IOL MONEY: Raging Bull Awards - Special Edition - February 2022

| ARMAND HOUGH (ANA)

FEBRUARY 2022

RAGING BULL AWARDS SPECIAL EDITION

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CONTENTS

SPECIAL RAGING BULL AWARDS EDITION Ninety One says global investment experience counts 6 Raging Bull certificate and award winners 8 Important contacts and links

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FUND PROFILES

Counterpoint SCI Value Fund Sygnia FAANG Plus Equity Fund Gryphon Prudential Fund Bateleur Flexible Prescient Fund Absa Bond Fund Sarasin IE Multi Asset Strategic Fund Baillie Gifford Worldwide Long Term Global Growth Fund

SPONSORS

PERSONAL

FINANCE

DATA PROVIDERS

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FROM THE EDITOR

Excellence is the unlimited ability to improve the quality of what you have to offer. – Rick Pitino

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

OVER its 25 years, the annual Raging Bull Awards has built a reputation in the investment industry as a unique showcase for funds and asset managers that deliver consistently superior returns for investors, as well as being a way of simply rewarding top-performing fund managers for a job well done.

Two criticisms come up regarding the awards and I shall deal with each one in turn. The first revolves around the well-worn truism "past performance is no indicator of future performance". Should the awards be used by investors to guide them in their choice of funds? My counter-arguments are that: a) Reputation counts, because what else do you have to go on? This is the case when choosing a doctor, a plumber, or a mechanic for your car. Past performance establishes a service provider's reputation. New kids on the block may be just as good, if not better, but you don't know that until they have a history of performance on which you can make a judgement. b) The awards are in two categories: for straight performance over three years and for risk-adjusted performance over five years. The risk-adjusted awards over five years, which is the more relevant category for investors deciding where to invest their money, take account of consistency of performance and the relative "smoothness" of the performance curve over a full five years, thereby giving investors a good idea of how well a fund manager balances risk and reward over a relatively long time frame.

The second criticism revolves around the human factor.

The awards rate human performance; they are for actively managed funds. Passively managed index-tracking funds do not require much in the way of human intervention. There is no room here to get into the passive-versus-active debate.

However, the bulk of investment assets in South Africa, and as far as I know in the US and Europe, remain in actively managed funds.

Until index trackers and artificial intelligence replace active management, error-prone humans will still be managing our money in the foreseeable future. So for the time being we can honour those who show themselves to be a cut above the rest.

Martin Hesse

If it’s personal to you, it’s personal to us.

To do things the right way requires a personal commitment. A considered approach. That’s why we use decades of expertise and market knowledge combined with fundamental research to guide all our investment decisions.

Because when it comes to managing your wealth, it’s not just a job, to us: it’s personal.

We care for our clients’ assets like our own because we never forget who they really belong to. If you’re an individual, family, charity, trust or corporate looking for a global investment manager with diversified investment solutions, choose the one that is personally committed to your future. The one who does things the right way. The Melville Douglas way. www.melvilledouglas.co.za

Best Offshore Management Company

Melville Douglas is a subsidiary of Standard Bank Group Limited.

Melville Douglas Investment Management (Pty) Ltd. (Reg. No. 1987/005041/07) is an authorised Financial Services Provider.

(FSP number 595). STANLIB is a registered representative in terms of CISCA. For any additional information and basis for the award please contact Melville Douglas.

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NINETY ONE SAYS GLOBAL INVESTMENT EXPERIENCE COUNTS For the second year in succession, Ninety One has won the coveted Raging Bull Award for South African Manager of the Year. MARTIN HESSE reports

ASSET manager Ninety One attributes its Raging Bull Award for the South African Manager of the Year to the global nature of the company’s highly experienced investment team.

For the second year in a row, the company was crowned South African Manager of the Year at last week’s Raging Bull Awards, for the superior performance of its unit trust funds to the end of 2021. In second place was last year’s runner-up, Cape Town boutique asset manager Mi-Plan, and third was Coronation Fund Managers. The Offshore Manager of the Year award went to Melville Douglas, the offshore investment arm of the Standard Bank group.

The awards, hosted annually

by Personal Finance, were sponsored this year by the JSE, Sanlam Investments, and Melville Douglas. The data suppliers were ProfileData and its subsidiary PlexCrown Fund Ratings. The ceremony, as last year, took the form of a video presentation, which can be viewed on the IOL News YouTube channel.

Apart from the Manager of the Year awards, eight Raging Bull Awards and 30 Raging Bull Certificates went to individual funds in local and offshore categories (see page 8).

