Two black managers vie for best equity fund in unit trust Oscars
• Aluwani and Mazi Capital go head to head for one of Morningstar’s performance awards
In the unit trust award season, the Golden Globes (or should that be the Golden Balls?) are already history. It will soon be time for the Oscars, namely the Morningstar Fund Awards to be held in Cape Town on February 28.
In contrast to the 100-odd Golden Balls awarded, Morningstar is notoriously tightfisted. There are just seven sector awards and no awards for popular sectors such as flexible income or property, though an award is given for the moribund bond sector. But if the detail can be criticised, it makes sense to focus on the multi-asset sectors, as these are the sectors that dominate client inflows.
It is interesting to see that the best South African equity fund is contested between two black managers. Malungelo Zilimbola at Mazi Capital is a previous winner. He doesn’t call himself a momentum manager, buying previous winners. But his portfolio might indicate otherwise — 20% of Mazi Equity is made up by Naspers. To be fair he has also invested in fallen angels such as Foschini, MTN and Aspen. Mazi has been one of the few clear successes in the black economic empowerment (BEE) management space.
Aluwani, with R54bn under management, is about the same size as Mazi at R42bn. Like Zilimbola, Patrick Mathidi, the manager of Aluwani Top 25, is an alumnus of both Investec and RMB Asset Management.
Aluwani has a large major shareholder in Momentum. Who knows how it will do once it has fully broken away.
Perhaps it will flourish, as Taquanta did when Nedbank sold out. Taquanta is now the largest BEE manager.
Mathidi had an even larger exposure to Naspers than his rival, a massive 28%. This would have been the single largest reason that these two funds got to the top of the rankings. But while these awards are weighted towards 2017, they incorporate results of the last five years. It is always interesting to see the success of the large houses against the niche players.
It is unfortunate that the BEE managers are only competitive in the equity space and remain subscale in balanced and (Taquanta apart) fixed income.
PSG used to be a cosy shop in Constantia before two people from Sanlam brought some ambition into the place. They are the charismatic Anet Ahern, the CEO for the past five years, and her effective hatchet man, Greg Hopkins. Ahern is certainly one of the longtime proponents of active management since her time as a portfolio manager at Allan Gray and as head of BOE Asset Management.
PSG has been nominated in the two largest categories, aggressive allocation and cautious allocation, for its PSG Balanced and PSG Cautious funds. Their rivals both make extensive use of index funds. The NFB Ci Cautious Fund uses index funds for its equity building blocks, while Nedgroup Investments Core Diversified uses a cheap index approach throughout. We will soon see if PSG’s active approach has prevailed, and whether active lives to fight another day.
NFB is an unusual example of a nomination as an independent financial advisory group. Very few advisers still consider portfolio construction to be a core competence. But at NFB while the advisers schmooze the clients, Paul Marais and his team focus on the portfolios, blending unit trusts as efficiently as possible. NFB has quite a formidable opponent in the moderate category: Chris Freund of Investec, who runs the Discovery Moderate Balanced fund. It is an unusual category with a maximum equity exposure of 60%. Freund says the fund has been true to label, with both risk and return halfway between the Discovery Balanced and Cautious funds.
The duel for the Flexible category could prove the most interesting contest of all. It is between Old Mutual Flexible, run by the head of its MacroSolutions (multi-asset) business, Peter Brooke, and Centaur Flexible run by Roger Williams. Brooke calls his business unit a boutique, but compared with the R4.5bn Centaur it is a Makro. Williams is a previous winner of the award as well as of several Golden Balls, but upsets are always possible.
In the global equity category it is a case of two big funds managed overseas but with strong South African roots. One is Orbis Global Equity. This is definitely a fund that can be locked away in your top drawer for the next 10 to 20 years. Not that it never has a bad year — some have been embarrassing — but over time this sister group to Allan Gray has proved its worth.
It is the bookies’ favourite, but don’t rule out the Investec Global Strategic Equity Fund. It is an interesting blend of a quantitative Four Factor approach with the often quirky active bets by fund manager Mark Breedon, a veteran of what is now Alliance Bernstein.
It’s a case of heads I win, tails I win for Coronation in the bond category. Its own branded bond product, run by Nishan Maharaj, is pitted against the Absa MultiManaged Bond Fund, half of which is run by Coronation.
It used to be conventional wisdom that multimanager funds would always give average performance, but the success of Absa and NFB (which is a multimanager in all but name) has proved this wrong.
Morningstar will also give awards for fund houses, and the three shops have all been contenders before. Nedgroup has been a great commercial success with funds such as Rainmaker and Stable, and after a few years under Ahern’s whip PSG can’t be ruled out. But all eyes will be on 2017’s winner, Prudential, which is just a really dependable fund manager and would have an advantage in a risk-adjusted ranking.
Because it does not have enough eligible funds, Allan Gray, with R250bn in unit trust assets, is considered a smaller manager. It is in rather peculiar company in 2018. Pinebridge sounds about as sexy as an office block in Tygervalley, but it is a large global manager with $90bn under management. Yet it is in the smaller manager category. Originally part of the troubled AIG, it can’t be blamed for adopting a low profile.
The other nominee is Dodge & Cox, a well-respected $270bn global manager based in San Francisco. Neither of these companies can be called minnows. But the rules are consistently applied and all these shops had at least three but fewer than 10 eligible funds.
THE DUEL FOR THE FLEXIBLE CATEGORY COULD PROVE THE MOST INTERESTING CONTEST OF ALL