Listen to the show on Spotify and Apple Podcasts:

And on YouTube:

Portfolio construction is clearly a passion point for Nico Katzke of Satrix. He’s also a fan of analogies, so you can expect to learn about whether it’s the elephant or the mouse that swings the bridge that they are crossing.

But beneath the fun, there’s a serious learning opportunity here about how asset allocation drives the returns in a multi-asset balanced fund. Identifying the elephant is a very important part of the process.

This is true even during a period of heightened geopolitical noise, giving us great reminder about the importance of a long-term lens and an anchored strategy.

With reference to the detailed strategic asset allocation document that Satrix makes available to the market, Nico explains the thinking behind the Satrix Balanced Index Funds.

In this episode:

00:00 Intro

01:30 Setting the scene: Satrix’s balanced funds and multi-asset strategies

03:45 Understanding the top-down process

06:05 How asset allocation drives long-term returns

06:40 The elephant, not the mouse

08:30 Placing balanced funds on the risk spectrum

09:32 Looking at the asset buckets in more detail

11:55 Low-cost vehicles as the building blocks

12:31 Overview of current exposure

15:16 Methodology used to assess different asset classes

19:41 Responding to changes in the geopolitical context

26:17 South Africa’s relative attractiveness

28:37 Closing thoughts

30:07 Disclaimer

This podcast is in partnership with Satrix.

Transcript:

The Finance Ghost: Welcome to this episode of the Ghost Stories podcast. We are heading rapidly towards the end of the year. Only a couple of months left. That gives us a good opportunity to talk about some of the stuff going on out there, but also just to understand how pro investors think. 

To do that today, we have Nico Katzke from Satrix.  

Nico, you’ve been on here a million times. You’ve been a busy man this year. You’ve been travelling, you’re a voice that is well known to the Ghost Mail audience, and you always bring us so much cool stuff.  

Welcome, and thanks for making some time.  

Nico Katzke: Yeah, it’s great to be back on the pod. Good to chat to you again, Ghost. Looking forward to today. 

The Finance Ghost: So, among other things, we’re going to talk about the Satrix Balanced Fund. As prep for this, I’m aware that you sent a 30-page strategic asset allocation (SAA) document to clients recently, which is quite a thing. Very interesting.  

That means that it is anything but passive investing. This is a fund that you, at Satrix, put a lot of effort into managing and how you actually go about it. So, we’re going to focus on that today.  

Maybe before we go into the details and some of the excellent insights that sit behind the strategy, perhaps just give us a quick overview of this fund, what it is, and who it’s for? 

Nico Katzke: Yeah, so there’s actually more than one, but the funds we’re talking about today are the Satrix Balanced Index Fund range. These funds are multi-asset strategies, as opposed to single-asset-class funds – like, for example, the Satrix Top 40, which invests in the 40 largest stocks on the JSE, or the ALBI that tracks bond instruments. So, instead of it being a single asset class, these are multi-asset strategies. 

Now, multi-asset strategies have a wider mandate to invest in different types of fund categories altogether. These proportions – in other words, how much equities you hold, how much bonds, how much local, how much offshore – are ultimately determined by the manager. 

Now, our Balanced Fund is great for investors who want to take the guesswork out of what combination of assets to hold, as we do all the research and work in the background. You mentioned our SAA report – we do that every two years, and we do it by way of a very detailed process.  

This provides investors with a great way to diversify their portfolios without much fuss. In many ways, it removes the anxiety for direct investors looking to be diversified but not having the skills or the confidence to decide how best to invest.  

Think of it as a just-add-water solution for investors, and a really cost-effective one at that. 

The Finance Ghost: And this is available to institutional and retail investors, right? 

Nico Katzke: Correct. It is used as a core building block by more institutional-type investors, and then intermediaries and advisers as well. But also, it’s available to investors who directly want to hold something either in a discretionary portfolio or for the long term and, like I said, who just want to take out the guesswork.  

You know, you want to put your money to productive use, but you don’t know exactly what to put it in – we do all the work in these funds. So yeah, for us it’s a great solution for investors. 

The Finance Ghost: Yeah, very interesting. You’ve mentioned there that it’s multi-asset in nature, which means equity, bonds, all kinds of interesting things in there, and we’ll get into that. You’ve got developed and emerging markets as well.  

