INVESTING
31 December 2019
KIM ZIETSMAN Head: Business Development and Marketing, Laurium Capital
What you need to know about the Laurium Income Prescient Fund
Tell us a bit about Laurium Capital Laurium Capital is an independently owned boutique manager, started in 2008. We run hedge and long-only funds in South Africa and the rest of Africa, and have R27bn assets under management.
Despite the broader limits in the Multi-Asset Income category, we are unlikely to make significant use of the equity and Africa allowances and property exposure will probably remain significantly below the limit over time, in line with the volatility target of the fund.
When was the Laurium Income Prescient Fund launched and who manages it? The Laurium Income Prescient Fund was launched on 1 March 2019. It is managed by Jean-Pierre Du Plessis (J-P), who joined the team on 1 January 2019. Prior to joining Laurium in January 2019, he was deputy head of fixed income at Prescient Investment management in Cape Town where he worked for nine years. Prior to this, J-P worked in the portfolio management industry in the UK for 12 years.
What do you hope to achieve with this investment strategy and who would benefit most? The fund is focussed on generating yield. We have a primary target of generating inflation +3% returns, and a secondary objective of avoiding drawdowns over a rolling three-month period. The fund is for conservative investors who want to obtain real returns but with low volatility and is focused on compounding real returns over time while minimising the potential for drawdowns, allowing them to generate income.
The Laurium Income Prescient Fund falls into the Multi-Asset Income Category – what can funds in this category invest in? Funds in this category may invest in a spectrum of bonds, money market, real estate markets or, to a limited degree, equities, with the primary objective of maximising income. They can have a maximum effective equity exposure (including international equity) of up to 10% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio. The ASISA category allows the fund to invest within the SARB limits, a maximum of 30% in offshore investments and 10% in African investments. This said, the fund will aim to limit currency volatility through hedging where appropriate.
GUY FLETCHER Head: Client Solutions & Research, Sanlam Investments
L
et no one ever tell you that simply putting money aside on a monthly basis will solve all your retirement problems without a proper strategy. It is estimated that up to 80% of your retirement ‘pot’ is likely to come from the growth in your monthly savings, rather than the actual savings themselves. As such, we need to give the appropriate attention to how this money is invested. Fortunately, the world of investments is constantly evolving and, in many ways, we now have more opportunities and tools at our disposal than previous
FORTUNATELY, THE WORLD OF INVESTMENTS IS CONSTANTLY EVOLVING
What are the largest drivers of return in an income fund? The largest determinate of returns will be derived from generating yield in the portfolio. There are several drivers that can be used to actively generate returns – duration, credit, inflation linked bonds, preference shares, property and international assets and currency. Why is the investment strategy appropriate? Fixed Income investments play a vital role as a source of income, for capital preservation, total return and diversification benefits, especially for conservative investors who may be in their later life stage.
What are the risks, liquidity and returns for the strategy? This is a conservative portfolio. We want to protect capital and generate real returns. We focus on liquid asset classes, reducing liquidity risk. Property and international assets can be volatile, so it is important that we size these appropriately. We may use currency options/overlays to reduce the volatility of having naked offshore currency exposure. What are your key differentiators vs. your peers in the income space? • Focus: It is our only fund in the Fixed Income space, not part of a greater model that allocates to this strategy • Size: The fund is small, which allows us to be nimble and get meaningful allocations to smaller assets and secondary offerings • Global experience: J-P’s experience of investing in offshore markets and structuring is also a differentiator • Team leverage: Financial analyst Matthew Pouncett and property analyst Ruan Koch give J-P an improved insight into the credit and property markets. J-P also receives quantitative research and support from our quants analyst, Menzi Mthwecu. How would an adviser access this fund? The fund is available directly via Prescient and also via Glacier, Investec and STANLIB LISPs. With the support of the retail allocators and investors, we are aiming to add it to additional platforms in time.
Nine investment elements your parents wish they had
generations had. So, how does the current landscape of investing stack up relative to the world of your parents? Nine investment elements your parents wish they had: 1. Choice: There have never been more funds, more managers and more investment platforms than we have at the moment. 2. Technology: Choice leads to complexity and overcoming complexity requires insights, data processing and visualisation tools. Our methods of portfolio construction have never been more thorough, more personalised or more comprehensive. 3. Insights: A massive upside to technology is the ability to understand where performance comes from and how to manage your investment plan accordingly. 4. Costs: Costs have been declining
for years, both locally and internationally, particularly within the active manager space. In fact, the average consumer pays less than two-thirds of typical unit trust fees in the 1990s. 5. Opportunity: South Africans have seen their ability to invest internationally increase from 1% of their retirement portfolio in the early 90s to 30% today, with an additional 10% allowance for Africa. South Africans are also individually entitled to take R10m foreign investment allowance offshore every calendar year. 6. Accessibility: Platforms abound. Today there are multiple platforms, with very low switching fees, with low cost and negotiated access to the bulk of products. 7. Implementation: The second wave of choice is vehicles. One is no
longer limited to single investment products but can invest in a range of vehicles. 8. Expanded asset set: The world of private investments, including direct property, private equity (and debt) and, not least, hedge funds, used to be the preserve of only institutions and high-net-worth individuals. Recent legislation has opened these up to the average investor. 9. Legislation: The regulatory framework that underpins the investment environment has never been stronger. We have at our disposal the most comprehensive set of tools for improving our understanding, and creating a plan that services our individual needs and our individual risks. There truly has never been a better time to be an investor.
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