With only 22 days to go until South Africa’s sixth democratic elections and a slew of public holidays, local markets seemed to have gone into limbo. There is a lack of conviction of what the election results will be and, more importantly, what they would mean. Most voting polls suggest that the ANC should win, but there are mixed views on what the margin will be and what this will mean for President Ramaphosa’s reform mandate.
To be sure, since taking over as President in February 2018, Ramaphosa has been in a catch-22: he has had to keep the unions and various ANC factions on side, while trying to do what is best for the country. It is hoped that once the election is done and dusted, he will be freed of this bind.
While investors have remained on the side-lines, not wanting to take large positions ahead of key event risks, the markets have continued to make steady gains. The ALSI has returned 12.3% (total) year-to-date, the ALBI is up by 4.9%, and the rand is almost 3.0% stronger against the dollar. Even South Africa’s 5-year credit default swap spread has declined by 40bp. This is surprising in the context of a potential GDP contraction in 1Q19 and intermittent and severe load shedding.
It may just be that we are all fatigued by the same old issues plaguing the country: power cuts, protests, Eskom’s debt spiral, populism, and weak confidence. Even Moody’s decided not to review the sovereign in March. The economy is going nowhere slowly and with that the credit rating. But hey, you cannot beat SA’s weather (or Rugby Sevens team).
So do all these factors feature in voting considerations? Does the electorate care about tourist visas, the Zondo commission, state capture, Moody’s, WGBI and electricity? The recent escalation in service delivery protests would suggest that these things matter to people. So even if the ANC is set to win, these elections will be hotly contested – there are a record 48 parties on the national ballot paper alongside a myriad of provincial-only parties. Would greater competition and voter apathy/disillusionment penalise the ANC? Potentially. We are transitioning from liberation politics to coalition politics. Only time will tell whether President Ramaphosa will reform to transform the economy. In the meantime, spare a thought for India’s Election Commission that is running a five-week national election for 900 million voters.
Headline Information of the Matrix Funds
LONG FUNDS: (Inception date 1 June 2014)
- Matrix NCIS Equity Fund has SWIX TR as a benchmark and continues to do well against peers as well as the benchmark index. The fund ranks number 3 if one compares it against all funds in the General Equity space (123 funds) since inception with annualised performance of 7.8% achieving Swix +2.2% over this period.
- Sanlam Select Defensive Balanced Fund achieved a return of CPI+3.3% since inception exceeding investment objectives (CPI+3%). The fund is ranked number 1 out of 91 funds since its inception with annualised performance of 8.3%.
- Sanlam Select Bond Plus Fund has outperformed the ALBI since inception by 0.2% per annum. The fund is ranked number 7 out of a universe of 27 funds over the same period with annualised performance of 8.5% since inception.
- Sanlam Select Absolute Fund has a very short track record under management of Matrix Fund Managers. We took over the management of this fund in October 2017. The supplemental deed of the fund is being changed to the Medium Equity category. Comparing the short track record against peers shows a promising start. If you were to look in Morningstar, for example, the fund has a longer track record but we are only responsible for the last 17 months.
- Matrix NCIS Fixed Income Retail Hedge Fund has returned 15.8% since inception. The fund achieved annualised returns of performance of 11% over the last 3 years outperforming Equities with no correlation.
- Matrix NCIS Multi Strategy Retail Hedge Fund has returned 11.8% since inception. Over time the fund has no correlation to the equity market, low correlation to bonds, and performs well against both asset classes since inception.
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