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Global Equity Shariah Monthly Report | November

 

  • Our Shariah compliant ETF will invest in companies of a high quality with wide economic moats 
  • The fund will take active positions against the MSCI World Index (the index) with typically 30 positions against the index’s 400 constituents
  • Historically a selection of high-quality businesses managed with a rigorous valuation discipline has managed to outperform the index over time based on the investment team’s 

 

Almalia Sanlam Active Shariah Global Equity Performance Review

Monthly Performance of Fund/Sector

In October the fund’s net asset value decreased by 5.9% versus the market’s return of -4.9% in Dollar terms. This was the first month for the strategy and we were able to populate the Shariah compliant ETF with high quality businesses which should be able to add significant shareholder value over time.  The fund has a broad geographic split from around the world and currently has 24 positions against the index with roughly 400 constituents. The average return on equity for our portfolio is 16% and the average operating margins are 16% which we believe lay a solid foundation for future returns given the portfolio’s 4.2% average free cash flow yield.

What Has Driven This Performance?

Our top performer during the month of October was Corteva (+14.6%).  Corteva’s (CTVA) results for the last quarter pleased the market with corporate expense at $27M lower than the street's forecast $31M. While the lowered corporate expense is hardly needle-moving, it does suggest CTVA is controlling costs, which is of particular importance post their split into an independently listed business since May last year. The company's cost cutting efforts in general seems to be paying off, and an additional $250mln is expected in the 2021 fiscal year.

Japanese prestige cosmetics company Shiseido also performed well during the month, returning 7.9%.  Shiseido is the largest cosmetics manufacturer of its Asian peers, and the number 3 player worldwide, with a strong foothold in both its home market Japan, and China from which it obtains over 20% of its revenue.  The company will continue to expand its presence in Asia and the Americas over time which will lead to strong growth in free cash flow generation.

 

 

Constituents

Top 10 holdings

Company

Weight

Johnson & Johnson

7.0%

Novartis

5.4%

Roche

5.3%

Abbott Laboratories

5.2%

Philips

5.0%

Henkel

4.8%

Kao

4.8%

Medtronic

4.6%

Sage

4.6%

Sanofi

4.4%

Past performance is no guarantee of future performance. Source: Sanlam Investments UK. Data as of 31/10/2020

 

 

Source: Bloomberg/ HANetf. Data as of 31/10/2020

 

 

Outlook

Investors continue to favour the US equity market against other regions of the world. The US market is up 2.8% in US$ year to date versus the rest of the world being down by -10.8%. On a sector level, the difference in performance continues to be rather significant with information technology names up by 21.2% in US$ year to date and financials and energy stocks down by -22.1% and -48.2% respectively.  We continue to hold no energy or financials exposures in the fund.  We also have not utilities in our portfolio as they do not pass our stringent quality criteria and Shariah Screening process.

We believe names Taylor Wimpey, Sage, Novartis and Inditex could recover meaningfully for us over time even though most of these names are a drag on performance in the short term. Our large position sizes in names like Johnson and Johnson, Roche and Medtronic were off to a tough start in October but we believe they will continue to deliver significant shareholder returns for investors over time in line with their long-term history. We are comfortable that our active position leads us naturally to an observation we are very comfortable to explain to our investors.  In order to have investment results different to the index, you need to be positioned very different to the index. We acknowledge that valuations in some sectors are at multi decade lows but we prefer to focus on business quality and attractive valuations, as opposed to purely statistically cheap valuations.  The market rarely offers investors a free lunch and more than often cheap valuations are simply a reflection of investors’ concerns on the underlying quality of the business.

 

 

Product Details

The Almalia Sanlam Active Shariah Global Equity UCITS ETF is a UCITS compliant exchange traded fund domiciled in Ireland.  

The fund aims to achieve capital growth over the medium to long term, whilst complying with the Principles of Shariah Investment.  

Our Shariah compliant ETF is an actively fund managed by Sanlam Investment Managers that invests in best of class, high quality companies with strong growth prospects, durable business models, sustainable revenue and free cash flow. It focuses on 20-35 companies with high returns on capital, low leverage, enduring businesses with a sustainable competitive advantage that produce significant free cash flow after capital expenditure.

Please remember that when you trade ETFs your capital is at risk and past performance is no guarantee of future performance.

 

Exchange  Bloomberg Code  RIC  ISIN  SEDOL  Currency  TER 
London Stock Exchange  AMAL LN HAAMAL.L  IE00BMYMHS24  BMDNKB0  USD  0.99% 
London Stock Exchange  AMAP LN AMAP.L  IE00BMYMHS24  BMDNKC1  GBP  0.99% 
Deutsche Boerse Xetra  ASWE GY  ASWE.DE  IE00BMYMHS24  BMWTXV0  EUR  0.99% 
Borsa Italiana  AMAL IM  AMAL.MI IE00BMYMHS24 BMWTXS7  EUR  0.99% 

 

Click here to download our Shariah ETF Monthly Report

 

 

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