SANGEETH SEWNATH, DEPUTY MANAGING DIRECTOR OF NINETY ONE

LOCAL WINNER Ninety One 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 2020, 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.

In an interview with Personal Finance, Sangeeth Sewnath, deputy managing director at Ninety One, said winning the award for a second time in a row in the two years since the company’s demerger was further

confirmation that investors could be as confident in Ninety One as they were in Investec Asset Management.

“We’ve spent a lot of time explaining to our clients that despite the demerger and the listing, what we do hasn’t changed, the people that they deal with haven’t changed, and I think this award emphasises and reinforces what we’ve been saying for the last two years,” Sewnath said.

When asked the reasons behind Ninety One’s performance over and above the performance of the markets (what is known in the industry as “alpha”), Sewnath pointed to the global nature of the company’s substantial investment team.

“We have over 250 investment

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professionals in our business, and more than two thirds of those people sit outside of South Africa – Hong Kong, London, New York, Singapore – and we think that has done two really important things for us: it has allowed us to become better money managers and it has allowed us to win this war on talent in the industry, because not only are people focused on SA-particular investments or stocks, but they have a far broader universe on which to focus on, and we’ve managed to attract and train a lot of talent on the back of this globally integrated business.”

Sewnath said that while the Raging Bull Awards recognised performance over five years, it

was a source of pride that over 20 and 30 years, the company’s track record was “absolutely stellar”.

Take, for example, its flagship multi-asset fund, the Ninety One Opportunity Fund: over 20 years it has delivered an annualised return of 13.92%, about 8% above inflation.

OFFSHORE WINNER Mike Laws, the managing director of Melville Douglas, was thrilled to hear the news of his company’s award. “This win means the world to the Melville Douglas team.

The Raging Bull Awards have always been regarded as the top recognition for the unit trust industry in South Africa.

Winning the coveted Offshore Management Company for 2021 award validates the work our team does in providing clients with long-term returns without putting capital at undue risk.

“As a private client asset manager, we look at risk differently. Benchmark performance tends to be shortterm in nature. Instead, we focus on a much longer timeframe, where volatility and ensuring no permanent loss of capital are more important to our clients.

Winning this award, which measures five-year risk-adjusted returns across our global fund range, vindicates that what we promise our clients has been delivered: superior, risk-adjusted long-term returns,” Laws said.

HOW THE WINNING MANAGERS FARED Each qualifying fund receives from one to five PlexCrowns, with a three-PlexCrown rating denoting average performance within a fund’s peer group. The managers are then given a weighted average PlexCrown rating on all their funds.

Ninety One The winning South African manager scored an average 4.24 PlexCrowns over its 18 qualifying funds, which collectively had R222.8 billion under management at the end of last year. Four funds scored five PlexCrowns, seven scored an above-average four PlexCrowns, and four scored three PlexCrowns. The fivePlexCrown funds were the Ninety One Equity Fund and the

manager’s three South African multi-asset funds: the Cautious Managed Fund, Managed Fund and Opportunity Fund.

Mi-Plan The first runner-up scored an average 3.59 PlexCrowns over its eight qualifying funds, which collectively had R9.25 billion under management at the end of last year. Two funds, the Mi-Plan IP Global Macro Fund and the Mi-Plan IP Enhanced Income Fund, scored five PlexCrowns. Four funds scored three PlexCrowns.

Coronation After a four-year absence, Coronation Fund Managers are back in the top three. The second runner-up scored an average 3.51 PlexCrowns over

its 19 qualifying funds, which had assets under management of R316.78 billion at the end of last year. Two funds, the Coronation Equity Fund and the Coronation Smaller Companies Fund, scored five PlexCrowns.

Five scored an above-average four PlexCrowns, and there were seven funds with three PlexCrowns.

Melville Douglas The winner of the Offshore Manager of the Year had three qualifying funds that it markets to South African investors, and they scored an average of four PlexCrowns. Two funds, the Melville Douglas Global Growth Fund (USD) and the Melville Douglas Income Fund (USD) achieved five PlexCrowns.

