2018 Turned out to be a year that most investors would want to forget. It has been 10 years since the Global Financial Crisis and our equity market is set for its worst year since 2008. Some of the key take aways from the year influencing the global and local investment landscape listed below.
- Ramalution: From Ramaphoria to Ramapessimism to Ramarealism as South Africa entered recession and fiscal policy flip flops between the Budget and the MTBPS
- Unthinkable: The ANC government hiked the VAT rate for the first time in 25 years and second time ever since introduction, putting even more pressure on tight-belted SA consumers
- Valentine’s day treat: Zuma resigns on 14 February and Ramaphosa takes over and puts through a compromise cabinet reshuffle
- Commissions: The Nugent Commission on SARS leads to Moyane’s dismissal, court upholds Ramaphosa’s decision; The Zondo Commission on State Capture gets its first victim with Nene’s resignation
- Revolving door: Nene is replaced by Tito Mboweni, making him SA’s 6th finance minister in 4 years (Nene/Van Rooyen/Gordhan/Gigaba/Nene/Mboweni)
- Lawyers: Shaun Abrahams kicked out as head of the NPA, replaced by Shamila Batohi – ex-ICC in the Hague, ex-KZN NPA
- Property rights: ANC follows through on changing the constitution to allow for land expropriation without compensation
- Lights out: Eskom back in the spotlight amid renewed load-shedding and balance sheet burdens
- Independent: EFF and ANC resolutions threaten SARB independence, but governors stood firm as SARB does what it wants – cutting rates in March only to reverse the easing in November despite CPI inflation around 4.5% and growth tracking sub-1%
- Opposition own-goals: DA’s fall from grace with in-fighting, the De Lille saga and strategy blunders; VBS debacle fells the EFF
- Land mines: Global markets drive SA equity de-rating leaving the ALSI with the worst YTD performance since 2008, but we cannot forget the SA-specific implosions – NEPI Rockcastle (Viceroy report accusing them of accounting irregularities), Aspen (leverage), Mediclinic (disappointing results and repeated profit warnings), Tigerbrands (listeriosis), British American Tobacco (FDA regulations) and MTN (Nigerian fines)
- Trade tariffs and taxes: From trade wars – Trump tariffs on washing machines and solar panels, then on steel and aluminium, and later on a broad range of goods from China – to trade truce –G20 gives 90 day reprieve. Trump delivers on tax cuts, but does not realise tariffs are like tax hikes
- Fed follows through: FOMC hikes on strong US economy and tightening labour market, even if Trump goes from loving Powell to regretting his appointment
- Fed hikes foil fickle EMs: US hikes and strong US dollar put EM FX under pressure, with Argentina and Turkey currency collapses forcing the reserve banks to hike rates aggressively, causing spill-overs to twin-deficit countries like Brazil and South Africa
- Equities hit a wall: US equity market drifts higher for most of the year as other markets retrace, but slumps in October as yields spike
- Turm-Oil: Oil price surges to over US$80/bbl and then slump to below US$60/bbl on OPEC+ production swings, increasing US oil independence, and Iran sanctions waivers
- Messy EU politics: After long-forgotten Grexit, we faced Italexit, Macron’s tax blunders and the tedious process of Brexit as May could be facing a no confidence vote
- 007: Mr Bond says it is time for a recession as the yield curve near inversion as markets start betting on the Fed being done, raising late-cycle fears despite highly variable lags in the past and the still-distorting impact of global QE on bond markets
- Populism: In 2017 global growth accelerated despite populism, but in 2018 populism finally bites into the growth momentum
- U-turn: Following robust asset class performance in 2017, 2018 shapes up to be a very poor year across all asset classes practically every one producing sub-inflation returns
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 4 if one compares it against all funds in the General Equity space (124 funds) since inception with annualised performance of 6.1% and achieving Swix +2.2% over this period.
- Sanlam Select Defensive Balanced Fund achieved a return of CPI+3.25% since inception exceeding investment objectives (CPI+3%). The fund is ranked number 1 out of 91 funds since its inception with annualised performance of 8.4%.
- 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 8.1% 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 and it should be in 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 13 months.
- Matrix NCIS Fixed Income Retail Hedge Fund has returned 10.4% to investors over the last year, providing an annualised return over the last 10 years of 15.7%.
- Matrix NCIS Multi Strategy Retail Hedge Fund has returned 11.6% since inception. Over time the fund has no correlation to the equity market, low correlation to bonds, and achieves well against both asset classes since inception.