Global & Local SNN
Minimum Disclosure Documents

Global & Local SNN Equity Fund

This is a South African “general” equity portfolio designed around eliminating high Human Factor shares from the broad South African equity market.

In addition to the Human Factor, The G&L Equity Strategy combines other single-factor strategies. These strategies build upon the long-standing concept of diversification: that combining exposures to factors can help soften the effect of drawdowns and increase the potential for outperformance.

The exposure of the fund to the single-factor strategies is quantitatively calculated to optimise the expected return under certain constraints of total risk (absolute volatility) and tracking error (relative volatility).

The other single-factor strategies that we combine with the Human Factor are:

  • Large capitalisation shares are combined to reduce the tracking error of the fund to the market due to the large weighting of the biggest shares in the market.
  • Value aims to capture excess returns from stocks that have low prices relative to their fundamental value. The value strategy is tracked by price to book, price to earnings, dividends, and free cash flow.
  • Momentum shares that have outperformed in the past tend to exhibit strong returns going forward. The momentum strategy uses relative returns from 3 months to a 1-year period.
  • Quality shares are defined by low debt, stable earnings, consistent asset growth, and strong corporate governance. They are identified through financial metrics like return to equity, debt to equity and earnings variability.
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Global & Local Low Volatility Equity Fund

This is a South African “specialist” equity fund designed around eliminating high Human Factor shares from the broad South African equity market and quantitatively minimising the total portfolio volatility.

Portfolios comprised of low-volatility shares have earned similar or higher returns than portfolios of higher-volatility shares. Investors are not rewarded for owning riskier shares the way they are rewarded for investing in riskier asset classes. The low volatility strategy finds the minimum variance portfolio by choosing the lower beta shares and quantitatively minimising the total portfolio volatility taking account of the correlation between shares.

Low volatility equity performance is cyclical. While it outperforms and protects capital in bear markets, it tends to not outperform strongly during bull markets and can, in fact, underperform for multi-year periods. Low volatility equity allows investors to be exposed to the equity market but at as low a risk as possible. When being included as a building block in a balanced portfolio, it allows a slightly higher exposure to the equity asset class but at the same level of risk.

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Global & Local SNN Balanced Fund of Funds

The G&L SNN Balanced Fund of Fund is designed around a unique and proprietary methodology developed by New Age Alpha (LCC) that measures investor behaviour risk, called the Human Factor. The Human Factor is the risk that investors have pushed the stock price too high and out of line with management’s ability to deliver the performance to support that stock price.

Assessing management’s ability to deliver performance to support the price of the stock is critical because it balances the stock price (which is based on investors’ biases) and the company’s results. If management fails to deliver such results the stock price will drop, and investors will lose money. Investor loss is strongly related to management failing to deliver the results the stock price implies. There is no benefit of exposure to Human Factor Risk, only cost. This Human Factor Risk is the risk of losing for which investors are not paid for taking.

By avoiding this Human Factor risk, the G&L SNN Balanced Fund of Fund both reduces risk and outperforms. Using both company fundamentals and stock price - both unambiguous pieces of information - allows us to repeatedly and consistently identify stocks likely to underperform. Alpha at that point is as simple as eliminating those high Human-Factor shares from our portfolios.

The fund uses state of the art software developed by SalientQuants (Pty) Ltd for asset allocation. With the software, the fund explicitly measures and controls risk level and exposures allowing risk budgeting to be implemented in portfolio construction. The fund efficiently allocates the risk and optimally diversifies the allocation to underlying funds. This risk budgeting methodology allocates risk to underlying funds and not simply Rands

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Global & Local SNN Offshore Equity Fund

A common myth is that to generate higher portfolio returns an investor must take on more risk. That is not true at all. Some types of risks result in losses rather than greater returns. The G&L Offshore Equity fund avoids these risks and by doing so increase the return.

The Fund is designed around a unique and proprietary methodology developed by New Age Alpha, LCC that measures investor behaviour risk, called the Human Factor. The Human Factor is the risk that investors have pushed the stock price too high and out of line with management’s ability to deliver the performance to support that stock price.

Assessing management’s ability to deliver performance to support the price of the stock is critical because it balances the stock price (which is based on investors’ biases) and the company’s results. If management fails to deliver such results the stock price will drop, and investors will lose money. Investor loss is strongly related to management failing to deliver the results the stock price implies.

There is no benefit of exposure to Human Factor Risk, only cost. This Human Factor Risk is the risk of losing for which investors are not paid for taking.

By avoiding this Human Factor risk, the fund both reduces risk and outperforms. Using both company fundamentals and stock price - both unambiguous pieces of information - allows us to repeatedly and consistently identify stocks likely to underperform. Alpha at that point is as simple as eliminating those high Human-Factor shares from our portfolios.

The G&L Offshore Equity fund is a quantitative fund that allocates exposure to Human Factor strategies, Low Volatility equity strategies and cash over the following regions: U.S. Large-Cap, U.S. Small-Cap, UK, Europe Ex-UK, and Japan.

Exposure to each underlying regional risk allocation corresponds to their weights in the benchmark, the S&P BMI Global Developed World Universe.

Within each of the underlying regions, the exposure to Human Factor strategy, Low Volatility equity strategy and cash for that region is determined by respective indicators that reflect market momentum, sentiment and economic strength.

Low Volatility shares have been shown to earn higher risk-adjusted returns than highly volatile assets. Exposure to shares is determined proportionally by the inverse of volatility.

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South Africa HQ

208 Barry Hertzog Avenue
Greenside
Johannesburg
South Africa

Tel: +27 (0)11 486 2500

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Global & Local Asset Management is an authorised juristic representative of Global & Local Investment Advisors (PTY) Ltd FSCA License Number: 43286, To view Global & Local Investment Advisors (PTY) Ltd website please go to www.globallocal.co.za

Any investment performance quoted on this website is not an indicator of future performance, and cannot be construed as investment advice.

Global & Local Asset Management provides investment advice for those investors wishing to invest capital in offshore markets. Investment advice is dependent on each individual investor’s personal circumstances, thus it is imperative for each investor to consult with an experienced and licensed investment advisor that will be able to compile a comprehensive investment plan tailored to that specific investor’s circumstances and needs.

Any views expressed on this website are those of Global & Local Asset Management unless otherwise quoted.
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