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RAGING BULL CERTIFICATE AND AWARD WINNERS (for results to December 31, 2021) CERTIFICATES FOR RISK-ADJUSTED PERFORMANCE OVER FIVE YEARS

MANAGER OF THE YEAR AWARDS South African Manager of the Year (Raging Bull Trophy) Ninety One South African Manager of the Year – 2nd Place (certificate) MI-PLAN South African Manager of the Year – 3rd Place (certificate) Coronation Fund Managers Offshore Manager of the Year (Raging Bull Trophy) Melville Douglas AWARDS FOR STRAIGHT PERFORMANCE OVER THREE YEARS Best South African Equity General Fund Counterpoint SCI Value Fund Best South African Interest-Bearing Fund Absa Bond Fund Best (SA-Domiciled) Global Equity General Fund Sygnia FAANG Plus Equity Fund Best (FSCA-Approved) Offshore Global Equity Fund Baillie Gifford Worldwide Long Term Global Growth Fund AWARDS FOR RISK-ADJUSTED PERFORMANCE OVER FIVE YEARS Best South African Equity General Fund on a Risk-Adjusted Basis Counterpoint SCI Value Fund Best South African Multi-Asset Equity Fund on a Risk-Adjusted Basis Gryphon Prudential Fund Best South African Multi-Asset Flexible Fund on a Risk-Adjusted Basis Bateleur Flexible Prescient Fund Best (FSCA-Approved) Offshore Global Asset Allocation Fund on a Risk-Adjusted Basis Sarasin IE Multi Asset Strategic Fund CERTIFICATES FOR STRAIGHT PERFORMANCE OVER THREE YEARS DOMESTIC FUNDS Best South African Equity Resources Fund Sanlam Investment Management Resources Fund Best South African Equity Midand Small-Cap Fund Coronation Smaller Companies Fund

Best South African Multi-Asset Flexible Fund Centaur BCI Flexible Fund Best South African Multi-Asset Low Equity Fund Absa Smart Alpha Defensive Fund Best South African Multi-Asset Medium Equity Fund Southern Charter BCI Balanced Fund of Funds Best South African Multi-Asset High Equity Fund Emperor IP Balanced Fund Best South African Multi-Asset Income Fund Saffron SCI Active Bond Fund Best South African Interest-Bearing ShortTerm Fund Truffle SCI Income Plus Fund Best South African Interest-Bearing Variable-Term Fund Absa Bond Fund Best South African Real Estate Fund Harvard House BCI Property Fund SA-DOMICILED GLOBAL AND WORLDWIDE FUNDS Best (SA-Domiciled) Global Multi-Asset Flexible Fund Global IP Opportunity Fund Best (SA-Domiciled) Worldwide MultiAsset Flexible Fund Naviga BCI Worldwide Flexible Fund OFFSHORE FUNDS Best (FSCA-Approved) Offshore Europe Equity General Fund STANLIB European Equity Fund Best (FSCA-Approved) Offshore United States Equity General Fund Franklin US Opportunities Fund Best (FSCA-Approved) Offshore Far East Equity General Fund Schroder International Selection Fund All China Best (FSCA-Approved) Offshore Global Fixed-interest Bond Fund Allan Gray Africa Bond Fund Best (FSCA-Approved) Offshore Global Real Estate General Fund Reitway Enhanced Global Property Fund

DOMESTIC FUNDS Best South African Multi-Asset Low Equity Fund on a Risk-Adjusted Basis Amplify SCI Wealth Protector Fund Best South African Multi-Asset Medium Equity Fund on a RiskAdjusted Basis Southern Charter BCI Balanced Fund of Funds Best South African Multi-Asset High Equity Fund on a Risk-Adjusted Basis Gryphon Prudential Fund Best South African Multi-Asset Income Fund on a Risk-Adjusted Basis Sasfin BCI Flexible Income Fund Best South African Interest-Bearing Short-Term Fund on a Risk-Adjusted Basis PSG Income Fund Best South African Interest-Bearing Variable-Term Fund on a RiskAdjusted Basis Absa Bond Fund Best South African Real Estate Fund on a Risk-Adjusted Basis Harvard House BCI Property Fund SA-DOMICILED GLOBAL AND WORLDWIDE FUNDS Best (SA-Domiciled) Global Equity General Fund on a Risk-Adjusted Basis BlueAlpha BCI Global Equity Fund Best (SA-Domiciled) Global MultiAsset Low Equity Fund on a RiskAdjusted Basis M&G Global Inflation Plus Feeder Fund Best (SA-Domiciled) Global MultiAsset High Equity Fund on a RiskAdjusted Basis STANLIB Global Balanced Feeder Fund Best (SA-Domiciled) Global MultiAsset Flexible Fund on a RiskAdjusted Basis MI-PLAN IP Global Macro 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 RiskAdjusted Basis Select BCI Worldwide Flexible Fund

