IOL FEBRUARY 2021
SPECIAL RAGING BULL EDITION
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CONTENTS
SPECIAL RAGING BULL AWARDS EDITION Ninety One is SA’s top asset manage 4 2020 hindsight: where money was made and lost 6 Raging Bull certificate and award winners 8 Watch the award presentation 17 Important contacts and links 23
FUND PROFILES
Fairtree Equity Prescient Fund Long Beach Flexible Prescient Fund PSG Wealth Global Flexible Fund of Funds Absa Inflation Beater Fund Absa Bond Fund Anchor Global Equity Fund IP Global Momentum Equity Fund
SPONSORS
DATA PROVIDERS
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FROM THE EDITOR
Excellence is not a skill, it’s an attitude.– Ralph Marston
CONTACT US PUBLISHER Vasantha Angamuthu vasantha@africannewsagency.com MONEY EDITOR Martin Hesse martin.hesse@inl.co.za DESIGN Mallory Munien mallory.munien@inl.co.za PRODUCTION Renata Ford renata.ford@inl.co.za BUSINESS DEVELOPMENT Keshni Odayan keshni@africannewsagency.com SALES Charl Reineke charl@africannewsagency.com Kyle Villet kyle.villet@africannewsagency.com ENQUIRIES info@anapublishing.com
Welcome to this special edition of IOL MONEY showcasing the “Oscar” winners of the investment industry. The awards are made annually for performance to the end of the previous year (in this case 2020). Fund awards are made on the basis of straight performance over three years and risk-adjusted performance over five years, while the prestigious Manager of the Year awards are made solely on risk-adjusted performance over five years. The PlexCrown Ratings system is used to determine risk-adjusted performance. A fund is awarded from one to five PlexCrowns, with three being the average for the fund’s peer group. The average annual return is weighed against the risk a manager took on to achieve that return: for two funds with similar returns, the one that gave investors a “smoother ride” would win over the one whose performance was more volatile. They say that past performance is no guarantee of future performance - and you always need to bear this in mind when investing. On the other hand, how can one judge a fund manager’s skill apart from his or her past performance? It’s on past performance that reputations in any profession are built. Take medicine, for example: you are more likely to choose a surgeon with a reputation for successful operations than one just out of medical school or one who has notched up some failures. Congratulations to our worthy fund winners and to the South African Manager of the Year, Ninety One, runners-up Mi-Plan and H4 Collective Investments, and to the Offshore Manager of the Year, T Rowe Price.
Martin Hesse
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NINETY ONE IS SA’S TOP ASSET MANAGER Martin Hesse reports on the winning unit trust management companies for performance to the end of 2020 NINETY One was crowned South African Manager of the Year at this month’s Raging Bull Awards, which recognise superior investment performance by unit trust fund managers. In second place was last year’s winner, Cape Town boutique asset manager Mi-Plan, and third was the collective investment arm of the Peregrine Group, H4 Collective Investments, a newcomer to the Raging Bull winners’ podium. The Offshore Manager of the Year award went to T Rowe Price, a US-based global investment firm, whose funds are marketed here in South Africa by Prescient. The awards, hosted annually by Personal Finance, were sponsored this year by the JSE, Sanlam Investments, Stanlib, Truffle and Fundamental. The data suppliers were ProfileData and its subsidiary, PlexCrown Fund Ratings. Instead of the traditional black-tie gala dinner, which had become an annual highlight for the investment industry, this year’s ceremony took the form of a video presentation, which was streamed on Tuesday this week, and which can be viewed on the IOL News YouTube channel. Apart from the Manager of the Year awards, eight Raging Bull Awards and 29 Raging Bull Certificates went to individual funds in local and offshore categories (see page 8). LOCAL WINNER Ninety One may have a relatively
new name, but it is one of the most well-established asset management companies in South Africa, with a highly experienced investment team that has a presence in major centres across the globe. The company changed its name at the beginning of last year, from Investec Asset Management to Ninety One, when it separated from Investec Bank. It has received many accolades at the Raging Bull Awards over the years, including two special awards at the 21st Raging Bull Awards in 2017, for the best-performing equity and multi-asset funds over 21 years: the Investec Equity Fund and the Investec Managed Fund. In an interview with Personal Finance, the firm’s managing director, Thabo Khojane, and deputy managing director, Sangeeth Sewnath, said the timing of the award, after rebranding as Ninety One, “couldn’t have been better”. They said that the accolade of Manager of the Year was less about
industry recognition than about being an affirmation to its clients of its commitment to delivering good outcomes. “Last year, given all the uncertainty, it didn’t really feel like there were any winners, and over the last one, two and even five years the investment environment has been really difficult. And so it has been reassuring for us that if you stretch this to the real long term – we are turning 30 this year – if you look at our 20- or 30-year track record, we were really encouraged that we have done really well over that period of time, and we think that’s what really counts,” Sewnath said, who added that many clients have been with them for all that time. He said the company’s consistently superior performance over the long term and its differentiation from its competitors could be attributed to three things: the longevity and stability of the business; its unique employee-ownership culture, and its global reach. “We’ve spent a lot of time making sure that we’ve built a globally integrated business. We have investment teams across New York, London, Hong Kong, Singapore, which we think is a big part of our long-term success. We’ve got clients in 120 different countries around the world.”
5 Khojane elaborated on the culture at Ninety One. “It’s all about giving people the freedom to create, whether it’s our portfolio managers or business leaders, it’s about encouraging them to take risks, to initiate things from scratch and to grow them organically. “There is also this clarity of purpose, which is an almost obsessive focus on the client and making sure that we are accountable to the client.” Khojane also emphasised the importance of being a global player. “We think this gives us a huge edge, not only in terms of investment decision-making but also our ability to attract talent.” The last differentiator, Khojane said, was humility. “There are probably two ways in which humility is tested: when you are at the top (in terms of performance) and when you are at the bottom. When you are at the top, that is not the time to swing for the fences or second-guess what your client has appointed you
to do. Similarly, when you are the bottom, that is not the time to capitulate and change your stripes.” OFFSHORE WINNER Pieter Hendricks, the head of Middle East and Africa, Global Investment Services at T Rowe Price, told Personal Finance the news that his firm had won the Raging Bull Award for Offshore Manager of the Year, had come as a happy surprise. “We are very pleased to receive the Raging Bull award, especially since this is an endorsement for our company and it underlines our focus on long-term performance for the benefit of our clients. We believe that the sophisticated South African investor community has access to best-in-class global asset managers, and to win this award amongst a competitive peer group is a testament of the quality of the T Rowe Price global investment platform,” he said.
