The road less travelled

BY ABRI DU PLESSIS Portfolio Manager, Gryphon

Gryphon’s multi-asset funds have distinguished themselves from their peers in three ways:

• They have proven their ability to consistently deliver inflation-beating returns

• They protect investor’s capital during volatility

• They present a very different performance profile to that of their peers.

Gryphon’s Prudential Fund was awarded the Raging Bull certificate for Best South African Multi-Asset High Equity Fund on a Risk Adjusted Performance Basis over five years in acknowledgment of this.

Both multi-asset funds, the Prudential and Flexible, are managed in the same way; the Prudential Fund is Regulation 28 compliant and can therefore hold a maximum equity exposure of 75%, while the Flexible Fund can hold 100% in equities.

Common belief is that there are two certainties in life, namely death and taxes. Similarly, Gryphon believes that there are two major certainties in asset management:

• Asset allocation is the major determinant of portfolio performance, and

• Costs erode returns.

Historically, equities have been the asset class that delivered long-term, inflationbeating returns. However, there have been notable periods where returns from equities have been quite muted; the past seven or so years have been just such a period.

What differentiates the Gryphon funds from their peers is the philosophy of being fully exposed to the asset class of choice – the execution of this philosophy means that during a bull market, the funds are fully exposed to equities but in a secular bear market they will hold no equities at all!

This is in stark contrast to the category peers. The average multi-asset fund tracks the FTSE/JSE All Share Index very closely. Over the almost seven years of the funds’ existence, the correlation between the FTSE/JSE All Share Index and the average return of flexible funds is around 95%, while the Gryphon funds vault between a negative or almost 100% correlation.

Given market returns over this period, investors would have benefited greatly from skilled asset allocation, as illustrated in the chart.

This picture tells the complete story – how effectively Gryphon’s multi-asset funds have been able to outperform the underlying asset class components. This speaks to the ability of stepping on the right stones as the water is rising and falling, as well as moving forward while keeping one’s feet dry as the tide shifts and changes.

Given the performance history of the funds, we believe our rules-based approach has proven itself worthy of serious consideration, both for protection from volatility and the inflation-beating performance it delivers, as well as the diversification from its peers.