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RAGING BULL AWARD-WINNING FUND

COUNTERPOINT SCI VALUE FUND COUNTERPOINT CEO PAUL STEWART AND VALUE FUND MANAGER PIET VILJOEN ♦ Raging Bull Award for the Best South African Equity General Fund (straight performance over three years to December 31, 2021) ♦ Raging Bull Award for the Best South African Equity General Fund (risk-adjusted performance over five years to December 31, 2021)

CAPE-Town-based boutique asset manager Counterpoint Asset Management was founded in 2012 and is headed by Paul Stewart. It manages 16 unit trust funds under the Sanlam Collective Investments licence, and these range from interestbearing, through multi-asset, to equity funds.

The Counterpoint SCI Value Fund, which invests in shares listed on the JSE, outperformed its peers and its benchmark, the FTSE/JSE All Share Index, over both the three-year and five-year periods to the end of 2021, delivering annualised returns of 23.87% over three years and 14.72% over five years, according to ProfileData.

This was well above the benchmark, which delivered 15.71% and 11.38% respectively.

Personal Finance asked fund manager Piet Viljoen about how the fund is managed and the reasons behind its outstanding performance.

Can you outline the investment philosophy/strategy of the Value Fund?

The fund employs a strict value philosophy.

Our interpretation of value means only

buying shares that are trading below their intrinsic value, with a comfortable margin of safety.

This strategy often requires investors to be patient and unmoved by shortterm news flow and sentiment but has historically delivered exceptional outcomes for investors who are able to stay committed to their investment strategies. In managing the fund, we employ a sensible risk management process which focuses on assessing business risk, market risk and applying sound diversification principles.

The fund invests in listed equities as well as assets with equity-like returns, but they must be listed in South Africa.

We believe investors can and should make their own decisions as to what proportion of their assets should be invested in South Africa and can then allocate across a pure South African and pure global value strategy based on their requirements.

The fund celebrates its 10th anniversary this year. It has outperformed its benchmark, the JSE All-Share Index, over that period, with exceptional returns in 2021.

To what do you attribute the fund's excellent performance?

Sensible risk management, and the ability to invest across the size spectrum of companies listed on the JSE. Smaller companies have been – and continue to be – very attractively valued and will therefore likely deliver better returns than larger and more widely held companies that are more fully priced. The fund has had an overweight in smaller companies since the pandemic related sell off in March 2020.

Which counters specifically stood out for you over the past couple of years?

MTN has been a big winner for the fund, as well as Glencore. Both stocks were neglected by the market due to bouts of bad news.

How are you positioning the fund going ahead, taking into account the possible effects of inflation and higher interest rates?

Equities are reasonably good hedges against inflation, particularly equities that have a short duration – in other words, their cash flows lie immediately ahead of them, and are not reliant on many years of speculative growth ahead of them as is the case in high growth stocks. This is good for “value” stocks, as they generally don’t discount a lot of growth far out into the future, meaning the present value of their projected cash flows are not subject to being diminished by rising interest rates – as opposed to growth stocks. We think therefore that the next few years, where central banks may well hike rates in response to rising inflation, will in all probability offer nice tailwinds to the value strategy. | Martin Hesse

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RAGING BULL AWARD-WINNING FUND

SYGNIA FAANG PLUS EQUITY FUND FUND MANAGERS: KYLE HULETT AND IAIN ANDERSON

replaced it with Microsoft; the fund already had a large exposure to Microsoft, but subsequently sold Twitter.

Performance is attributed to fantastic earnings growth in online platform companies, particularly in the US, accelerated by lockdowns and work-from-home strategies.

♦ Raging Bull Award for the Best (SA-Domiciled) Global Equity General Fund (straight performance over three years)

SYGNIA specialises in passive, indextracking funds, but it also has several actively managed funds, of which the Sygnia FAANG Plus Equity Fund is one.

Launched in 2018, it focuses on global big tech stocks, its benchmark being the NYSE FANG+ Index.

Back then the acronyms FANG and FAANG represented the high-growth big United States tech stocks: Facebook, Amazon, Apple, Netflix, and Google.

While Google is now Alphabet and Facebook now Meta, the acronyms have stuck.

Chinese companies also feature prominently in the fund’s portfolio: at the end of December, it’s top five holdings were: Baidu (12.1%), Alibaba (11.6%), Meta (11.4%), Apple (11.3%) and Amazon (11%).