Sangeeth Swenath
HOW THE WINNING MANAGERS FARED Ninety One. The winning South African company scored an average of 4.176 PlexCrowns over its 15 qualifying funds, which collectively had R175.3 billion under management at the end of last year. Six funds scored five PlexCrowns, three scored an above-average four PlexCrowns, and five scored three PlexCrowns, which represents the average performance of the peer group. The five-PlexCrown funds were the Ninety One Global Strategic Managed Feeder Fund, Commodity Fund, Value Fund, and three multi-asset funds: the Cautious Managed Fund, Managed Fund and Opportunity Fund. Mi-Plan. The first runner-up scored an average 4.032 PlexCrowns over eight qualifying funds, which collectively had R6.3bn under management at the end of last year. Two funds scored five PlexCrowns, two scored four PlexCrowns and the other four scored three PlexCrowns. The five-PlexCrown funds were the Mi-Plan IP Global Macro Fund and the Enhanced Income Fund. H4 Collective Investments. The second runner-up scored an average 3.726 PlexCrowns over 10 qualifying funds, which collectively managed assets of R16bn at the end of last year. Two funds scored five PlexCrowns, four scored four PlexCrowns, and two scored three PlexCrowns. The fivePlexCrown funds were multi-asset funds: the H4 Diversified Fund and Stable Fund. T Rowe Price. The US-based offshore manager of the year scored 4.000 PlexCrowns over its 15 qualifying funds. Five funds scored five PlexCrowns, and a further four funds scored four PlexCrowns. The five-PlexCrown funds (denominated in US dollars unless otherwise stated) were: the T Rowe Price European Equity Fund, Asian ex-Japan Equity Fund (denominated in British pounds), Asian Opportunities Equity Fund (denominated in British pounds), Global Focused Growth Equity Fund, and Global Growth Equity Fund.
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2020 HINDSIGHT: WHERE MONEY WAS MADE AND LOST Martin Hesse looks back over a year no-one saw coming. FINANCIAL markets fared surprisingly well overall last year, considering the devastating impact of the coronavirus on the global economy, reinforcing the widely held belief that financial markets no longer reflect the “real” economy. The MSCI World Index, which measures the performance of the world’s top companies, was up almost 20% in rand terms for the year. Some of the world’s wealthiest men have vastly increased their fortunes over what for many of us has been a most unhappy period. However, if you delve into the different market sectors, the picture becomes less rosy, for, while some sectors boomed during the pandemic, others, such as the airline and hospitality industries, suffered unprecedented losses, and will take years to recover. The JSE was up about 4% for the 2020 calendar year, according to the FTSE/JSE All Share Index (Alsi), despite plunging 30% in March. Some sectors reached the end of the year in good shape:
resources shares – particularly miners of gold and the platinum group metals – did particularly well (up 21%, on average), industrials were up 12%, and large-cap shares were up 10%. However, the financial sector, which includes the banks and insurance companies, had a miserable year (down almost 20%), and the shares of mid-sized and smaller companies on the JSE, a reliable indicator of the state of the “real” economy, were down over 14%, on average. The South African listed property sector – property companies listed on the JSE – has had a torrid time over the past few years, and the pandemic provided a body blow: it was down 35% for the year. This figure would have been worse if listed property had not bounced back fairly strongly in the last quarter. The rand, which started the year at about R14 to the dollar, dropped 25% to R19 to the dollar at the height of the crisis, but then recovered to end the year at
roughly the same value as it had started it. Inflation was the lowest it has been since 2004: it was 3.1% for 2020. Unit trust funds that did well last year were those that were able to capitalise on the growth in sectors that performed well, such as the mining shares, while avoiding the sectors that did badly. On the global stage, the big US tech stocks “shot the lights out”: the Nasdaq index, which contains a preponderance of tech stocks, was up 45% for the year in dollars. Funds focused on global markets that held these big tech stocks in their portfolios did extremely well, although the performance was tempered by a strengthening rand in the second half of the year.
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UNIT TRUST PERFORMANCE A CLOSER LOOK AT SOME OF THE POPULAR UNIT TRUST SUB-CATEGORIES:
♦ South African general equity funds. The FTSE/JSE All Share Total Return Index, which, unlike the Alsi, factors in reinvested dividend distributions, was up 7% for 2020, with a worthwhile 3% coming from dividends. Against this, the 171 funds in this category averaged only 1.35% for the year: the top fund returned a handsome
19.81%, while the bottom fund recorded a 24.06% loss. ♦ Global general equity funds. These are funds that invest in equity markets outside South Africa, and are therefore subject to fluctuations in the value of the rand against the other major currencies. In rand terms, the best-performing fund almost doubled its investors’ money (98.19%), while the worstperforming managed only 2.05%. The average of the 77 funds in the sub-category was 21.67%. ♦ South African multi-asset high-equity funds. The 186 funds in this category averaged 5.24%. Returns of individual funds
ranged from -13.4% to 28.24%. ♦ South African multi-asset income funds. The 86 multiasset funds that specialise in producing income (as against capital growth) averaged 5.69% for 2020. The highest return was 11.65%, the lowest -0.30%. ♦ South African interestbearing funds. The returns from interest-bearing funds do not show the variance of those from funds that include equities. In 2020, money market funds delivered an average of 5.81%, short-term interest-bearing funds averaged 6.19%, and variableterm interest-bearing funds averaged 7.12%.
