The objective of the 1NVEST SA Property ETF is to track the SA Listed Property Index (SAPY), as closely as possible.

The STANLIB SA Property ETF will change it's name to 1NVEST SA Property ETF, effective from 01 November 2019

Fund review

The fund has performed in-line with its benchmark over the quarter. The last FTSE/JSE rebalance saw the deletion of Accelerate Property and the addition of Storage Property. The fund benefitted from its exposure to Sirius Real Estate, which returned 14.3%, together with Investec Australia Property Fund and NEPI Rockcastle, which were the other top performers. However, exposure to MAS Real Estate, Attacq Limited and Redefine Properties detracted from performance, as these were the three worst performers. MAS Real Estate returned -23.0% over the quarter.

Market overview

Post a strong run of equity markets across the globe in the first half of 2019, global markets have since slowed down due to increased tension in the trade wars and continued slowdown in global economic data. Europe and USA continued with monetary easing to offset economic slowdown. Returns have hence been flat for the quarter apart from the emerging markets, with the MSCI World at 1.1% and MSCI EM at -2.1% for the quarter. Locally, GDP was 3.1% Q/Q in Q2 2019 reversing the Q1 2019 contraction, SARB cut rates by 25bps in line with census in their July meeting but left it unchanged in September. The national treasury published a white paper on structural reform including SOE reform, marking one of the first signs of structural reforms in the new Presidency. Locally, domestic asset classes such as equities (SWIX ALSI), bonds (ALBI), and cash (STeFi) recorded mixed returns of -2.14%, 1.5% and 1.8% respectively.

Looking ahead

Against the backdrop of slowing global economic growth, a pause in trade war, could provide some relief to the financial markets. But if trade uncertainty continues posing a significant drag on business and consumer confidence, we expect risk aversion will rise as the ability of developed markets and vulnerable emerging economies to weather the impact of trade wars remains uncertain. Additionally, emerging economies with sizeable dollar debts and fiscal deficits may struggle. Locally, uncertainty will remain high until the government provides evidence that SA’s economic policy and reforms are heading in the right direction for future growth. We believe investors should focus on liquid markets segments with risk dialled down compared with market benchmarks.

The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.

Fund review

The fund has performed in-line with its benchmark over the quarter. The last FTSE/JSE rebalance saw no changes in constituents, but changes to shares in issue and free-float. The fund benefitted from its exposure to Fortress REIT A, which returned 16.9%, together with Resilient and Investec Australia Property Fund, which were the other top performers. However, exposure to the SA Corporate Real Estate Fund, Attacq Limited and Redefine Properties detracted from performance, as these were the three worst performers. The SA Corporate Real Estate Fund returned -14.3% over the quarter.

Market overview

In the second quarter of 2019, equity markets continued to shrug off any negative sentiment arising from the second half of 2018. The majority of equity markets across the globe recorded strong positive returns in the first half of 2019, with the MSCI World Index recording 15.6%, MSCI Emerging Markets recording 9.2% and the South African equity market as represented by FTSE/JSE Shareholder Weighted Index recording 9%. Global growth continues at a slower pace with many of the major economies progressing to later stages of the business cycle. The less hawkish Fed and the pause in trade wars provided some relief for financial conditions but the era of easy money has shifted towards gradual tightening of monetary policy. Locally, Cyril Ramaphosa led the ANC to a win in the national elections promising tighter reforms and improved governance at struggling state owned entities. But, weak first quarter GDP dominated post-election headlines. Locally, domestic asset classes such as bonds (ALBI), property (PCAP) and cash (STeFi) recorded gains of 3.7%, 4.5% and 1.8% respectively.

Looking ahead

Against the backdrop of slowing global economic growth, pause in trade war and a less hawkish Fed, there is potential for some relief to the financial markets. But if trade
uncertainty continues posing a significant drag on business and consumer confidence, we expect risk aversion will rise as the ability of developed markets and vulnerable
emerging economies to weather the impact of trade wars remains uncertain. Additionally, emerging economies with sizeable dollar debts and fiscal deficits may struggle.

After more than two years of steadily rising interest rates, 2019 could mark the peak for US treasury yields for the current business cycle, however the road ahead is likely to remain bumpy. Locally, uncertainty will remain high until the government provides evidence that SA’s economic policy and reforms are heading in the right direction for future growth. We believe investors should focus on liquid markets segments with risk dialled down compared with market benchmarks.

