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Sanlam portfolios take the lead

| Market Insights

21st Raging Bull Awards, January 2017

Several Sanlam portfolio managers brought home accolades for being the top performers in their fund categories after the 21st Raging Bull Awards ceremony held in Johannesburg on Wednesday, 25 January. The prestigious Raging Bull Awards ceremony recognises the top managers in the South African unit trust industry, measured on their long-term performance. Awards for asset-specific categories of funds are based mainly on straight performance, calculated by Profile Data for the three-year period to end 2016. The winners were the Sanlam Investment Management (SIM) Enhanced Yield Fund, the SIM Small Cap Fund and the SIIP India Opportunities Fund.

It was not the first time the SIM Enhanced Yield Fund was named the best SA Interest Bearing Short Term Fund. It had also received the honour of being first in its category in 2014. The fund is managed by Melville du Plessis, a Chartered Financial Analyst (CFA), and also a certified Financial Risk Manager and Chartered Alternative Investment Analyst.

Melville says the track record of the fund demonstrates its ability to outperform during increasing and decreasing interest rate cycles, as well as in favourable and unfavourable credit market environments. Its benchmark is the STeFI + 0.5%, but since its launch in May 2011 the SIM Enhanced Yield Fund has beaten the STeFI by 1.36% p.a., which is an unusually large outperformance for a fixed interest fund, limited to cash, government, corporate and inflation-linked bonds. One of the ways the fund avoided underperformance was by having either no or very limited exposure to counters such as African Bank and First Strut.

The SIM Enhanced Yield Fund is actively managed, and the enhanced yield is pursued by using a combination of interest rate and credit opportunities. Credit added roughly 45% of the outperformance and interest rate management about 55% of the outperformance during 2016, while the two components add value fairly equally over the long term. Although it’s impossible to have perfect foresight with regards to what the future holds, Melville believes that appropriate risk management and avoiding undue concentration risk is one of the most efficient ways to avoid underperformance. The highest and lowest annual returns since launch have been 10.43% and 5.51% respectively.

For the second year in a row, the SIM Small Cap Fund, managed by Vanessa van Vuuren, won the top accolade in the Best SA Equity Smaller Companies Fund category. Vanessa is a CFA charter holder and holds two honours degrees – one in Organisational Psychology and one in Financial Analysis and Portfolio Management. She credits the success of the fund to the extent of the SIM equity team’s coverage and the strong research culture embedded within the team.

Because the small-cap sector is generally under researched in the industry, Vanessa says there are ample undervalued companies – and hence exciting opportunities – in the sector. She ascribes a significant part of the outperformance of the fund to the appropriateness of the mandate, which allows her to invest in early-stage smaller companies.

The returns over the three years considered by the Raging Bull Awards were driven by the SIM Small Cap Fund’s selection of smaller companies based on the strength of their business models, their implicit growth potential and the price SIM was paying for the potential. Examples of companies that performed well over this period include Adapt-IT (50% p.a.), Advtech (41% p.a.) and Curro (22% p.a.).

All SIM’s funds are driven by one house view process, and the awards reaped by the SIM Enhanced Yield and Small Cap Funds demonstrate that SIM owns superior fixed interest and equity capabilities.

The SIIP India Opportunities Fund is an Irish-domiciled international equity fund investing predominantly in Indian Equities, or in companies mainly operating in India. It is managed by Sanlam Investment Management (Pty) Ltd.

Disclaimer: All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate advice after a thorough examination of a particular situation. We endeavor to provide accurate and timely information but make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information or opinions. Any representation or opinion is provided for information purposes only. Unit trusts are generally medium to long-term investments. Past performance of the investment in no guarantee of future returns. Unit trusts are traded at a ruling price and can engage in borrowing and scrip lending. Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Radius Administrative Services (Pty) Ltd (“Radius”), Blue Ink Investments (Pty) Ltd (“Blue Ink”), Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Private Wealth (Pty) Ltd (“SPW”) and Sanlam Employee Benefits (Pty) Ltd (“SEB”), a division of Sanlam Life Insurance Limited; and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) and Satrix Managers (RF) (Pty) Ltd (“Satrix”). Although all reasonable steps have been taken to ensure the information in this document is accurate, Sanlam Collective Investments (RF) (Pty) Ltd (“Sanlam Collective Investments”) does not accept any responsibility for any claim, damages, loss or expense; however it arises, out of or in connection with the information. No member of Sanlam gives any representation, warranty or undertaking, nor accepts any responsibility or liability as to the accuracy of any of this information. The information to follow does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Services Act. Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision. Sanlam Group is a full member of the Association for Savings and Investment SA (ASISA). Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager, Sanlam Collective Investments, and a registered and approved Manager in Collective Investment Schemes in Securities. The maximum fund charges for the SIM Small Cap Fund include (including VAT): An initial advice fee of 3.42%; initial manager fee of 0.00%; annual advice fee of 1.14% and annual manager fee of 1.71%. The most recent total expense ratio (TER) is 1.76%. The maximum fund charges for the SIM Enhanced Yield Fund include (including VAT): An initial advice fee of 0.34%; initial manager fee of 0.00%; annual advice fee of 1.14% and annual manager fee of 0.47%. The most recent total expense ratio (TER) is 0.49%. The yield on the SIM Enhanced Yield Fund is a current yield (9.11% at 31 Dec 2016) and is calculated daily. Income funds derive their income from interest-bearing instruments, which are any assets, such as a corporate or government bond, stock or money market instrument that pays regular, periodic interest to the investor. The maximum fund charges for the SIIP India Opportunities Fund include: An entry fee of 5.00%; a 0.00% exit charge; a switching charge of 2.00%; annual fund charge of 1.98%. International investments or investments in foreign securities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002. International investments or investments in foreign securities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments Scheme.

The SIIP India Opportunities Fund is a sub-fund of the Sanlam Universal Funds plc, an open-ended umbrella type investment company, with segregated liability between its sub-funds, authorised by the Central Bank of Ireland, as an undertaking for collective investment in transferable securities under the European Communities (UCITS) Regulation, 2003 as amended (the Regulations). It is managed by Sanlam Asset Management (Ireland) Limited, Beech House, Beech Hill Road, Dublin 4, Ireland, Tel +353 1 205 3510, Fax +353 1 205 3521 which is authorised by the Central Bank of Ireland, as a UCITS IV Management Company & Alternative Investment Fund Manager and is licensed as a Financial Service Provider in terms of Section 8 of the South African FAIS Act of 2002. Sanlam Investment Management (Pty) Limited (SIM) is the Investment Manager, responsible for managing the Fund’s investments. Changes in exchange rates may have an adverse effect on the value, price or income of the product. The Sanlam Universal Funds plc full prospectus, the Fund supplement and Key Investor Information document is available free of charge from the Manager, the Investment Manager or at www.sanlam.ie. Any offering is made only pursuant to the relevant offering document, together with the current financial statements of the relevant fund, and the relevant subscription application forms, all of which must be read in their entirety together with the Prospectus, Supplements and the KIID. No offer to purchase securities will be made or accepted prior to receipt by the offeree of these documents, and the completion of all appropriate documentation. variable market factors. The Manager has the right to close any Portfolios to new investors to manage them more efficiently in accordance with their mandates if stated in the Supplement. The portfolio management of all the portfolios are outsourced to Regulated and authorized financial services providers.

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