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RAGING BULL CERTIFICATE AND AWARD WINNERS (FOR RESULTS TO DECEMBER 31,2020)
CERTIFICATES
Best Global Real Estate Funds Reitway BCI Global Property Feeder Fund Best Worldwide Multi-Asset Flexible Fund Select BCI Worldwide Flexible Fund
STRAIGHT PERFORMANCE OVER THREE YEARS
Best South African Equity Resources Fund Ninety One Commodity Fund Best South African Equity Mid- and Small-Cap Fund Coronation Smaller Companies Fund Best South African Multi-Asset Flexible Fund Long Beach Flexible Prescient Fund Best South African Multi-Asset Low Equity Fund Amplify SCI Wealth Protector Fund Best South African Multi-Asset Medium Equity Fund Foord Conservative Fund Best South African Multi-Asset High Equity Fund Long Beach Managed Prescient Fund Best South African Multi-Asset Income Fund Sasfin BCI Flexible Income Fund Best South African Interest-Bearing Short-Term Fund Truffle SCI Income Plus Fund Best South African Interest-Bearing Variable-Term Fund Absa Bond Fund Best Global Multi-Asset Flexible Fund MI-PLAN IP Global Macro Fund Best Worldwide Multi-Asset Flexible Fund Naviga BCI Worldwide Flexible Fund Best Offshore Europe Equity General Fund T. Rowe Price European Equity Fund Best Offshore United States Equity General Fund Franklin US Opportunities Fund Best Offshore Far East Equity General Fund Templeton China Fund Best Offshore Global Fixed-interest Bond Fund Allan Gray Africa Ex-SA Bond Fund Best Offshore Global Real Estate General Fund First World Hybrid Real Estate Plc
RAGING BULL AWARDS (trophies) STRAIGHT PERFORMANCE OVER THREE YEARS RISK-ADJUSTED PERFORMANCE OVER FIVE YEARS
Best South African Multi-Asset Low Equity Fund Absa Inflation Beater Fund Best South African Multi-Asset Medium Equity Fund Kagiso Protector Fund Best South African Multi-Asset High Equity Fund Gryphon Prudential Fund Best South African Multi-Asset Income Fund Sharenet BCI Income Plus Fund Best South African Interest-Bearing Short-Term Fund Prescient Yield QuantPlus Fund Best South African Interest-Bearing Variable-Term Fund Absa Bond Fund Best South African Real Estate Funds Harvard House BCI Property Fund Best Global Equity General Fund Anchor BCI Global Equity Feeder Fund Best Global Multi-Asset Low Equity Fund STANLIB Global Balanced Cautious Feeder Fund Best Global Multi-Asset High Equity Fund Ninety One Global Strategic Managed Feeder Fund Best Global Multi-Asset Flexible Fund MI-PLAN IP Global Macro Fund
Best South African Equity General Fund Fairtree Equity Prescient Fund Best South African Interest-Bearing Fund Absa Bond Fund Best Global Equity General Fund IP Global Momentum Equity Fund Best Offshore Global Equity Fund Anchor Global Equity Fund
RISK-ADJUSTED PERFORMANCE OVER FIVE YEARS
Best South African General Equity Fund Fairtree Equity Prescient Fund Best South African Multi-Asset Equity Fund Absa Inflation Beater Fund Best South African Multi-Asset Flexible Fund Long Beach Flexible Prescient Fund Best Offshore Global Asset Allocation Fund PSG Wealth Global Flexible Fund of Funds
MANAGER OF THE YEAR AWARDS
South African Manager of the Year Ninety One Fund Managers South African Manager of the Year – 2nd Place MI-PLAN South African Manager of the Year – 3rd Place H4 Collective Investments Offshore Manager of the Year T. Rowe Price
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RAGING BULL AWARD-WINNING FUND
FAIRTREE EQUITY PRESCIENT FUND FUND MANAGERS: COR BOOYSEN, STEPHEN BROWN & CHANTELLE BAPTISTE ♦ Raging Bull Award for the Best South African Equity General Fund (for straight performance over three years to December 31, 2020) ♦ Raging Bull Award for the Best South African General Equity Fund on a RiskAdjusted Basis (for risk-adjusted performance over five years to December 31, 2020)
FOR the last four years, the Fairtree Equity Prescient Fund has dominated the awards in the domestic general equity categories. In 2017 it won both the straight-performance (over three years) and the risk-adjustedperformance (over five years) awards for a South African General Equity Fund. In 2018 and 2019 it won the riskadjusted award, and in 2020 it has again walked awaay with both. At the end of last year the fund was top of the South African Equity General sub-category over one, three, five and seven years. Over three and five years, the periods under assessment, the fund delivered 10.47% a year and 11.74% a year respectively, as against the JSE, whose All Share Total Return Index delivered 3.12% and 6.36% a year over those periods. The fund is one of several unit trust funds in the Prescient white-label stable offered by boutique asset manager Fairtree, based in Bellville in the Western Cape. It has traditionally been managed by Cor Booysen and Stephen Brown, but last year Chantelle Baptiste joined them on the equity investment team. At the end of 2020, resources stocks made up almost 52% of the fund’s portfolio, and shares in the consumer discretionary
Cor Booysen
sector accounted for another 25%. Personal Finance put the following questions to Booysen and Brown: Please outline your company’s investment philosophy/strategy. The fund actively invests in equities that offer attractive total shareholder returns with the intention of outperforming its benchmark, the FTSE/JSE Capped Shareholder Weighted All Share Total Return Index, over the long term. Our philosophy is based on three principles, which we believe lead to better portfolio returns: 1. Holistic. Due to the externalised nature of the South African equity market, we believe that both top-down and bottom-up analysis are required to make sound investment decisions. 2. Diversified. We believe it is better to own a well-diversified portfolio that is positioned to perform under most outcomes than to concentrate on a few positions that will do well during a single economic outcome. 3. Flexible. We believe in having the willingness and ability to change our portfolio when the environment changes, adapting quickly to changes in the economic conditions that affect the earnings outlook of companies.
