Financial Mail - Investors Monthly - - Analysis: Financial Services Funds -

The long-time man­ager of this fund, Tracy Brodziak — ow­ing to the pres­sures of her ra­dio com­mit­ments — now has an over­see­ing role on the fund, which is now run by Nee­lash Han­sjee.

Han­sjee says the fund has un­der­per­formed its bench­mark, the cat­e­gory av­er­age, over one year: de­trac­tors in­cluded Cap­i­tal & Coun­ties, which in­vestors aban­doned as they were anx­ious about the up­com­ing Bri­tish ref­er­en­dum on mem­ber­ship of the EU.

Han­sjee says Capco’s Lil­lie Square units, a high-pro­file res­i­den­tial de­vel­op­ment in West Lon­don, have slowed as Lon­don’s hous­ing mar­ket re­mains un­der pres­sure.

Old Mu­tual Fi­nan­cial Ser­vices has a com­par­a­tively high weight­ing in Bar­clays Africa as op­posed to Stan­dard Bank. Shares that helped the fund in­cluded Lib­erty, San­tam and FirstRand. Han­sjee says San­tam is a high-qual­ity busi­ness which keeps im­prov­ing and it has been able to di­ver­sify its rev­enue, no­tably through a deal with San­lam to take a 35% stake in its African and Asian busi­nesses.

Han­sjee says the fund has a pref­er­ence for banks, which in price-to-book terms are on 10-year lows in some cases. It has few niche fi­nan­cials apart from Pere­grine Holdings (3%) and Trans­ac­tion Cap­i­tal (1%).

He does not hold Capitec — the story looks good but the val­u­a­tion is “punchy”. It is also vul­ner­a­ble with a large un­se­cured con­sumer fi­nance fran­chise at a time when in­ter­est rates are in­creas­ing.

There have been plenty of bet­ter value shares to buy in the sec­tor, such as the fund’s par­ent com­pany Old Mu­tual, with the prom­ise of value to be un­locked through the coming re­struc­tur­ing. Bar­clays Africa is also look­ing cheap for a sound busi­ness with a 17% re­turn on eq­uity.

The fund has a sprin­kling of shares that are not true fi­nan­cials, such as Reinet. Even that has a stake in the UK pen­sions busi­ness, but its hold­ing in Bri­tish Amer­i­can To­bacco dom­i­nates its net as­set value.

Brodziak says in a dif­fi­cult mar­ket for fi­nan­cials the sec­tor still de­liv­ered a re­turn of 6.2% in the March quar­ter, ahead of the over­all mar­ket. And it was not a ho­mo­ge­neous sec­tor, with non­life in­sur­ance (San­tam) up 27% and gen­eral fi­nan­cials just 2%.

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