The fund, managed by Kyle Hulett and Iain Anderson, has returned an remarkable annualised 38.6% a year over three years, according to ProfileData, on the back of the stellar performance of many of these big tech stocks during the pandemic.

Personal Finance put the following questions to Hulett and Anderson:

Please outline your investment philosophy/strategy for the fund?

The Sygnia FAANG Plus Equity Fund is a technology fund with a specific focus on high-growth, consumer-focused, technology-enabled global platform companies. These platforms have loyal customer bases with an expanding service range, providing decent protection against competitors, and large potential growth. As a result, the fund focuses on the large-cap, globally dominant platform companies but includes smaller up-andcoming technology companies.

While the fund has underperformed your benchmark, the NYSE FANG Index, over three years, according to your fund factsheet, it has nonethless delivered remarkable returns for investors.

To what do you attribute this outperformance?

The benchmark was selected to allow as much access to the FANG companies as possible, but in line with its philosophy, the fund itself invests away from components of the benchmark. In 2021 the benchmark dropped Twitter and

How are you positioning the fund for 2022 and beyond – do you envisage headwinds for the tech sector?

We expect some headwinds for the tech sector in the short term as US interest rates rise, but earnings growth will remain strong and the stocks should continue to perform. In 2022 we have tilted the exposure a bit more to small caps and China tech shares, which have underperformed the US giants.

Longer term, as society becomes more tech-centric and these companies continue innovating through their large R&D budgets (paid for by generous cash flows), they should continue to grow through potentially life-changing new products and services.

Investors are comfortable with exposure to these global companies because of brand recognition and strong institutional support. Indeed, when many of the FANG stocks have market caps larger than the entire South African stock exchange, it is a question of how much exposure you should have rather than if.

Anti-trust issues and new regulations remain the biggest risk to the sector, but long term, investing in companies that can grow market share in a low-growth world are a significant theme for Sygnia. | Martin Hesse

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RAGING BULL AWARD-WINNING FUND

GRYPHON PRUDENTIAL FUND FUND MANAGERS: ABRIE DU PLESSIS AND REUBEN BEELDERS ♦ Certificate for the Best South African Multi-Asset High Equity Fund (risk-adjusted performance over five years to December 21, 2021) ♦ Raging Bull Award for the Best South African Multi-Asset Equity Fund (risk-adjusted performance over five years to December 21, 2021)

GRYPHON Asset Management is a boutique investment firm based in Bellville, Western Cape, with over 20 years’ investment experience. It offers six unit trust funds, including its Prudential Fund in the South African multi-asset high-equity category.

This fund delivered a solid annualised return of 10.9% a year over five years for its investors, at far lower risk than other funds in the multi-asset high-equity peer group.

Personal Finance put the following questions to the fund’s managers, Abrie du Plessis and Reuben Beelders: Although classified as a highequity fund, the fund currently has no exposure to equities, nor to bonds, with 90% of assets in offshore and local cash and 10% in gold. Can you explain your investment philosophy/strategy?

The Gryphon investment philosophy purports that, in an efficient market like ours, it is easier, more reliable and consistent to add value through asset allocation than through stock selection.

Historically, equities has been the asset class most likely to deliver inflation-beating returns. That said, there is a time to be out

of equities and protect capital in safe-haven assets until it is time to get back into the market. We are agnostic as to a preferred asset class and believe there is a time for each. We believe in committing fully to whichever asset class offers most relative value; this means we will either be 100% exposed to equities or hold no equities at all. This is a major contributing factor to our respectable risk-adjusted returns.

Our asset allocation decisions are informed by historical, data-based indicators that identify the various economic, business and investment cycles.

The fund has managed to outperform its benchmark of CPI + 5% over five years by an extra 1.5%. To what do you attribute this outperformance?

We moved out of equities at the end of August 2018, reflecting our need to protect the fund from market volatility. The fund delivered 10.9% per year since the move out of equities. This matches the 10.9% delivered by equities over this same period, the difference being that the equity return comes with much greater volatility.

The annualised cash return over the

same period was 5.7%; we clearly outperformed cash. This was the result of preserving capital during the market drawdown of -21% triggered by the Covid-19 crisis in March 2020, and then taking advantage of the attractive yields delivered by SA government bonds bought when South Africa was downgraded by international rating agencies.

Being out of equities does not mean just sitting idly in an unremarkable money market account – the outperformance achieved is a result of making the cash “sweat”.

Do you intend to stick largely with the current asset allocation for 2022, or will changing conditions necessitate exposure to other asset classes?