To what do you attribute your fund’s outperformance in 2020? Four sectors on the JSE had standout performances during 2020. These were gold miners, platinum group metal (PGM) miners, diversified miners as well as Naspers/Prosus. We were fortunate to start 2020 with large exposure to these four sectors. The fund invests in a number of focused strategies. Among these strategies we were overweight cyclical (diversified mining, platinum), defensive (gold mining) and value (property, local consumer discretionary, financials, industrials), which all supported our fund’s performance. How are you positioning the fund for the year ahead? We continue to have large positions in gold, PGM and diversified mining as well as Naspers, but have increased our positions in shares exposed to the South African economy (SA Inc). Over the longer term we are expecting further dollar weakness given a continued global recovery and rotation in cyclicals and emerging markets. This has been informing our view to tilt the portfolio into the SA Inc.-facing counters. We believe that South Africa is cyclically well-positioned for global recovery with a moderately undervalued currency, attractively priced bonds, and cheap equity market. Structurally South Africa has problems, but we have begun a path of reform which is being championed at the highest level. We will watch for key economic reform, which would be demonstrated by public-sector wage discipline and allowing for more private sector intervention in the failed state-owned enterprises. | Martin Hesse
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RAGING BULL AWARD-WINNING FUND
LONG BEACH FLEXIBLE PRESCIENT FUND FUND MANAGER: DAVID HANSFORD
This has allowed for unprecedented fiscal stimulus and quantitative easing (QE).
♦ Raging Bull Award for the Best South African Multi-asset Flexible Fund on a Riskadjusted Basis (for performance over five years to December 31, 2020)
Were there any particular standouts in the portfolio? PayPal, Adyen, Peloton, Spotify and Richemont were notable contributors to the fund’s performance during 2020.
♦ Raging Bull Certificate for the Best
South African Multi-asset Flexible Fund (for straight performance over three years to December 31, 2020)
LONG Beach Capital is a boutique asset management company run from Cape Town by executive director and portfolio manager David Hansford. Hansford manages two Prescient white-label unit trust funds: the Long Beach Managed Prescient Fund, a South African high-equity multi-asset fund, and the Long Beach Flexible Prescient Fund, also a South African multi-asset fund, but with the flexibility to hold any asset classes in any proportion. This is the third year in a row that Hansford’s flexible fund has won the Raging Bull Award in this category. At the end of 2020, the fund was top among its peers over the one-, three-, five-, seven- and 10-year periods. Over five years, the period under assessment, the fund achieved 13.62% a year, more than double the 6.36% return of the FTSE/JSE All Share Total Return Index. The fund is predominantly invested in equities, both local and foreign (South African funds can hold up to 30% offshore assets). It is a high-conviction fund, meaning it focuses on a small number of carefully chosen stocks. Its top five holdings at the end of 2020 were PayPal (11.4%), Capital and Counties
How are you positioning the fund for the year ahead, considering local and global opportunities and risks? From February 1 2021, the Long Beach Flexible Prescient fund will change its Properties (11.2%), Richemont (10.3%) and investment mandate to invest with a Naspers (10.1%). The fund has a mediumworldwide mandate and move to the Asisa to-high risk profile and is suited to investors worldwide multi-asset flexible sub-category. with a long-term investment horizon. Global markets are increasingly being Personal Finance asked Hansford about influenced by shorter-term trends, news the fund’s remarkable performance and his headlines, political events, computerised outlook for 2021 and beyond. trading, and an institutional focus on volatility as risk. To what do you attribute your Artificial intelligence, algorithmic fund’s outperformance in 2020? trading, institutional short-term performance Long Beach recognised early the Covidpressures and passive thematic investing are 19 pandemic and associated lockdowns all causing a significantly large number of were likely to accelerate digital technology, market participants to shorten their trading economic and business trends, versus create time horizons and security holding periods. a “new normal” or reverse existing trends. Daily moves are seemingly random, with The fund’s technology holdings were notable outsized volatility reactions to news flow and events. beneficiaries of this, including PayPal, Long Beach sees significant opportunity Adyen, Spotify and Peloton. in this market environment, to stand at the As the crisis started, the fund took a much less crowded long-term horizon and moderately defensive position, with up to 10% in cash and derivative protection, and act as a portfolio investor in our chosen companies, and, where possible, to limit then switched to be fully invested to benefit unnecessary short-term trading. from the recovery in equity markets. The end of the Covid-19 health crisis In 2008, governments’ and central is not yet visible, but eventually it will be banks’ response to the financial crisis was resolved and of limited duration, while the slow and restrained by concerns of moral hazard, being seen to bail out the financial extraordinary fiscal stimulus and QE will continue, and this will be positive for risk sector. Authorities have no such restraints assets, including equities. with the economic damage caused by Covid-19. | Martin Hesse
Truffle Asse t Ma n a g e me nt
Top performing fund in South Africa* The Truffle Sanlam Collective Investments Income Plus Fund, launched in September 2016, has been awarded a 2020 Raging Bull in the South African interest-bearing short-term category for the second consecutive year. Since inception, the fund has achieved an annualised return of 10.31% net of fees (52.15% cumulative) vs the benchmark of 6.91% (33.10% cumulative).
To learn more visit our website www.truffle.co.za Source: Morningstar as at 31 December 2020 *Full details and basis of this award are available from the manager.
The value of experience.
Truffle Asset Management (Pty) Ltd is an authorised Category I, II and IIA financial services provider, FSP number: 36584 (Date of Authorisation: 11/03/2009). Sanlam Collective Investments (RF) (Pty) Ltd is a registered and approved Manager in Collective Investment Schemes in Securities (CIS). Annual performance of the Fund vs benchmark: 2017: 12,99% vs 7,54%; 2018: 11,33% vs 7,25% ; 2019: 10,67% vs 7,29%; 2020: 6,19% vs 5,39%. Full fund performance from inception date and further details in respect of the fund can be obtained from the Manager or by referring to the latest MDD. You can view our full CIS Disclosure and FAIS disclosure on our website. Truffle operates independently from the Raging Bull Awards and is neither an associate or product supplier to Raging Bull. Registered address: Ground Floor, Lancaster Gate Building, Hyde Park Lane Business Complex, Hyde Lane, Corner William Nicol and Jan Smuts, Hyde Park, Sandton, Johannesburg, 2196.