The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.

Fund review

The fund performed in line with its benchmark for the quarter. The last FTSE/JSE rebalance saw the replacement of Rebosis Property Fund by the Hospitality Property Fund (B), as well as changes to shares in issue and free-float. The fund benefited from its exposure to NEPI Rockcastle, which returned 7.5%, together with Fortress REIT A and Growthpoint, which were the other top performers. However, exposure to Fortress REIT B, Hyprop Investments and Redefine Properties detracted from performance, as these were the three worst performers. Fortress REIT B returned -20.4% over the quarter.

Market overview

In the first quarter of 2019 equity markets shrugged off any negative sentiment arising from the second half of 2018. The majority of equity markets across the globe recorded strong positive returns, with the MSCI World Index recording 13.5%, MSCI Emerging Markets recording 11.1% and the South African equity market, as represented by FTSE/JSE All Share Index, recording 8%. Global growth continues at a slower pace with many of the major economies progressing to later stages of the business cycle. The less hawkish Fed provided some relief for financial conditions but the era of easy money has shifted towards gradual tightening of monetary policy. Locally, Eskom and corruption in other SOE’s remain in the headlines as domestic asset classes such as bonds (ALBI), property (PCAP) and cash (SteFi) recorded gains of 3.8%,1.73% and 1.9% respectively.

Looking ahead

Against the backdrop of slowing global economic growth, there is potential for trade uncertainty to continue, resulting in higher prices and a significant drag on business and consumer confidence. We expect risk aversion will rise as the ability of developed markets and vulnerable emerging economies to weather the impact of trade wars remains uncertain. Emerging economies with sizeable dollar debts and fiscal deficits may struggle. After more than two years of steadily rising interest rates, 2019 could mark the peak for US treasury yields for the current business cycle, however the road ahead is likely to remain bumpy. Locally, uncertainty will remain high until the widely anticipated national election provides some direction on the future of SA’s economic policy. We believe investors should focus on liquid market segments with risk dialled down compared with market benchmarks.

The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.

Fund review

Since inception the fund has performed well against its peer group and in-line with its tracking benchmark. The September FTSE/JSE rebalance saw the replacement of Greenbay Properties Ltd by Stenprop Limited as well as shares in issues and free float changes. Though property was the best performing asset class in South Africa over the last 15 years, we remain positive on future returns as currency and income diversification has increased in the sector over the recent past. This year thus far, the sector was unsettled by events surrounding Resilient and it’s three sister companies, namely, Fortress REIT Ltd; Nepi Rockcastle and Greenbay Properties, however, we expect that in the long term the fund will provide healthy returns that surpass both government bonds and cash through the cycle.

Market overview

Over the third quarter US equities led, driven by the strong growth environment and confidence in the US economy. In contrast to the attractive returns of US equities, fixed income returns have been uninspiring. Strong US data has kept the Fed on track to hike rates. Global growth has however not been as synchronised as last year. UK markets have been sensitive to suspicions of a no-deal on Brexit, and there has been a slowdown in manufacturing in the Eurozone, led by fewer exports into China. The rebound in the US dollar has made emerging markets especially vulnerable to negative sentiment and fear. Dollar denominated assets took the lead over local assets as the Rand lost 3.03% to the Dollar over the third quarter. In Rand terms foreign equity delivered the highest returns (MSCI World +8.17%) and outperformed foreign bonds (Barclays Global Treasury Bond Index +1.26%). In South Africa the second quarter saw a decline in consumer confidence and an increase in consumer spending. Cash (STEFI +1.74%), bonds (ALBI +0.81%) and inflation-linked bonds (ILBI +0.44%) outperformed both property (PCAP -2.22%) and equities (SWIX -3.34%). Seasonally adjusted GDP shrunk for a second consecutive period, driven by falling output from agriculture, transport and trade.

Looking ahead

Against the backdrop of strong US economic growth, there is potential for the trade conflict directed from the US to deepen, resulting in higher prices and a significant drag on business and consumer growth, and ultimately global growth. While growth appears healthy currently, we expect risk aversion to rise as the ability of developed markets and vulnerable emerging economies to weather the impact of trade wars remains uncertain. Additionally, emerging economies with sizeable dollar debts and sizable fiscal deficits may struggle. We believe investors should focus on liquid markets segments with risk dialled down versus market benchmarks.

The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.