Our indicators signal high levels of risk in the market at the moment – this suggests an inflection point in the current cycle and, if so, all risk assets will be affected. While some local assets are actually quite cheap, developed markets assets are not, and all risk assets usually get tarred with the same brush. Historically, when asset classes have traded at the levels we see currently, subsequent returns have been below par and/or very volatile.

Because of our focus on the protection of capital, our preference is thus to remain de-risked and out of equities at the moment. While mindful that cash is a low-yielding asset, it offers investors downside protection and also means that we keep our powder dry and are able to take advantage of opportunities which can appear suddenly in volatile markets like these. | Martin Hesse

RAGING BULL AWARD-WINNING FUND

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BATELEUR FLEXIBLE PRESCIENT FUND CEO OF BATELEUR CAPITAL AND MANAGER OF THE FLEXIBLE FUND: KEVIN WILLIAMS ♦ Raging Bull Award for the Best South African Multi-Asset Flexible Fund (risk-adjusted performance over five years to December 31, 2021)

THE Bateleur Flexible Prescient Fund, which is free to invest across asset classes in any proportion (the only restriction being its offshore exposure at 30% maximum), delivered annualised performance of 11.52% over five years at a lower level of risk than its competitors.

Personal Finance put the following questions to fund manager and Bateleur CEO Kevin Williams: What is your investment strategy for the fund regarding asset allocation and stock choice?

The fund is predominantly an equity/ cash fund. Asset allocation is determined considering both top-down macro factors (such as the direction of interest rates and quantitative easing) and bottom-up factors (such as equity valuations). For example, if economies are entering a tightening monetary phase and equity valuations are elevated, the fund would generally increase its cash weighting at the expense of equities. Recently, the fund has also held SA government bonds, as the yield differential between longer-duration bonds and short-term money market rates was unusually high, providing an attractive entry point. Stock selection is

fundamentally driven through Bateleur’s bottom-up research process.

To what do you attribute the fund’s excellent performance over the past five years?

By largely sticking closely to our investment philosophy and process and not being overly influenced by market noise. In addition, the fund held a high cash weighting when Covid lockdowns occurred in early 2020 and equity markets sold-off sharply. We were able to deploy this cash into select equities at attractive valuations during the market correction.

Are there any particular stocks that have stood out for you?

Three areas stand out. First, the platinum group metal companies have enjoyed a strong pricing environment over the past two years due to a tight rhodium and palladium market. The fund held exposure to this sector via Royal Bafokeng Platinum, the subject of a takeover offer at a substantial premium in the last quarter of 2021. Second, select domestic midcap shares. This segment of the equity market has been out of favour for several

years and many companies were trading at record low valuations in 2020. During 2021 several of these companies re-rated after proving their resilience against a tough economic backdrop. Mid-cap holdings include recycled paper manufacturer Mpact, consumables importer Hudaco, and mining explosives and chemicals supplier AECI. Last, the fund’s offshore holdings in Norwegian oil producer Lundin Energy, Swedish oral nicotine business Swedish Match, and US convenience store operator Dollar General were notable contributors to performance over the past three years.

How are you positioning the fund for 2022, taking account of a possible end to the pandemic, inflation and rising interest rates?

The anticipated rising global interest rate environment and ending of quantitative easing are notable headwinds for global equities in 2022, especially given that valuations are currently well above historical averages. As a result, the fund holds less than its maximum allowed exposure to foreign equities – and these stocks are more defensive and less growth oriented than two years ago.

South African equities still trade at a steep discount to historical averages and global equity markets, which provides an element of downside protection. The fund’s domestic holdings are largely stock specific incorporating select mid-caps, healthy weightings in RMI and Remgro, and quality defensives such as Shoprite and Spar. There is no “theme” to these investments. Each holding was acquired following in-depth fundamental analysis at valuations that were considered attractive at the time of entry. Liquid investments (cash and SA government bonds) currently comprise slightly less than 20% of fund value, emphasising our current more cautious outlook. | Martin Hesse

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RAGING BULL AWARD-WINNING FUND

ABSA BOND FUND in the fund’s management. The strategy of delivering the most attractive risk-adjusted return, and not simply accumulating the highest available yield, is the starting point to the fund’s performance over the long and short term.

The 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 beta market moves whilst participating in the positive beta moves is testament to the integrity and consistency of this approach.

