Francois van WykPortfolio Manager, PSG Wealth Stellenbosch Dorp Street2018 Investment outlook
SPEAKERS
Prof Dirk KotzéPolitical Analyst, UNISA Politic instability and what can we expect in 2018
Johan HugoHead of Portfolio Management, SatrixSatrix: Product range and new ETFs
Willem de VosPortfolio Manager, PSG Wealth Stellenbosch Dorp Street
PSG Wealth’s value proposition to clientsMorning Programme
PSG Wealth’s value proposition 9h00 – 9h15
SATRIX: Product range 9h15 – 9h30
Investment outlook 9h30 – 9h50
Comfort Break 9h50 – 10h00
Prof Dirk Kotzé 10h00 – 11h00
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Our value propositionPSG Wealth Stellenbosch Dorp Street
“A lot of people understand money. How many people
understand families?” - PICTET
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Ons waardeproposisiePSG Wealth Stellenbosch Dorpstraat
“Wanneer dit gaan oor familiegeld, familie
geld”
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A game of odds…… in war and in life
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Are you REALLY qualified to fly
this?
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Flying your financial fighter jet
JSE/FTSE All Share Index
Robo advice
“Political solution”
TRUMP
Pravin says…
Kim Jong Fiat Uno
Bitcoin
Endowment
Retirement annuity
RGS Geldsake
Capital gains tax
ZAR/US$ exchange rate
Ponzi schemes
ETFs
Section 7c
Risk vs Upside
Is my/our will still accurate?
Buy & Sell agreements
Hedge funds
Child moving overseas
PE ratio
Droogte
Warren Buffet
FAIS Act
Sharemax
Estate duty
Tax rate changes
Beneficiary
CFDs
Stockbroker
Property funds
“Actual inflation”
Brexit
Sanlam
Discovery
Investec
Allan GrayMoneyweb
Mediclinic
Probate
LISP
Volatiliteit
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What we offer at Dorp Street
Investment Advice
Financial Planning
Stockbroking and Online Trading
Asset Management
Short term Insurance
Fiduciary service
Portfolio Management
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Estimating the life of capital
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Financial PlanningAsset Allocation
Property23% Business
Assets6%
Share Investments
47%
Unit Trusts
0%
Retirement Funds14%
Vehicles3%
Other, Funiture,
Jewellery etc.7%
R 9980 000 , 75%
R 3327 320 , 25%
Local Offshore
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Financial PlanningEstate Planning
Notes:- Need to review will.
Joint Estate72%
Trust28%
Estate Duty Estimate:
Total Assets in joint estate 15 548 320R
Plus: Deemed Assets (i.e. life cover) 14 340 495R
Plus: Loans to Trust -R
Less: Retirement Funds 2 661 000R
Less: Trust Assets 3 750 000R
Dutiable Assets: 23 477 815R
Less: Master's fees & Admin costs 10 000R
Less: Executor's fees 434 340R
Less: Outstanding debt 1 780 000R
Less: Tax (CGT) 1 173 891R
Net Estate: 20 079 585R
Less: Abatement (sec 4A) 7 000 000R
Dutiable Estate: 13 079 585R
Estate Duty Payable @ 20% 2 615 917R
Estate Structure:
Joint Estate 10 018 320.00R
Trust 3 750 000.00R
Total Tax Payable at death: 4 224 147R
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Small decisions | Major effects
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Our Value PropositionHelping you to be a world class pilot
Ongoing Maintenance & Annual Review
Being Foxy
Having a relevant will, trusts vs companies, local vs offshore
Implementation
Asset class – Portfolio/Fund selection
Changing the maze into a flight plan – choices, risks, products, tax, liquidity, tax, currency, timing
Matching your assets to your life events
Understanding you
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Our proposition to you … a true family officeWhat does the research say?
Sources: JP Morgan Asset Management, “The Wealth Management Report”, Dec 2013; Strategic Wealth
Gives me access to a full ecosystem of credible solutions
Be interested in me, not just my money
Make me part of the decision making -
a partnership
One trusted adviser who is backed up by a
team of specialists A business that looks after all of my family’s
wealth needs
One simple picture of my finances
Add value for the fees I pay
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PSG Wealth Stellenbosch Dorp Street
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Independence
Fair fees
Continuity
Absolute confidentiality
A safe pair of hands
Peace of mind & a life enjoyed
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#wêreldklaskoffie
PSG Private Wealth Investment Seminar
Johann Hugo
2 November 2017
Our World
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Satrix capabilities
Indexing Factor investing Multi-asset International
We deliver low-costoptions for your chosenindex or return objective
Focus on minimising TE
Ensure investability and liquidity
Which factors can you take advantage of in the South
African market?