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RAGING BULL AWARD-WINNING FUND
PSG WEALTH GLOBAL FLEXIBLE FUND OF FUNDS MANAGER RESEARCH: HENKO ROOS ♦ Raging Bull Award for the Best
(FSCA-approved) Offshore Global Asset Allocation Fund on a Risk-adjusted Basis (for performance over five years to December 31, 2020)
PSG Wealth’s offshore funds are domiciled in Malta, but the fund selection and research is handled by its multi-management team, based in Gauteng. The PSG Wealth Global Flexible Fund of Funds is denominated in US dollars, with another version of the fund denominated in British pounds. The fund delivered 11.6% a year, after fees, in US dollars for the five years to the end of 2020. This compares favourably with the 4.9% a year of its benchmark, the average of its flexible global fund peers. A fund of funds invests in other funds instead of directly in assets such as equities or bonds. Its portfolio in December 2020 was evenly spread across six underlying funds. Personal Finance found out more from Henko Roos, the head of manager research at PSG Wealth: Please outline your investment philosophy, taking into account how you go about selecting underlying funds. The objective is to provide long-term capital appreciation through active management of a diversified portfolio of unconstrained global multi-asset funds. The emphasis is on equities, but there is no specific limit on the asset classes. As a multi-manager, our responsibility is manager selection and portfolio construction. We implement a best-
strong upside capture in the latter part of the year. We attribute our success to getting the balance right between aggressive returnseeking strategies and those with defensive characteristics.
Were there any standouts in the portfolio? Within a fund of funds structure, there are always winners and losers on a relative basis. Strategies that positioned more defensively in cash or high-quality instruments were clear winners in the first half of the year. As the year progressed and in-class principle – we select the adequate volatility declined, active manager flexibility number of funds in each risk-profile category shone through with their ability to capture that we believe will consistently deliver above- attractive opportunities in a discounted average performance, and leave the asset market. By the year-end, winning strategies allocation and stock selection calls to the were those with resilient holdings, high fund managers. To achieve this, we focus on active-share and strong security selection. identifying skilled managers with a consistent record. We then combine different but How are you positioning the fund complementary styles in an overall portfolio for the possibly challenging times aimed at achieving a consistent return ahead? profile, while managing risk and ensuring One of the key strengths of our approach competitive fees. is that we do not need to regularly make changes to our underlying managers. To what do you attribute the fund’s By engaging constantly with them and outperformance over the past few understanding their positioning, we maintain years, and specifically during the our conviction in their ability. With an pandemic? expectation for slowing economic activity Over the past few years, we have seen a over the first half of the 2021, due to the strong rally in global equities, particularly in increased restrictions, investors will likely need to look towards the second half of the the US and, as such, our more aggressive strategies, which had higher exposure to this year, where the hopes of vaccine roll-outs part of the market, succeeded. Stock selection could potentially see more positive sentiment improving market outcomes. remains a key component in what we look Central bank stimulus will continue to put for. Looking at 2020, we held part of the downward pressure on interest rates, leaving portfolio in strategies that were positioned them lower for longer; therefore, government conservatively leading into the year. These bonds will offer limited potential returns. strategies added significant returns by Equity markets, although volatile, still offer limiting drawdowns in the first quarter. As a better long-term outcome, and therefore markets recovered, our more aggressively the portfolio remains tilted to higher equity positioned strategies took advantage of exposure. | Martin Hesse various buying opportunities, resulting in
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RAGING BULL AWARD-WINNING FUND
ABSA INFLATION BEATER FUND FUND MANAGERS: EBEN MARÉ & KANYISA NTONTELA ♦ Raging Bull Award for the Best South African Multi-asset Equity Fund on a Riskadjusted Basis (for performance over five years to December 31, 2020) ♦ Raging Bull Certificate for the Best South African Multi-asset Low-equity Fund on a Risk-adjusted Basis (for performance over five years to December 31, 2020)
THE Absa Inflation Beater Fund is a conservatively managed low-equity multiasset fund, targeting a stable, above-inflation return. It achieved that admirably over the past five years, delivering 7.82% a year and beating its benchmark of Consumer Price Index inflation plus 3%. Although a handful of multi-asset low-, medium- and high-equity funds delivered higher returns over the period, none achieved this level of return at such low risk – the biggest monthly drawdown (loss) the fund had over the fiveyear period was 1.1%, while the average drawdown among its peers was 8.1%. The fund invests across the asset classes, but equities are limited to 20% of the portfolio, and there is a strong focus on maintaining consistently positive returns. It is managed by Eben Maré, who also heads the Absa Absolute Return Franchise at Absa Investments, and Kanyisa Ntontela. Personal Finance asked them about their strategy and asset selection. Please outline your investment philosophy/strategy, taking into account asset allocation and the macroeconomic backdrop. We are active, pragmatic value investors aiming to consistently deliver excess risk-
Eben Maré
adjusted returns. Our investment approach seeks value and rewarded risk. Furthermore, we place significant emphasis on riskadjusted returns and the quality of our investment outcomes. To what do you attribute your fund’s outperformance over the past few years, and specifically during the pandemic? The fund’s performance is attributable to our remaining true to our investment philosophy and process. Our aim has always been to build flexible portfolios that consistently yield significant positive real returns with minimal risk. As a result, during the pandemic we had a very low exposure to equity and property, which meant we escaped some of the brutal drawdowns in those markets. On a longer-term basis, we hold a measured approach to assumption of risk, and place a lot of emphasis on consistency and risk management. Were there any standouts in the equity portion of the portfolio? When we entered 2020 we had a very low exposure to equity and property. The positions we had went through a rigorous