The process of how you actually build this fund will be something that is really interesting to understand, because you’ve got to choose what these different asset classes are. You’ve got to think about how much you’re putting into each one. 

My assumption would be that there’s a top-down approach here, where you’re identifying the different buckets and how much you want in each one. And then you’re probably looking inside those buckets and saying, “Okay, well within the category of, for example, emerging market equities, there are a few different ways to play that.”  

Before we actually dig into some of the recent thinking going into this, is that correct? Is it a top-down approach in line with what I’ve described, or am I off the mark there? 

Nico Katzke: You’re spot on there. It is top-down in the sense that we first determine which asset classes we want to hold (for example, equities, bonds, local, global, etcetera) and then in what proportion. But then, after we’ve made that decision, we believe in keeping the rest as simple and low cost as possible. 

For example, where we have an 8% allocation to emerging market equities outside South Africa, in reality we can be creative and try to add value by picking one stock over another in that segment and be more granular in what we hold.  

But in truth, Ghost, we believe keeping it as simple as possible at that level. Instead of being creative in that sense, we like to hold a cost-effective, broadly diversified index, which has shown over time to deliver excellent results. 

Now, I suppose there are two schools of thought when it comes to investing for the long term. The one believes that long-term value creation requires identifying and taking advantage of short-term opportunities (you know, being nimble and moving in and out of positions opportunistically).  

The second school of thought (and no prizes for guessing which school I attend) is that optimal long-term positioning is what truly matters and then keeping costs low after that is what will stack the odds base in your favour. 

Now, the best outcome for clients would probably be somewhere in the middle. In other words, having your long-term core just do what it should be doing and then employing active managers who can opportunistically take advantage of short-term opportunities.  

I think a decent blend is absolutely what clients should be going for. But long-term strategies ideally should be focused mainly on the asset allocation decision, and the smaller part should be dedicated to being opportunistic or tactical. 

And this is not just our view. Global meta-studies have actually shown the same in that the biggest contributing factor to multi-asset portfolios, by far, is the asset allocation decision – what asset classes you hold.  

Studies show that tactical manoeuvres contribute only a small part. In other words, within, let’s say, the global equity category, whether you overweight this stock versus that stock, studies show that those decisions contribute about 5% (if you’re generous) to overall portfolio returns. 

This makes me think, Ghost, of the elephant and the mouse joke. Being a dad yourself, you probably know this one too, but it goes like this. Elephant and Mouse are walking in the jungle and they come across a wooden bridge over a river, which they then decide to cross (don’t ask me why they crossed the bridge, but let’s just assume they did).  

As they begin walking across the bridge, with each step, naturally, the bridge swings wildly from left to right. At some point, Mouse turns to Elephant and says, “Jislaaik, we’re making this bridge swing, hey?” [laughing] 

For me, that’s what an SAA does. It’s where we, at Satrix, spend all our attention. That’s the elephant. The tactical mouse? That, we limit. And we thereby try to focus on the controllables and less on the noise. It’s not the mouse making the bridge swing. It is absolutely the elephant’s big pounding feet that make it swing. 

This strategy has worked phenomenally well in our balanced funds. If we just look at the last 10 years, our most flexible high-equity balanced fund had the sixth-highest return out of more than 130 active fund peers.  

If you think about it, this was during a decade where a lot happened, from COVID to taper tantrums; trade wars; Russia and the US overstaying their welcomes militarily; etcetera, etcetera. 

You’d think that, during such a volatile decade, an active hand at the wheel would have been the preferred route over this time. But interestingly, a strategy with its eyes set firmly on the long term has actually managed to comfortably outperform its active peers, despite the many challenges and opportunities that existed.  

So, for us, this shows that acting in the short term, Ghost, is not always optimal and that sometimes trusting the process while keeping costs to a minimum can deliver very impressive results. 

The Finance Ghost: Yeah, that’s interesting, and I love the elephant joke [laughing]. That’s exactly right. Performance attribution and understanding where the elephants are. That’s a very fun analogy, thank you for sharing that.  

And would it be correct to say that this is then, because it’s more diversified, a less risky fund overall than a traditional equities-only fund? Would that be the correct place to put this balanced fund on the risk spectrum? 

Nico Katzke: It’s hard to say. It depends which equity strategies you are following. So, as a blanket statement, that might not apply to every equity strategy, but I would suggest that it’s more balanced. The risk is spread out more, so you’re not overly concentrated to a single asset class. 

