There are, confusingly, three Investec funds which operate in the balanced space. The largest of these is Investec Opportunity, run by Clyde Rossouw and Sumesh Chetty, the so-called “quality” team.
The youngest is Discovery Balanced, which replicates the main institutional portfolios run by Chris Freund and Rhynhardt Roodt and focuses on earnings revisions.
The third, Investec Managed, is a hidden jewel of the Investec stable and is small by its standards, with “only” R10bn. It is not even considered one of the core Investec funds.
The main differentiator of the fund is its fund manager, Gail Daniel. She is one of the founders of Investec Asset Management; Rossouw used to carry her bags. Daniel says the fund is often classified on platforms as aggressive but she considers flexible a better description — the equity allocation moves a lot, in a range between 40% and 75%.
Daniel’s style is hard to pigeonhole except perhaps as eclectic. She follows earnings revisions, and uses the same team of analysts as Freund, but her stock selection and asset allocation are unique. While it is fairly predictable that Rossouw will not buy gold shares, Daniel often does and currently owns Harmony and Gold Fields. Until recently she owned Sibanye Gold. Only Daniel could find similarities between Sibanye and Steinhoff, arguing that both need to keep making acquisitions to make decent returns. She is not impressed with Steinhoff’s acquisitions other than Pepkor but “tolerates” the share.
Over the past quarter she has cut her financials exposure from 22% to 8% of equities, selling out of Old Mutual and Standard Bank. She says Mutual’s managed separation might take longer than expected, as regulators are concerned about the implications of the Nedbank unbundling so soon after the Barclays retreat from Absa, and the weak pound doesn’t help. In the banks she is concerned about weak asset growth and the outlook for their African operations.
Daniel is not a property bull. She took a knock from her modest holding in Capital & Counties, one of the JSE’s worst performers. She holds her offshore assets through the Global Focused fund, which is designed to complement the local equity selection. It allows her to buy alternatives such as LVMH for Richemont or Rio Tinto for Anglo American and BHP Billiton.
She holds Constellation Brands, a US business which owns the Corona beer brand, as an alternative to SABMiller or AB InBev. The Focused fund also includes BMW, which is unusually cheap right now, Daniel argues. The Focused fund is 75% equities, 22% US bonds and 3% dollar cash.
Daniel is not a big believer in South African government bonds as they do not diversify the portfolio or offer protection when the rand falls. As for corporate bonds, she says the credit risk is still mispriced.