 had us off to a be�er start than the way we ended 2016. It seem that there could return some stability into the markets and the noise in so many different

parts of the world has se�led, although the a�er effect is yet to be made known. We await President Trump’s threats vs reality, the a�er effect of Brexit and all that it holds and

locally what the reshuffle of the cabinet will do when ra�ng agencies revisit their ra�ng this year. Are we out of the woods, well we believe not, but we can see some light at the

end of the tunnel. Regardless of the abovemen�oned, we saw decent returns in the market and many of the hedge funds benefited from this as well. Many of the more aggressive

por�olios keeping in line with the market and some even outperforming the market over the first quarter. The niche element the hedge fund exposure and opportunity that comes

with it, we s�ll believe is a much added value within the RMB note structure. Some important things to be on the watch for the remainder of the year would be interest rates in

South Africa and our poli�cal environment that seem very unstable.

The Mul� Managed Por�olios have been on par for the first quarter of 2017, the equity side of the por�olio exposure has held its own and we are definitely off to a be�er start

than last year this �me. Looking at some of the “big names” in the asset management world we have included Allan Gray and saw Corona�on as a house really ge�ng things right

for the first quarter, with a heavy hand in the upside of the por�olio. Through every risk category Corona�on has realized good returns, from the Balanced Defensive, Balanced Plus

and even the offshore fund, Global Opportunity Equity Feeder Fund. Think Capital that add much diversifica�on from an asset class perspec�ve on its own also got off to a good

start for 2017. The por�olios struggled through last year as the unstable poli�cal environment played its part, as this year we are op�mis�c and believe we can see things

normalize.

The Best Ideas range is exactly that, what we believe the best ideas are. This thought speaks about the belief we have in the fund managers and their ability to deliver returns over

the investment horizon of the por�olios. The hedge fund dominated construct of these por�olios pro vide the opportunity for investors to see performance even when markets are

down. The construct of the por�olios saw the inclusion of the Fairtree Global Smart Beta Prescient Fund in the place of the Satrix MSCI World Equity Index FF, as we feel that this

new smart way of inves�ng can add value over the normal tracker over �me. With the Fairtree Assegai Long Short Equity Fund being closed for new flows we included the Fairtree

Sequoia for direc�onal equity exposure. We s�ll believe that the mul� strategy hedge funds together with the desired offshore and direc�onal equity �lt will see outperformance

for our clients. These por�olio are truly unique and one of a kind within the market, why have the ordinary when you can have something extraordinary?

Commentary





Fairtree Cau�ous Mul� Manager Fairtree Best Ideas Cau�ous

REGULATION 28 SOLUTIONS: RMB NOTE STRUCTURE





Fairtree Alterna�ve Equity

Fairtree Capital Guarantee

Fairtree Aggressive Growth

Fairtree Global Por�olio

Fairtree Equity Index plus Alpha

Fairtree Select Equity

Fairtree High Growth

Fairtree Aggressive Growth Mul� Manager

Fairtree Expo Growth

Fairtree Best Ideas Aggressive Growth

REGULATION 28 SOLUTIONS: RMB NOTE STRUCTURE con�nued

Fairtree Best Ideas Balanced GrowthFairtree Balanced Mul� Manager

Time Period: 2017/01/01 to 2017/03/31

2017/01 2017/02 2017/034.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

FTSE/JSE All Share TR ZAR Fairtree Assegai Long Short Equity Fund Wild Fig

Woodland

Drawdown


Fairtree Assegai Long Short Equity Fund

Wild Fig

Woodland

3.91 5.45 18.004.45 4.45

1.19 5.55 9.652.05 2.05

3.33 6.98 8.972.49 2.49

Fairtree Hedge Funds Trailing Returns

Time Period: 2015/04/01 to 2017/03/31

1 2 3 4 5 6 7

1.00

0.50 1.00

0.11 0.56 1.00

0.71 0.46 0.13 1.00

0.58 0.42 0.26 0.35 1.00

0.34 0.34 0.18 0.42 0.12 1.00

0.50 0.43 0.31 0.42 0.37 0.84 1.00




4 MSCI World NR USD

5 Fairtree Assegai Long Short Equity Fund

6 Wild Fig

7 Woodland

1.00 to 0.80 0.80 to 0.60 0.60 to 0.40 0.40 to 0.20 0.20 to 0.00

0.00 to 0.20 0.20 to 0.40 0.40 to 0.60 0.60 to 0.80 0.80 to 1.00

Correla�on Matrix




Beassa ALBI TR ZAR

STeFI Composite ZAR

MSCI World




1.26

0.23

1.29

2.00

10.35

3.12

8.56

0.63

5.79

4.88 4.88

6.64 6.64

1.95 1.95

1.60

2.64

2.82

3.75

5.65

2.53

1.46

11.02

7.56

4.63

5.98

14.48

7.45

6.77

14.41

3.78 3.78

1.37 1.37

2.49 2.49

1.86 1.86

4.30 4.30


Fairtree Wild Fig Fairtree Woodland Fairtree Assegai Long Short Equity





REGULATION 28 SOLUTIONS: RMB NOTE STRUCTURE Hedge funds

investment report q1 2017 - fairtree private client · 2019. 9. 19. · investment report q1 2017...

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