Our approach combines our philosophy, market insights and
quantitativeresearch
We create multi-asset solutions that offer diversified exposure to various local and international
asset classes
Our allocations are static
We employ the power of factor investing
Our international fundsprovide you with low-
cost exposure to various geographies across world
equity markets
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Fast Facts
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What is an ETF?
an investment fund tracking an index
listed on an exchange
trading daily during market hours like any share
priced around the NAV (net asset value) at all times
to replicate the performance of the index
at low cost
Satrix Product Overview – Global ETFs
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International equities JSE code Index tracked
Satrix MSCI World STXWDM MSCI World Developed Markets
Satrix MSCI Emerging Markets STXEMG MSCI Emerging Markets IMI
Satrix S&P 500 STX500 S&P 500®
Satrix Global ETFs replicate the specific index by investing in
BlackRock iShares Core series UCITS ETFs.
Satrix MSCI World ETF
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The MSCI World Index represents
large and mid-cap companies across
23 developed markets globally. The
index covers approximately 85% of the
free float-adjusted market
capitalisation in each country.
as at 27 October 2017
Source: MSCI
USA59.2%Japan
8.9%UK
6.5%
France3.9%
Germany3.6% Other
18.0%
Index Country Weights
Satrix Emerging Markets ETF
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The MSCI Emerging Markets
Investable Market Index (IMI)
represents large, mid and small
cap companies across 23
emerging market countries.
The index covers approximately
99% of the free float-adjusted
market capitalisation in each
country.
as at 27 October 2017
Source: MSCI
China29.7%
S. Korea15.3%Taiwan
11.8%
India8.6%
Other28.7%
Index Country Weights
Satrix S&P 500 ETF
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as at 27 October 2017
Source: S&P Dow Jones
IT 24.1%
Financials14.7%
Healthcare14.2%
Consumer Discretiona
ry 11.9%
Industrials10.1%
Index Sector Weights
The S&P® Index is widely
regarded as the best single gauge of
large-cap US equities. There is over
USD7,8 trillion benchmarked to the
index, with index assets comprising
approximately USD2,2 trillion of this
total. The index includes 500 leading
companies and captures
approximately 80% coverage of
available market capitalisation.
Consumer
Staples
7.9%
Energy, 5.8%
Utilities, 3.2%Real Estate, 2.9%
Materials, 2.9%Telecommunication
2.0%
Index Performance Data (in Rand)
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Net Total Return 1 Year (%) 3 Years (% p.a.) 5 Years (% p.a.)
MSCI World Index 16.22% 14.25% 22.48%
MSCI Emerging Markets IMI 28.44% 14.29% 14.75%
S&P 500® Index 16.65% 17,57% 26.05%
FTSE/JSE Top 40 Index (TR) 11.81% 6.86% 12.64%
Source: MSCI, S&P Dow Jones, Profile Data Index returns for periods longer than 1 year are annualised
to 30 September 2017
Comparative Data
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Product Index TrackedProduct
Type
Annual Total Expense
Ratios (TERs)
Satrix MSCI World MSCI World ETF 0,35%*
Satrix MSCI Emerging
Markets
MSCI Emerging Markets
Investable MarketETF 0,40%*
Satrix S&P 500 S&P 500 ETF 0,25%*
*targeted - the TERs for the new Satrix ETFs will be calculated after 1 year
Satrix capabilities
Indexing Factor investing Multi-asset International
We deliver low-cost
options for your chosen
index or return objective
Focus on minimising TE
Ensure investability and
liquidity
Which factors can you take
advantage of in the South
African market?