And within the multi-asset strategies, we have two options available to direct investors, being both the High Equity (or just the Satrix Balanced Index Fund) and the Satrix Low Equity Balanced Index Fund, where the proportion allocated to growth assets or riskier assets is just lower. So, there’s a higher-risk strategy, with higher upside over the long term, and a lower-risk strategy. So, we have both.  

But I would agree with this statement more broadly, that a diversified blend (and thinking specifically about diversifying across asset classes) should deliver, over time, a more stable return profile for investors. 

The Finance Ghost: Let’s dig into some of the buckets that are actually sitting here. I’m looking at the strategic asset allocation note that you sent to your clients (and there’s so much absolutely fascinating stuff in here), but there’s a bunch of buckets and I think we should start there.  

So, it’s SA equity, SA bonds, inflation-linked bonds (ILBs), global property. I’m going to let you take us through it and maybe just explain, bucket by bucket, what kind of stuff people will actually find in these balanced funds. 

Nico Katzke: Happy to do so. I think, before we do that, it may be useful to just take a step back and consider the fact that many of your listeners may think of Satrix as being a one-trick pony, in that our funds are just low cost and we don’t apply our minds in how we construct our portfolios. This is true in part, but the reality is that we actually manage various strategies where the design is anything but passive. 

This includes our factor range, which I’ve discussed with you in the past and which we can do a refresh on at some time. But it also applies to these balanced index funds we are discussing today, which are actually highly technical in their design but with the same low-cost structure that you’ve come to expect from us. 

So, you know, I suppose we’re less of a one-trick pony and more of a sort of multi-trick Mustang or, I don’t know, Swiss Army Stallion or…I don’t know. You’re the creative one, Ghost, you can think of a better… 

The Finance Ghost: I don’t think I’m going to top either of those, I can tell you now [laughing]. I’m going to let you claim whichever one you feel best about. Swiss Army Stallion [laughing]. 

Nico Katzke: Don’t quote me on that [laughing]. But okay, back to your question. I think it’s important to note there’s no benchmark or passive asset allocation in multi-asset funds. It’s always an active decision.  

And how much to hold of equities, bonds, credit, commodities, cash and the like, this decision is what we call the Strategic Asset Allocation, or the SAA. This process is quite involved, and this is the elephant in the elephant-and-the-mouse joke that I mentioned earlier. 

We spend weeks running quantitative models, debating asset class forecasts and expressing our views on everything from interest rates, inflation, sovereign risk, etcetera, so that our clients know that we’ve considered all these things when we arrive at our SAA. 

Now, at Satrix, we chair a committee of both internal and external professionals who provide their input before we then ultimately produce a detailed report, which I sent to you before recording. Please make it available to whoever’s listening. This is not a state secret. We’re very much in the game of sharing our secret sauce, and we want that for public consumption and debate as well. 

So, we very much want to embrace the notion that clarity (in terms of what you’re investing in when you invest in a portfolio) should be front of mind for clients. 

Before I get to the underlying building blocks, I think it’s important to stress that you can think of these funds (our balanced index funds) as being like a Lego creation, where the creativity lies in which blocks are placed in which order, while the blocks themselves are actually low-cost vehicles. 

The same way with Lego, it’s not about the expensiveness or the structure of the individual blocks – the blocks are quite simple and easy to understand – but it’s the blend together, putting them in the right order, that can actually create quite sophisticated solutions for clients. This way, investors know you’re not overpaying for the multi-asset blend, but you also know it is well diversified. 

On the different asset classes that you mentioned, let me summarise this briefly – and I’m going to not do it justice, so please read the report if you want a deeper dive into the different building blocks. 

In summary, I suppose we still like South African equities. We believe there’s lots of value locally and it’s still an attractive investment proposition, specifically for rand-based investors.  

I’m just going to reference our Balanced Index Fund (so the High Equity Fund). So, we hold 40% local equities in our multi-factor vehicle SmartCore™, which has achieved top-quartile performance over the past three years and, from our perspective, has the advantage of harvesting long-term factor premia.  

As I mentioned, I’m happy to discuss that at some stage again, but just for simplicity, we hold about 40% local equities in that fund. 