FUND MANAGER: JAMES TURP ♦ Certificate for Best South African Interest-Bearing Variable-Term Fund (straight performance over three years to December 31, 2021) ♦ Certificate for the Best South African Interest-Bearing Variable-Term Fund (risk-adjusted performance over five years to December 31, 2021) ♦ Raging Bull Award for the Best South African Interest-Bearing Fund (straight performance over three years to December 31, 2021)

THE Absa Bond Fund provides investors with well-diversified exposure to the South African Bond market as well as other interest-bearing instruments. It has delivered the top returns over three and five years in the South African Interest Bearing category (10.29% and 10.01% annualised, respectively), outperforming its benchmark, the All Bond Index, by almost a full percentage point over five years.

These returns have come with low risk to investors, as one would expect from an interest-bearing investment.

Personal Finance put some questions to James Turp, head of fixed income at Absa Asset Management, and portfolio manager of the fund.

Please outline your investment philosophy/strategy regarding the fund.

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 rather the best strategic return given known risks.

The fund leverages off 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 low-risk conservative approach combined with an active management style has helped the fund deliver attractive alpha to our valuable investors. Duration calls are expressed using liquid government bonds relative to the All Bond Index, whereas credit positioning is focused toward the more liquid, higher-quality issuers.

To what do you attribute your fund's outperformance over the last few years, and specifically during the pandemic?

The fund’s outperformance is largely attributable to its conservative approach to the asset class and consistency of process

How are you positioning the fund for 2022, and what headwinds and tailwinds do you foresee for local bonds this year and beyond?

Looking ahead, the fund maintains its conservative positioning, while looking to outperform at low risk. South African bonds offer attractive yields across the curve and as such the fund will look to position around a near benchmark level of duration, whilst actively taking advantage of market moves.

Headwinds for South African bonds could stem from anything negatively impacting economic growth potential (such as interrupted power supply).

Global factors such as geo-political tensions and changes from current economic forecasts, which could cause prolonged and higher inflation, may be challenging. Tailwinds exist and could be strengthened, should the domestic fiscal metrics continue to improve. More progress being made on the economic reconstruction and recovery plan, as well as inflation peaking early, could also be positive. | Martin Hesse

RAGING BULL AWARD-WINNING FUND

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SARASIN IE MULTI ASSET STRATEGIC FUND FUND MANAGER: HENNING MEYER

♦ Raging Bull Award for the Best (FSCA-Approved) Offshore Global Asset Allocation Fund (risk-adjusted performance over five years to December 31, 2021)

WITH origins in the Swiss private bank J Safra Sarasin Group, Sarasin Investment Management was established in 1983 as a London-based asset manager with a focus on global, thematic investments. After acquiring Chiswell Associates in 2004, the business was known as Sarasin Chiswell, until it was converted to a partnership in 2007. The company has more than £18 billion in assets under management.

Sarasin has a licence from the Financial Sector Conduct Authority to market six of its funds in South Africa, which are denominated in British pounds, US dollars, or both. The funds are marketed in the country by the Prescient group.

The Sarasin IE Multi Asset Strategic Fund was launched in March 2008. It delivered an annualised return of 6.68% in US dollars over the five years to the end of 2021.

According to the fund’s fact sheet, the fund seeks to achieve a return ahead of inflation over the long-term through investment in a range of asset classes. It invests globally in a combination of assets - predominantly these are shares and company or government bonds.

Typically between 20% and 60% of the fund's assets are in shares (equities). It is

not constrained by geography, sector or style but manages risk through a variety of theme characteristics. Derivatives (financial instruments whose value is linked to the expected future price movements of an underlying asset) may be used only with the aim of reducing risk or costs, or generating additional capital or income.

As at the end of December 2021, the asset mix was: equities 44.8%, fixed income 37.0%, liquid assets 11.3%, and alternative Investments 6.8%. The five top equity holdings were: Microsoft 1.9%, Alphabet 1.7%, Amazon 1.7%, Dutch semiconductor company ASML (1.5%) and Home Depot (1.5%).

Personal Finance asked fund manager Henning Meyer about how the fund is managed.

Please outline your investment strategy for the fund.

The strategy seeks exposure to a wide range of asset classes, including equities, bonds, cash, commodities, alternatives and listed property. We invest globally, as we think it matters less where a company is listed, this allows us to choose our best ideas from the widest available investment universe. We are active investors, investing

in companies where we believe the longterm economic profits are not reflected in their market valuations.