process where we focused on: ♦ Quality, low-volatility value type shares. ♦ Low price-to-earnings ratios, high dividend yields and shares trading at discounts to net asset value. ♦ No index tracking. We further limited our stock exposure based on risk. We were looking for companies that we believed would recover as the economy recovered, and exposed the fund to SA Inc (companies predominantly operating in South Africa). In our opinion, SA Inc is in value territory, and we believe the opportunity exists for meaningful long-term returns. Some of the domestic counters that bought were Bidvest Group, Imperial Holdings, Pick n Pay and Tiger Brands. We even took a view to build a property position, which benefited us towards the later part of 2020. How are you positioning the fund for the year ahead, considering the ongoing effects of the pandemic and other local and global opportunities and risks? We believe that domestic cash is a proxy for inflation, while international cash holds no value. Domestic bonds offer attractive real returns, with fiscal risks “reasonably” priced in; international bonds are, again, hugely unattractive. There is upside in domestic equities. We question whether international equities are appropriately priced for risk. Property is a decimated asset class – we believe it could hold significant upside for a domestic recovery. Our short- to medium-term view is that markets have discounted all the good news and we find limited upside in risk markets. Even with vaccines, the pandemic will require time to be worked out of the system. The economic carnage, in the meantime, warrants a careful and measured approach to risk taking. | Martin Hesse
25th EDITION OF THE RAGING BULL AWARDS
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In a break with the past as a consequence of the Covid-19 lockdown, the Raging Bull Awards ceremony, which has traditionally been a glittering black-tie gala dinner, took the form of a stylish video presentation, which was broadcast on Tuesday, February 2. WATCH THE VIDEO ON THE IOL NEWS CHANNEL ON YOUTUBE HERE
LANCE Witten, the chief content officer at African News Agency, and Martin Hesse, the content editor of Personal Finance, at the recording of the first virtual Raging Bull Awards event. | HENK KRUGER African News Agency (ANA)
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RAGING BULL AWARD-WINNING FUND
ABSA BOND FUND FUND MANAGER: JAMES TURP ♦ Raging Bull Award for the Best South African Interest-bearing Fund (for straight performance over three years to December 31, 2020) ♦ Raging Bull Certificate for the Best South African Interest-bearing Variable-term Fund (for straight performance over three years to December 31, 2020) ♦ Raging Bull Certificate for the Best South African Interest-bearing Variable-term Fund on a Risk-adjusted Basis (for performance over five years to December 31, 2020)
THE Absa Bond Fund is a fixed-income fund that provides affordable access to the South African bond market. It is ideal for investors with a medium- to long-term investment horizon who seek lower risk than an equity fund, or who need diversification from the equity market. According to ProfileData, the fund delivered 10.39% a year, on average, after costs, over three years. Its benchmark, the South African All Bond Index, returned 8.88% over that period. There are 32 funds in the interest-bearing variable-term sub-category that qualified for inclusion in the awards. Over three years, they averaged an annual return of 7.12%. The fund invests primarily in South African government and corporate bonds of varying durations. Bonds, like equities, are traded on a secondary market, so returns come not only from yield, but also from capital appreciation on bond prices. Balancing these two aspects of performance requires a skillful manager. Personal Finance found out more from James Turp, the head of fixed income franchise and portfolio manager at Absa Investments.
Please outline your investment philosophy/strategy, taking into account yield versus price, government versus corporate bonds, and the macroeconomic backdrop. The Absa Bond Fund aims to beat its benchmark at the lowest acceptable level of risk. This strategy has notably delivered strong periods of outperformance during periods of increased volatility, which has been a signature characteristic of the asset class. Using this philosophy, the fund focuses on delivering the most attractive risk-adjusted returns over the short and long term. This approach does not seek to return the highest yield available, but the best strategic return given the known risks. The fund leverages off of intense fundamental and technical analysis of the investment environment, focusing on key influences to the structural bond market, such as inflation, monetary policy, term-premia and liquidity risk. A lowrisk, conservative approach, combined with an unflinching active management style, has helped the fund to deliver attractive returns to our investors. Duration calls are expressed
using liquid government bonds relative to the All Bond Index, whereas credit positioning is focused toward the more liquid, higherquality issuers. To what do you attribute your fund’s outperformance over the past few years, and specifically during the pandemic? The fund’s outperformance is largely attributable to its conservative approach to the asset class and the high level of experience and constant asset class research involved in the fund’s management. The strategy of delivering the most attractive riskadjusted return, and not simply accumulating the highest available yield, is the starting point of the fund’s performance over the long and short term. The fund managers’ active approach to portfolio management attempts to structure a defensive position to benefit from the prevailing macro-economic environment with minor active adjustments in line with structural changes to the yield curve. The fund’s bias to outperforming during negative market moves while participating in the positive moves is testament to the integrity and consistency of this approach. How are you positioning the fund for the year ahead, considering the ongoing effects of the pandemic and other local and global opportunities and risks? After the incredible year that was 2020, the fund will continue to focus on its investment philosophy to deliver its mandated benchmark. The fund will seek opportunities as they present themselves across the yield curve and fixed income market. It is very possible that volatility will be high during 2021 and, as such, it will be important to remain calm and focused on delivering the best for our investors from this exciting asset class. | Martin Hesse
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RAGING BULL AWARD-WINNING FUND
ANCHOR GLOBAL EQUITY FUND FUND MANAGER: NICK DENNIS ♦ ♦Raging Bull Award for the Best (FSCAapproved) Offshore Global Equity Fund (for straight performance over three years to December 31, 2020)
THE Anchor Group is a South African company that offers a range of unit trusts to investors, including an offshore range domiciled in Ireland and denominated in US dollars. Its offshore Global Equity Fund was launched in 2015. The fund, which is aimed at the investor who can withstand short-term volatility in order to reap superior rewards over the long term, delivered 90.9% (in US dollars) in 2020, and averaged 29% a year over the past three years. Its top holdings at the end of 2020 were Sea, a South East Asian gaming and ecommerce company; Tesla; Roku, a developer of devices and software for smart TVs; Snap, the company behind the eponymous social media app Snapchat; and Etsy, an American e-commerce website focused on craft and handmade items. Its fund manager, Nick Dennis, is refreshingly upbeat about global opportunities for savvy investors. Personal Finance put the following questions to Dennis: Please outline your investment philosophy/strategy. I want to invest in “multibaggers”. These are companies (and shares) with the potential to increase by multiples of their current size over the next five to 10 years. These
are typically young, innovative, founderrun companies that are solving important problems in enormous markets. Finding them isn’t easy – there isn’t a multibagger screen in Bloomberg and spreadsheet analysis will only take you so far. Having an open mind, embracing creativity and being comfortable with the unorthodox are all necessary inputs.