We also hold 17% in local nominal bonds, which we like for various reasons, the least of which being that you are still locking in very attractive real yields through the cycle today. If you look at the bond yields that you can get effectively for free at the moment, you’re earning inflation-plus, so for us that’s still a very attractive proposition. 

Rounding off local, we also hold some short-duration enhanced cash exposure just to manage liquidity in the fund – about 2%. We also have a 3% direct property exposure. So, if you take the equity block, about 5% of that local equity building block is property, then you add that to the 3% and you have, more or less, a 5% allocation to local property in the portfolio. Now, that’s about a 62% allocation locally, in total.  

We also hold 38% offshore, in the form of 20% global equities (developed market equities specifically), 8% emerging market equities, and then we hold 10% real assets in the form of global listed property and listed infrastructure. So, that’s kind of the nice blend that I mentioned earlier.  

The one asset class we’ve become quite known for not holding (and initially, I promise you, when we sold off all of that asset class, it grabbed some attention and we were actually having to defend it at the time quite a lot) is global bonds and credit.  

So, we’ve not held any global bonds for the last five years, during which time our fund has not shared in its negative annualised returns, I can happily say. At the time, it was a brave call (but ultimately the correct one) that we made in 2021 and which we still stand by today. We simply believe that rand-based investors are better served with higher-yielding local nominal bonds, which give you a far better and more attractive real yield, and we like that offshore yield to come through real assets in property and infrastructure. Without getting too technical, that’s what we deem to be a more optimal blend.  

But yes, open invite to anyone wanting to know more. This is just the highlights. Ghost will share the link, and you can reach out if you want to read and understand our positioning on the different asset classes. 

The Finance Ghost: Yeah, and there is a lot to read and understand. I think that’s the point. This is quite technical stuff, but therein also lies the value-add, right? Because you’re looking at all of these different asset classes and you’re using different techniques to figure out where you want to be and to what extent you want to be there. It’s the elephant, as you said, more so than the mouse. 

Maybe just help us understand more about the maths, without going into crazy detail (I mean, there are some scary-looking formulae in this document, so I don’t think we’re looking to work through that), but rather just the principles that sit behind these elephants. How do you actually go about assessing these buckets and where you want to be, especially through the cycle? 

You’ve mentioned that this fund has been doing very well. Obviously, that’s not a guarantee of future performance, but it does speak to track record through a world that has done all kinds of crazy things. 

So, just give us a bit more insight into, high level, what some of the techniques are that you use to actually assess these buckets? 

Nico Katzke: Look, I’m very conscious of not having a maths-on-a-podcast segment. I know you’re going to push back on that [laughing]. So, without getting technical at all, and I want to mention the SAA document mostly hides the maths in the appendix so, you know, you can safely read it. 

The idea for us, when it comes to the optimisation process and what we want to achieve there, Ghost (and I think this is the golden thread for us, around all our quantitative modelling), is to ensure that we are well diversified from a risk-source perspective.  

That is incredibly important. Because a lazy man’s interpretation of diversification is simply saying, “Well, we hold many different things.” But the reality is, if those different things are highly correlated or move in the same direction, that’s not really helpful. That does not achieve good diversification. 

I’ll give you a good example of where this was particularly important. When we sold our global bonds to zero in 2021 and rather replaced that offshore yield component with real assets (so like I mentioned, global property and global infrastructure), what happened in 2022 was that global equities sold off – massively so. I think from a dollar perspective, you lost well over 20% in developed market equities. 

The problem was that developed market bonds also sold off (if memory serves, 16% or 17% at the time). So, the problem was both equities and bonds sold off, so your portfolio didn’t really have that defensive ballast in place. 

And we actually mentioned in 2021 that that’s our fear. That there’s been this breakdown in the traditional kind of negative correlation between bonds and equities. Because, for your listeners, when you build a portfolio, you want there to be different types of returns.  

If everything’s moving in the same direction, it feels great when markets are going up, but it feels terrible when markets are going down. So, you sometimes want to hold things that you don’t really want to hold, in and of themselves, but which, in combination in the portfolio, actually make a lot of sense. 

And so, 2022 arrived and what we saw was that the defensive ballast – those real assets, infrastructure specifically – had a flat year. In other words, it didn’t lose money, so it acted as that defensive ballast at exactly the right time. 

It’s those things that we identify statistically, through quantitative modelling, that we then debate internally through qualitative means (just our reasoning that we apply there and our interaction with other professionals), and then we blend both of those. 