Our approach combines our
philosophy, market
insights and quantitative
research
We create multi-asset
solutions that offer diversified
exposure to various local and
international asset classes
Our allocations are static
We employ the power of
factor investing
Our international funds
provide you with low-
cost exposure to
various geographies
across world equity
markets
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Different factors relevant in SA market
Factor exposure Weight Role in portfolio
Price Momentum 25% Exposure to stocks with strong price trend
Earnings Momentum 25% Fundamental validation of price momentum signal
Value (Yield) 25%Strong income component
Quality 25% Defensive during periods of market stress
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Factor building blocks | Performance summary
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Dividend plusStable
dividendQuality Momentum
Equallyweighted
Size (Midcaps)
Size (Smallcaps)
SWIX
Q3 8.5% 2.6% 9.6% 10.8% 5.8% 3.8% 3.0% 7.0%
1yr 10.1% 7.6% 8.9% 11.9% 1.6% -2.8% -0.1% 7.0%
3yr 3.8% 10.5% 6.2% 10.7% 4.1% 7.1% 7.1% 7.4%
5yr 6.1% 13.1% 10.5% 17.8% 8.4% 10.4% 13.7% 12.8%
10yr 9.9% 13.2% 14.6% 14.0% 8.8% 11.5% 9.8% 10.6%
-5%
0%
5%
10%
15%
20%
Q3 1yr 3yr 5yr 10yr
Smartcore* | Performance summary
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-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
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04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
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Monthly excess returns Rolling 12m excess returns
Monthly and 12m rolling relative returns of Smartcore *Smartcore is a ‘best view’ equity
factor blend:
50% Momentum
25% Quality
25% Stable Dividend
• Recent performance vs. SWIX
has improved (2.8% over 12m)
• Struggle in Momentum factor in
2016 was offset by strong
performance of Stable Dividend
Satrix highlights
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Launch of International ETFs
Launch of Quality ETF? Best African Fintech company 2016 & 2017
Current AUM | R420m
Current AUM | R35m
Thank you
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03 | Investment Outlook
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S&P500Where to from here?
Iriss
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History of US Bear & Bull Markets since 1926Average Bull Market lasted 9 years with cumulative total return of 472%
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S&P500: Attribution Analysis of ReturnsSince March 2009, 8.6yr Bull Market gained 311% or 17.5%p.a.
Deutsche Bank
40%
30%
16%22%
27%
5% 8% 8%
20%
-43%
-3%
3%
2%
10%
17% 9%
-6%
7%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
2009 2010 2011 2012 2013 2014 2015 2016 YTD
EPS growth Rating change Share price performance
Rating change: -12.7%Earnings growth 269.6%
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S&P500: Where to from here?Where to from here?
Iriss
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Buffet’s Summary of Market Drivers
TWO CRITICAL ECONOMIC VARIABLES
1. Interest Rates
2. Profitability
ONE PSYCHOLOGICAL FACTOR
1. Sentiment
Warren Buffet: Fortune 2001
RATIONAL
BEHAVIOURAL
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Current Investment Environment
• Fundamentals looking decidedly more positive than a year ago
• US economic leadership, Chinese economic soft landing & European and Japanese
economic stability and even some economic growth
• Banking sector has started to extend loans again after recapitalisation & compliance
with new regulations (TARP)
• Global economic growth reasonable (2017: 3.5%) and accelerating (2018: 3.6%)
• Interest rates still very accommodative despite rising trend
• Investor sentiment becoming perhaps too complacent?
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Business Cycle & Asset Class returnsUS economy now in full expansion & SA in weak recovery
Deutsche Bank
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Bear markets are triggered by …
• Oncoming recession (earnings growth)
• A policy mistake (interest rate hikes)
• Inflation shock (interest rate hikes)
• Investor exuberance/Speculative valuations
• Geopolitical shock
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Bitcoin A real currency or Tulip mania?
YouTube
• Please see the following URL for the video that was on this slide:
- https://www.youtube.com/watch?v=40OuVyVGdIM
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Bitcoin A currency or Tulip mania?
• It looks and trades more like Tulip balls
• It has no fundamental underlying value
• Cryptocurrency & Blockchain technology is useful
• The currency of a country is backed by the economy & foreign reserves of that country.
It’s your legal tender!
• Please don’t be fooled into this hype. If you do, you are on your own. PSG cannot trade
Bitcoins
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04 | Political instability – what to expect
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Political Instability
• Prof. Kotzé’s slides were in shorthand and limited to explaining what he was discussing.
• It would not make sense to anyone that is not well versed in what he was discussing at
the seminar.
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FAIS Affiliates of the PSG Konsult Group are authorised financial services providers.