At the core of everything we do is our thematic investment process, which aims to identify long-term structural trends that will shape the investment landscape for years to come, and identify companies that will benefit from these trends. Finally, we take a responsible ownership approach to all our investments. Environmental, social and governance factors are fully integrated into the analysis of every investment we make.

Once owners, we actively engage with the companies we invest in and are proactive in seeking change where necessary.

How are you positioning the fund going into 2022 considering the uptick in inflation, the expected relaxation of stimulus by central banks, and geopolitical issues?

For a number of reasons the fund has been positioned relatively cautiously throughout most of 2021 and heading into 2022. First, the continuing pressure on global supply chains coupled with a tight US labour market implies higher inflation for longer, so we remain strongly underweight fixed income securities, while the credit quality of our corporate bonds remains strong.

Second, we have only been modestly overweight equities on the back of still strong global growth and robust earnings and dividends, but employed protective option strategies to hedge shorter-term market weakness.

Third, we will remain cautious for a while longer on emerging markets, while noting that in the longer term at least some of the regulatory agenda in China is to be welcomed. Finally, we won’t be afraid of holding higher than normal cash balances – yes, cash yields are effectively zero but today’s market challenges make short-term market setbacks more likely. | Martin Hesse

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RAGING BULL AWARD-WINNING FUND

BAILLIE GIFFORD WORLDWIDE LONG TERM GLOBAL GROWTH FUND ♦ Raging Bull Award for Best (FSCA-Approved) Offshore Global Equity Fund (straight performance over three years to December 31, 2021)

THE UK-based investment house Baillie Gifford was founded in Edinburgh, Scotland, in 1908.

As of September last year it had just under half a trillion dollars of assets under management.

The company has seven worldwide funds that are marketed in South Africa

by Sanlam Collective Investments. Of

these, the Worldwide Long Term Global Growth Fund has won a certificate for its outstanding performance over three years: 41% a year, on average, over that period, which is almost double its benchmark, the MSCI All Country World Index, which delivered 21.2% annualised.

While the short-term surge is welcomed, the fund essentially aims to deliver superior long-term returns for investors by investing in companies that are in the high-growth phase of their development.

The portfolio contained only 37 stocks in December. The top five holdings were: Amazon (5.6%), NVIDIA (5.5%), Tesla (5.2%), ASML (4.5%) and Moderna (4.2%).

In the fact sheet, the two managers

of the fund, Mark Urquhart and Tom Slater, say: “Long Term Global Growth is a purely stock-driven, unconstrained global equity strategy focused on investing in exceptional growth companies from around the world.

The approach is committed and expressly long-term because we believe that investing in companies with the scope to grow to multiples of their current size over the next decade has the potential to transform the returns achieved for investors over time.

“Portfolio holding sizes are based purely on our view of the magnitude of the potential upside and our associated level of conviction. The turnover in the portfolio is low, reflecting our long-term perspective and resistance to trading on short-term news flow.”

PLEXCROWN RATING OF MANAGEMENT COMPANIES DOMESTIC MANAGEMENT COMPANY RATINGS

OFFSHORE MANAGEMENT COMPANY RATINGS

AS AT 31 DECEMBER 2021

AS AT 31 DECEMBER 2021

MANAGEMENT COMPANY

PLEXCROWNS

Ninety One 4.243 Mi-Plan 3.590 Coronation 3.511 Boutique Collective Investments 3.420 Absa 3.323 Prescient 3.234 Stanlib 3.224 H4 Collective Investments 3.177 Discovery 2.950 PSG 2.899 Old Mutual 2.840 M&G Investments 2.812 Nedgroup Investments 2.786 Alexander Forbe 2.736 Prime Collective Investment Schemes 2.708 Oasis 2.527 Allan Gray 2.523 Momentum 2.521 Marriott 2.372 IP Management Company 2.358 Ashburton 2.257

MANAGEMENT COMPANY

PLEXCROWNS

Melville Douglas 4.000 PineBridge 3.750 Ashburton 3.667 T Rowe Price 3.589 Investec World Axis PCC 3.500 Marriott 3.500 Nedgroup Investments International 3.375 Stanlib 3.367 Alexander Forbes Investments (Jersey) 3.250 VAM Global Management Company 3.208 Oasis 3.167 Sarasin 3.125 Sanlam 3.103 Schroder 3.000 Coronation 2.917 Ninety One Global Strategy Funds 2.900 Momentum 2.875 Foord 2.750 Allan Gray 2.500 Standard Bank 2.500 Prescient 2.333 Brooks Macdonald International 2.167

INFORMATION

19

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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

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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

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