You’ve probably come to know by now that I like using sport analogies. So, when we construct this portfolio, what we try to do is not to pick the 15 quickest players in the Currie Cup to play for the Springboks. What we want to do is pick quick players, yes, within their position, but then we want to also have an Ox Nché who can scrum.  

He might not run the 100 metres in under 20 seconds, but the point is that he has a specific role in the team. He might not be the flashiest guy scoring tries in the corner, but he has a specific role, and that’s the way we think about blending different asset classes. 

What often happens is that clients ask us, “Okay, so you’re buying this asset class. Does that mean you’re bullish on it?” Well, it might not, right? For the same token that you can ask me, “When you pick Ox Nché for the Springboks, are you picking him because he’s good under the high ball?” Well, absolutely not. But he’s good in the scrum, right? 

We need to consider the collective and what our team has and needs. This is how we think of blending different asset classes together. And this is such an important decision, as I mentioned. 

So, it’s all about balancing risk, identifying statistical sources of risk, and then identifying the indices that play well together in a portfolio. 

The Finance Ghost: Yeah, I love it. There are a lot of really great insights coming through there. And while we’ve got you, Nico, maybe we should also talk about the world that we’re currently operating in and how this all fits together? 

Because a big part of being diversified is because the future is uncertain, right? None of us really know exactly what’s going to happen and when. Hence, diversification gives you some protection in an uncertain, volatile world.  

And there is a lot of volatility, so you obviously need to think about this stuff when you’re doing your strategic asset allocation. But as you’ve alluded to, you also need to let the thing just do its work, over time, and effectively get paid for being diversified, making good decisions and picking the right thing, and depending on the maths and historical averages and all the rest. 

But at the moment, as you think about this and as you and the team actually manage this fund, what are some of the big-ticket items that are top of mind for you when it comes to geopolitics, AI and all the rest of the things that are currently impacting global markets around us? I’m sure the fuel price is one of them. 

Nico Katzke: Yeah, great question. I’ll say at the outset that we try not to be swayed by short-term noise or to act whenever there’s a new Truth Social post that can cause market anxiety. We try to stay the course.  

It’s for this reason that we revisit our SAA every two years. Because we find that to be an optimal blend between not acting too frequently (which would be more sort of tactical in nature) and also not acting too infrequently (which means that your asset allocation becomes stale and you’re not considering new opportunities or new kinds of insights that you can gather). 

So, two years, for us, is a good blend to reconsider our asset allocation. But there’s so much happening at the moment. You mentioned a few things. If you think about the pressure that, for example, the US dollar is under and the US’ standing as a trusted geopolitical partner (which has materially changed over the last few years).  

We do believe it will take a lot to recover from this lost standing and damaged trust amongst political partners for the US, which was forged over many decades, right? 

For me, the thing always, Ghost, is that a leadership void in defence partnerships tends to be filled by someone. So, I wouldn’t simply celebrate the US’s lowered appetite for being a defence partner to democratically leaning regimes. It is a massive concern, and it’s a concern on many fronts, including what this means for the prospect of free and fair trade going forward. 

And it’s not just the US looking weak on the geopolitical front. I mean, currently France is violently reckoning with its unrealistically generous social spending regime, while the reality is Europe more broadly seems to have declared a trade war with itself, and it actually looks like it’s winning this war.  

So much is not making sense from a European and a broader Western economic perspective. There’s a lot of pressure. Developed markets are straining under fiscal deficits and high debt burdens. Also, key elections are being held in coming weeks, the effects of which will probably only become clearer in coming months. 

And if you think about it, Ghost, what’s so interesting about the upcoming US midterms is that, traditionally, US midterms have been seen as an opportunity for a sort of clearing mechanism for policy uncertainty.  

If you think historically, we’ve mostly seen markets rally following midterm results because what follows that is greater policy certainty. But this time around, I actually think that things might be quite a bit different, in no small part due to the more likely outcome of a divided government in the US.  

And the current White House has shown a track record of not fully embracing unfavourable outcomes. I suppose that would be putting it very generously… 

The Finance Ghost: Very generously, indeed! [laughing] That’s right up there with your Swiss Army Stallion, Nico. No one’s going to beat you at these creative descriptions. 

Nico Katzke: Look, I’m trying not to offend anyone from a political perspective. I know how sensitive this topic can be. But let’s unpack the US midterm election that’s coming up, right? 

