Per­petua Met Bal­anced, In­vestec Man­aged, Truf­fle Met Bal­anced, El­e­ment Bal­anced, Ash­bur­ton Bal­anced

Financial Mail - Investors Monthly - - Contents - STEPHEN CRANSTON

The high-eq­uity category is by far the largest in the unit trust in­dus­try, with R414bn un­der man­age­ment.

It has ben­e­fited from its sta­tus as the home of the most growth-ori­en­tated sta­ble of funds that still qual­ify un­der Reg­u­la­tion 28 of the Pen­sion Funds Act — th­ese funds have a max­i­mum 75% ex­po­sure to eq­ui­ties and 25% to off­shore as­sets.

It is very con­ve­nient for fi­nan­cial ad­vis­ers to put their re­tire­ment an­nu­ity clients into one or more high-eq­uity funds rather than do­ing their own as­set al­lo­ca­tion and split­ting be­tween lo­cal eq­uity funds, for­eign eq­uity funds and so forth.

Usu­ally, they are not qual­i­fied to make th­ese al­lo­ca­tions in the first place. But some lazi­ness has crept in and ad­vis­ers fo­cus on a few bal­anced funds such as Al­lan Gray Bal­anced, Corona­tion Bal­anced Plus, Fo­ord Bal­anced and In­vestec Op­por­tu­nity with­out look­ing closely at other funds that are in the sec­tor.

This month we con­sider some of the over­looked funds that de­serve con­sid­er­a­tion.

In­vestec Man­aged is not ex­actly ig­nored, with R10bn un­der man­age­ment. But it should be much big­ger given the rep­u­ta­tion of Gail Daniel. A founder mem­ber of In­vestec As­set Man­age­ment, the then Gail Boon was groomed by In­vestec As­set Man­age­ment boss Hen­drik du Toit to be its first star port­fo­lio man­ager. Even given the ran­dom­ness of past per­for­mance, Daniel’s record at the World­wide and Eq­uity funds and at this fund has been im­pres­sive. In­vestec Man­aged is the best bal­anced fund over the past 20 years.

There are cer­tainly mis­con­cep­tions about the Man­aged fund. It is not an ag­gres­sive fund, stay­ing firmly within the Reg­u­la­tion 28 re­quire­ments. Per­haps Daniel, who is (apolo­gies) an out-of-the-or­di­nary man­ager, is less easy to sell as a man­ager of stodgy re­tire­ment prod­ucts than Clyde Rossouw at Op­por­tu­nity Fund or Chris Fre­und at Eq­uity Fund, who are more ob­vi­ously safe pairs of hands. Yet Daniel feeds off the same in­vest­ment process as Fre­und and users the same team of an­a­lysts. The fund is worth a fur­ther due dili­gence from fund pick­ers.

Ash­bur­ton, FirstRand’s three-year-old as­set man­age­ment busi­ness, is much more of a new kid on the block, though much of its team, not least chief in­vest­ment of­fi­cer Paolo Se­na­tore, built up a solid track record run­ning port­fo­lios for RMB Pri­vate Clients. There is cer­tainly plenty of ex­pe­ri­ence at the Ash­bur­ton Jersey unit, which has been around for more than 20 years. Ash­bur­ton is also the first as­set man­ager for many years to be ex­plic­itly top down (as­set al­lo­ca­tion led), though it has some stock an­a­lysts on board.

Much as ad­vis­ers pre­tend to ig­nore past per­for­mance they de­serted deep value funds on the back of their poor per­for­mance, which ad­mit­tedly lasted for at least six years. But in the year so far th­ese funds have beaten the mar­ket by 17% to 22% as sec­tors such as gold have bounced back. They are clearly dif­fer­en­ti­ated from main­stream bal­anced funds, and present a good way to di­ver­sify port­fo­lios.

This month we look at two bal­anced funds that fit into this category — El­e­ment and Per­petua. El­e­ment, in its in­car­na­tion as Fraters, was an early sup­porter of en­vi­ron­men­tal, so­cial and gover­nance is­sues, though that has not proved to help it hold on to clients. But ev­ery dog has its day, and El­e­ment has had a su­perb first half of 2016. As a busi­ness, with just a few hun­dred mil­lion un­der man­age­ment, it is on life sup­port, and it would be a tragedy for the diversity of the in­dus­try if it went un­der. The port­fo­lio man­agers of El­e­ment Bal­anced, Ter­ence Craig and Jeleze Hat­tingh, are as­tute and de­serve at least some in­dus­try sup­port.

The other deep value fund, Per­petua Bal­anced, is just as small as El­e­ment Bal­anced, with R7m un­der man­age­ment, but at least it has a much more ro­bust in­sti­tu­tional book: the house has R5,5bn un­der man­age­ment. Its mar­ket­ing-savvy chief in­vest­ment of­fi­cer Del­phine Goven­der calls her fund “true value” — not the dreaded deep value — and some of its shares, such as Net­care and Bri­tish Amer­i­can To­bacco, are not scream­ingly cheap.

The last fund we look at, the Truf­fle Bal­anced fund, prob­a­bly doesn’t need much pub­lic­ity. It has gath­ered R2,3bn un­der man­age­ment un­der its own steam and it has now won the highly pres­ti­gious man­date to run the Ned­group In­vest­ments Man­aged fund. There is huge ex­pe­ri­ence among its fund man­agers, such as Iain Power and Charles Booth, who were lead­ing lights at RMB As­set Man­age­ment. Its port­fo­lios prob­a­bly have more in com­mon with the big bal­anced funds than the other four funds, and it suf­fered in the short term from low ex­po­sure to re­sources as well as its bet on UK prop­erty, but long term it seems a solid bet.

Some lazi­ness has crept in and ad­vis­ers fo­cus on a few bal­anced funds with­out look­ing closely at other funds in the sec­tor

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