Were there any particular standouts in the portfolio? Two examples are Sea Limited and Etsy, which rose 395% and 302%, respectively, in 2020. Sea is a gaming and e-commerce company that operates predominantly in South East Asia and that has every chance of becoming the Amazon/Tencent of South East Asia. Etsy is a US-based online marketplace for craft goods. It is the anti-Amazon: boutique, intimate and friendly, as opposed to monolithic and commoditised. The pandemic helped Etsy to win over millions of new customers.
How are you positioning the fund for the year ahead, considering the ongoing effects of the pandemic and other local and global opportunities and risks? The Cambrian explosion was a period over 500 million years ago in which an To what do you attribute your abundance of new life forms emerged. I fund’s outperformance over the believe we’re in the early stages of a second past few years, and specifically Cambrian explosion – of ideas, innovation, during the pandemic? new business models and multibaggers Over time, I’ve increased the fund’s – driven by the democratisation of allocation to potential multibaggers and technological tools that were previously away from traditional GARP (growth at a limited to the largest corporates on Earth. reasonable price) names. Covid-19 was Today, it’s possible to create a business and reach a level of scale that was previously an important catalyst in accelerating that unthinkable and at a speed that is barely change; in some sense, the pandemic opened my eyes to existing trends that I had conceivable. Covid was not the genesis under-estimated and not fully embraced until of this emerging phenomenon, but it has been a critical accelerant. I think we’re in 2020. A multibagger is built on the foundation the early stages of a golden age for stockpickers. The current market environment is of a great product – one that’s typically unsettling for many (if not most) investors. cheaper, more convenient and offers customers greater choice and flexibility. From The pace of disruption is rendering “cheap” stocks expensive and vice versa. It’s an e-commerce environment in which one has to stay to streaming to the cloud, humble, but open to boundless possibilities. Covid-19 exposed more people to It is hard to be anything but wildly bullish superior products. The fund’s holdings long term. | Martin Hesse benefited significantly from that shift.
BOUTIQUE COLLECTIVE INVESTMENTS (BCI) IS DELIGHTED TO ANNOUNCE THAT A NUMBER OF OUR BCI PARTNERS RECEIVED RAGING BULL AWARDS ON 2 FEBRUARY 2021. Congratulations to the following investment managers: Certificates for Straight Performance over 3 years awarded to: Best South African Multi-Asset Income Fund Sasfin BCI Flexible Income Fund Best (SA-Domiciled) Worldwide Multi-Asset Flexible Fund Naviga BCI Worldwide Flexible Fund
Certificates for Risk-Adjusted Performance over 5 years awarded to: Best South African Multi-Asset Income Fund on a Risk-Adjusted Basis Sharenet BCI Income Plus Fund Best South African Real Estate Fund on a Risk-Adjusted Basis Harvard House BCI Property Fund Best (SA-Domiciled) Global Equity General Fund on a Risk-Adjusted Basis Anchor BCI Global Equity Feeder Fund Best (SA-Domiciled) Global Real Estate Fund on a Risk-Adjusted Basis Reitway BCI Global Property Feeder Fund Best (SA-Domiciled) Worldwide Multi-Asset Flexible Fund on a Risk-Adjusted Basis Select BCI Worldwide Flexible Fund (BlueAlpha) Furthermore, we want to give a special mention that the Anchor Global Equity Fund won the Raging Bull Award for Best (FSCA-Approved) Offshore Global Equity Fund over 3 years.
BCI HOME TO SOME OF THE BEST INVESTMENT MANAGERS IN SOUTH AFRICA!
CONTACT US www.bcis.co.za | e: clientservices@bcis.co.za | t: 087 057 0571 Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique Collective Investments Scheme, approved in terms of the Collective Investments Schemes Control Act, No 45 of 2002 and is a full member of the Association for Savings and Investment SA. Collective Investment Schemes in securities are generally medium to long term investments. The value of participatory interests may go up or down and past performance is not necessarily an indication of future performance. The Manager does not guarantee the capital or the return of a portfolio. Collective Investments are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximum commissions is available on request. BCI reserves the right to close the portfolio to new investors and reopen certain portfolios from time to time in order to manage them more efficiently. Additional information, including application forms, annual or quarterly reports can be obtained from BCI, free of charge. Investments in foreign securities may include 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. Boutique Collective Investments (RF) Pty Ltd retains full legal responsibility for the third party named portfolio. Although reasonable steps have been taken to ensure the validity and accuracy of the information in this document, BCI does not accept any responsibility for any claim, damages, loss or expense, however it arises, out of or in connection with the information in this document, whether by a client, investor or intermediary. This document should not be seen as an offer to purchase any specific product and is not to be construed as advice or guidance in any form whatsoever. Investors are encouraged to obtain independent professional investment and taxation advice before investing with or in any of BCI/the Manager’s products. Full details and basis of the award is available from the Manager.