So, this election will actually determine who controls the House of Representatives. Up to about a third of the Senate seats are on the ballot, so that means all the House seats are up for election and about a third of the Senate seats. 

Now, the House currently stands at 220 versus 215, so it’s a very narrow lead for Republicans. In other words, anyone developing a conscience on any voting matter overnight can actually swing the result. The Senate is 53 to 45, so a slightly bigger lead. 

From our vantage point (and I read again this morning just the statistics that are available for predicting this), the most likely outcome is a divided government, with the House of Representatives going to the Democrats and the Senate remaining Republican. 

In other words, the guys crafting the law are likely going to be Democrat, and the guys signing into law are going to be Republican. What this means is a divided House, right? So, a divided government is what markets are predicting. And this would naturally constrain Trump’s policy options at home. 

Now, what’s interesting is, historically, when presidents have been faced with this in the US, they tend to focus more on foreign policy. That means likely an even more interventionist US administration, from a foreign policy perspective, which is a frightening thought. 

Either way, existing tax and regulatory legislation would likely remain in place as things currently stand, but the political room for fresh stimulus or broad tax reform would probably be limited in a divided election outcome. So, as a result, we think the fiscal stance is likely to remain broadly neutral to mildly restrictive over time. 

But the massive deficits and debt concerns still remain. And so, we believe the dollar is likely going to remain on the back foot, medium to longer term, as a result. US Treasuries are on the back foot.  

And if you have very high debt levels and you’re just issuing more debt, it stands to reason that the market is just going to charge you a high interest rate for doing so. If you’re a highly indebted borrower and you want to buy another luxury car, the bank is probably going to say, “Fine, but I’m going to charge you a very high interest rate.” 

And ultimately, this is weighing on the US consumer, who as a result faces higher interest rates and higher mortgage rates. And also, companies in the US that are, to a large extent, debt-financed are struggling also to recover from that shock as well. So much is happening, Ghost. 

And then locally, our own elections. It may not make global headlines (what’s going to happen next week and following the result), but it may very likely have quite the opposite effect locally. 

Hopefully, the elections will provide a new government alliance with more agency to do the right thing as relates to much-needed policy amendments. And on this, I truly believe (and I might be too optimistic, but I truly believe, and I hope you agree, Ghost) that the worst is past us locally, in terms of governing problems and economic woes. 

It’s not going to be solved overnight, but I do think we’ve hit the bottom and we’re bouncing up. And the future, I think, looks bright in South Africa, while oddly we’re in a position where the opposite may in fact be the case for our more developed market partners. 

I mentioned it recently to someone that – if you look at the US midterms, France going into elections and many European elections looming, and the distrust in the election process – it does seem like South Africa is looking like the shining beacon of stability and democracy at the moment.  

I wouldn’t put that on my tombstone, but you know what I mean. It’s a bizarre world at the moment. Many things are turned upside down. And I suppose it’s from this perspective that I just want to give comfort to your listeners that we do a lot of work considering all these matters and baking that into our SAA. 

Does that mean we’re going to get everything right? Of course not. But we try to position the portfolio as optimally as we can and just take the guesswork out of the equation for our clients and provide them with a cost-effective, well-diversified solution. 

The Finance Ghost: I do agree with you, for what it’s worth, about where we’re at in South Africa at the moment. I do think we’re going to have a pretty crummy end to the year from a consumer perspective.  

I must say, I don’t personally see huge relief on the horizon for the consumer stocks that have been given such a hiding. But I think overall the South African story is definitely not the worst, globally. 

I’m not unhappy about being here and building a business here and a career and everything else. I have friends who have businesses in places like the UK, and I can promise you it is not the land of milk or honey. And it’s not the land of sunshine either, usually, other than for basically, what, a month and a half of the year at best? 

Nico Katzke: [laughing] 

The Finance Ghost: So yeah, South Africa’s got a lot of problems, but we do have a lot of opportunity, and I think it’s a decent place to be at the moment with everything going on in the world.  

Let’s see what happens for the rest of this year. Because, as you’ve correctly pointed out, there are some very big, very important elections that will have global consequences and some very important stuff happening at home as well on that front. Lots to think about.  

