Smartly Relooking Balanced

Index tracking or passive investing – whichever you’d prefer to call it – has attracted a lot of attention from both the media and active managers in the past. The arguments for and against are well documented and, as with any debate, there are always three sides to the story. If you’ve been kept out of the loop on these conversations you would do well to immerse yourself in them now, says Kingsley Williams, Chief Investment Officer at Satrix.


2017 seems to have been the year for index tracking to shake off any second rate mantle it may have been handed and really show investors that index tracking is anything but passive and a credible competitor for actively managed balanced funds.


The fund which has been able to demonstrate this best is the Satrix Balanced Index Fund, which ended the 2017 year as the second best-performing balanced fund overall and the top performing index tracking balanced fund (source: Morningstar, 2018). There are 173 retail balanced funds available at present in the high-equity multi-asset or balanced fund category, of which 11 are index-tracking balanced funds.



It is important to note that all index-tracking balanced funds are not the same. They tend to differentiate themselves in a few areas:

  • Asset allocation – they do not all have the same strategic allocation to available asset classes. While the vast majority of funds do have a static allocation, some of them do take tilts around a strategic allocation in an attempt to improve performance over time.

  • They do not include an allocation to all available asset classes nor the full investable set of assets within each asset class.

  • While the vast majority of funds do include index trackers in each of the underlying asset classes, some of them do use enhanced indexing in an attempt to boost alpha.

  • The frequency of rebalancing the strategic asset allocation differs.

These differences become important when comparing performance over time and when choosing which index-tracking balanced fund to invest in.



The Satrix Balanced Index fund has the following unique traits:

  • It has a unique equity SmartCore™

  • The fund has a strategic asset allocation which is rebalanced semi-annually

  • It has a 70% allocation to equities – 55% local SA equities and 15% offshore equities

  • The fund has a small allocation to local cash of 5%



The most differentiating feature of the Satrix fund compared to its peers in the same category is its equity SmartCore™. The SmartCore™ is a proprietary Satrix index launched in 2013, made up of a combination of smart beta indices. While its composition is researched and periodically reviewed by Satrix, the current composition has been in place since January 2016.