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RAGING BULL AWARD-WINNING FUND
IP GLOBAL MOMENTUM EQUITY FUND FUND MANAGER: SHAUN KROM
We were well positioned during the pandemic in that many of the companies that we invested in are leaders in the digital ♦ Raging Bull Award for the Best (SAeconomy or provide products that are in high domiciled) Global Equity General Fund demand (for example, home improvement (for straight performance over three years suppliers such as Home Depot and Wayfair). to December 31, 2020) We invested before and during the pandemic in the infrastructure layer of digital TV (for example, Roku) and digital advertising that is not Facebook or Google. We do not have much FAANG (Facebook, Amazon, Apple, Netflix and Google) exposure. However, we have benefited by investing in world-leading companies such as Twilio, which develops companies in the stock universe – this is done and publishes internet and communications IP MANAGEMENT Company is a automatically. Separately, we determine collaboration of established financial services infrastructure; Shopify, which is arming the fundamental themes that are driving the businesses that have operated unit trust rebels to compete with the Amazon empire; global economy. Themes we are currently funds in their own right for more than 15 MercadoLibre, which provides fintech and invested in include fintech, consumer brands e-commerce solutions in South America; years. IPMC provides own and co-branded that are digitising, cloud computing put to portfolios to its investment management JD.com, which is like the Amazon of China; various uses, companies targeting niche partners. One of these is Emperor Asset and Nike, a great brand, with an increasing markets, property disruptors, companies Management, a subsidiary of the Purple margin as it goes direct to its users. specialising in security and digital identity Group, which manages the IP Global management, the green economy, the future Momentum Equity Fund. Were there any standouts in the of work and productivity, and biotech. The fund, which will be five years old in portfolio? June, achieved an average annual return of We then do a deep dive into each of the Almost all of our companies performed well 43% over three years to the end of 2020, companies in our narrowed-down universe to during 2020, the majority returning more according to ProfileData. Against this, the determine if and how it fits into our themes. than 50%, with some companies returning MSCI World Index achieved 14.97% a Such analysis includes whether the company more than 100%. year in rand terms. According to its fact is a leader in that theme, the depth of its sheet, almost half (47.82%) of the portfolio moat (a company’s competitive advantage), How are you positioning the fund is invested in global tech and e-commerce the uniqueness of the business and who for the year ahead, considering the stocks. Personal Finance found out more its competitors are, its customer retention ongoing effects of the pandemic and other local and global about the fund from fund manager Shaun levels, new product pipelines, ownership opportunities and risks? Krom. and leadership, and its profit margins and The fund is quite similarly positioned to cash flow. We then determine each stock’s allocation in the portfolio based on its factor last year. We have taken a slightly higher Please outline your investment exposure to companies with new business strength, its leadership position within each philosophy/strategy. theme, as well as whether a company can be models and applying unique technology in We begin our analysis by narrowing our the property space, as well as companies universe algorithmically. Specifically, we classified under more than one theme. involved in improving work productivity. narrow down the universe into the best momentum, quality, value and stability To what do you attribute your fund’s Digital security and identity management continues to be a central theme, as does companies. This is done by analysing the outperformance over the past few new commerce, brands and the genomic price movements, as well as the balance years, and specifically during the revolution. | Martin Hesse sheets and income statements, of the pandemic?
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INFORMATION click on the links to visit the website
Here are sources that can help you with financial education, give you more information on savings and investments, and afford you recourse if you have a consumer complaint or a complaint against a financial services provider
FINANCIAL EDUCATION Financial Sector Conduct Authority MyMoney Learning Series https://www.fscamymoney.co.za South African Savings Institute #WaysToSave https://waystosave.co.za/ OMBUDSMAN & REGULATORS Ombudsman for Banking Services ShareCall: 0860 800 900 or phone: 011 712 1800 Email: info@obssa.co.za www.obssa.co.za CONSUMER ISSUES National Consumer Commission Toll-free: 0860 003 600 or phone: 012 428 7000 Email: complaints@thencc.org.za www.thencc.gov.za CONSUMER GOODS AND SERVICES OMBUD ShareCall: 0860 000 272 Email: info@cgso.org.za www.cgso.org.za
FINANCIAL ADVICE Ombud for Financial Services Providers phone: 012 470 9080 or 012 762 5000 Email: info@faisombud.co.za www.faisombud.co.za INVESTMENTS Financial Sector Conduct Authority ShareCall 0800 110 443 or 0800 202 087 info@fsca.co.za www.fsca.co.za LIFE INSURANCE Ombudsman for Long-term Insurance ShareCall 0860 103 236 or phone: 021 657 5000 Email: info@ombud.co.za www.ombud.co.za MEDICAL SCHEMES Council for Medical Schemes MaxiCall: 0861 123 267 Email: complaints@medicalschemes.com or information@medicalschemes.com www.medicalschemes.com
CREDIT OMBUD MaxiCall: 0861 662 837 or phone: 011 781 6431 Email: ombud@creditombud.org.za www.creditombud.org.za
RETIREMENT FUNDS Pension Funds Adjudicator ShareCall: 0860 662 837 or phone: 012 346 1738 Email: enquiries@pfa.org.za www.pfa.org.za
NATIONAL CREDIT REGULATOR ShareCall: 0860 627 627 or phone: 011 554 2600 Email: complaints@ncr.org.za or (debt counselling) dccomplaints@ncr.org.za www.ncr.org.za
SHORT-TERM INSURANCE Ombudsman for Short-term Insurance ShareCall 0860 726 890 or phone: 011 726 8900 Email: info@osti.co.za www.osti.co.za
TAX Tax Ombud ShareCall: 0800 662 837 or phone: 012 431 9105 Email: complaints@taxombud.gov.za www.taxombud.gov.za PROFESSIONAL ORGANISATIONS Fiduciary Institute of Southern Africa (FISA) phone: 082 449 2569 Email: secretariat@fisa.net.za www.fisa.net.za Financial Planning Institute of South Africa (FPI) Phone: 011 470 6000 Email: info@fpi.co.za www.fpi.co.za South African Institute of Tax Professionals (SAIT) Phone: 012 941 0400 Email: info@thesait.org.za www.thesait.org.za FINANCIAL DATA ◆For ◆ the latest financial market indicators, go to https://www.iol.co.za/businessreport/market-indicators ◆For ◆ the latest quarterly unit trust performance, go to https://www.iol.co.za/ personal-finance/collective-investments ◆To ◆ look up performance of a particular unit trust fund go to https://www.iol.co.za/ personal-finance/fund-look-up