I guess that’s the overarching point with a long-term diversified investment lens, right? There’s always going to be noise. There’s always going to be stuff happening. There’s always going to be something that scares you; something that excites you.  

It’s actually pretty important to have this almost stoic approach where you just stay the course, you know? Just don’t break anything. Just keep going. That’s almost the hardest part, but in some ways that really is the elephant on the bridge, right? That’s really what actually drives success. 

Nico Katzke: I’ll also just end off from my side with the perspective that I’ve shared – and I truly believe this: one should never forego your long-term investment discipline and principles in the face of short-term uncertainty.  

And that’s far easier said than done. We have an inherent, almost knee-jerk reaction as humans. When we’re faced with uncertainty, we feel like we must act. But when it comes to long-term investing, inaction is oftentimes the best course of action. 

If you’ve set your course and you know this is the right mix (you know, you should have growth assets in your portfolio, etcetera, etcetera). It’s so easy to lose sight of your long-term goals just because there’s uncertainty in the short term. But if you’re investing for 15 years, the short term actually doesn’t matter that much.  

And it’s that term dimension – that investment term – that makes all the difference. So, keeping your eyes on the prize, so to speak, is such an important investment principle, and I can’t stress it enough. Even though the world is uncertain and there’s a lot happening, if you do the right thing consistently, I believe you’re creating wealth long term. 

The Finance Ghost: Absolutely. Nico, thank you so much for your time, as always. I really appreciate it. It’s always great to get your insights here, and all the best for the end of the year.  

I look forward to hopefully doing another one of these with you early next year, and maybe we can reflect on how things went in the end and what’s going on in the balanced fund at that stage as well. 

I’ll make sure that the link is here so that people can go and read about these different funds and go and access this document. And yeah, thank you for your time. It’s been really great. 

Nico Katzke: Thank you for the opportunity, Ghost. As always, great pleasure to speak to you. 

Disclaimer:

Satrix Investments (Pty) Ltd is an approved financial service provider in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”). The information above does not constitute financial advice in term of FAIS.

Satrix Managers (RF) (Pty) Ltd a registered and approved Manager in Collective Investment Schemes in Securities. Collective investment schemes are generally medium- to long-term investments. With Unit Trusts, Exchange Traded Funds (ETFs) and Actively-managed ETFs (AMETFs), the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETFs and AMETFs, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange.  ETFs and AMETF are registered as a Collective Investment and can be traded by any stockbroker on the stock exchange, LISP platforms and or via online trading platforms. ETFs and AMETFs may incur additional costs due to being listed on the JSE. Past performance is not necessarily a guide to future performance, and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF and AMETF Minimum Disclosure Document. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF and AMETF Minimum Disclosure Document.

Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Performance is calculated for the portfolio and the individual investor performance may differ as a result of initial fees, actual investment date, date of reinvestment and dividend withholding tax. Some funds may hold assets in foreign countries and could be exposed to risks such as potential constraints on liquidity and the repatriation of funds, macroeconomic, political, foreign exchange, tax risks, settlement risks and potential limitations on the availability of market information.

A feeder fund is a portfolio that invests in a single portfolio of a collective investment scheme, which levies its own charges and which could result in a higher fee structure for the feeder fund. The manager has the right to close the portfolio to new investors in order to manager it more efficiently in accordance with its mandate. A money market portfolio is not a bank deposit account. The price is targeted at a constant value. The total return to the investor is made up of interest received and any gain or loss made on any particular instrument and in most cases the return will merely have the effect of increasing or decreasing the daily yield, but that in the case of abnormal losses it can have the effect of reducing the capital value of the portfolio. Excessive withdrawals from the portfolio may place the portfolio under liquidity pressures and in such circumstances a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed. Seven day rolling yield is calculated by taking into account the interest earned by the fund during a seven-day period minus any management fees incurred during those seven days. The yield is a current and is calculated on a daily basis. A fund of funds portfolio is a portfolio that invests in portfolios of collective investment schemes that levy their own charges, which could result in a higher fee structure for the fund of funds. AMETF are ETFs which are actively traded by a Portfolio Manager to adjust the AMETF holdings and asset allocation with the aim to outperform the benchmark. AMETF differ from ETFs which only track indices. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Satrix retains full legal responsibility for the co-named portfolios. For further information related to performance of a specific fund please refer to the MDD of the fund on Satrix.co.za website. Full details and basis of the award are available from the Manager.