Financial Mail - Investors Monthly - - Analysis: Unit Trusts -

The fund will soon have much more vis­i­bil­ity when it is merged with the Ned­group In­vest­ments Man­aged Fund. The house has a flavour of the old RMB As­set Man­age­ment, as the lead port­fo­lio man­agers, Charles Booth and Iain Power, both had a sim­i­lar job there. The third man­ager, Jonathan du Toit, did not work there, but he is the son of one of RMB’s pioneers, Peter du Toit.

The fund has com­fort­ably beaten its bench­mark of CPI plus 4% over all pe­ri­ods

since its launch in 2011. Power says it is con­ser­va­tively po­si­tioned right now with an ef­fec­tive 40% in eq­ui­ties, and a fur­ther 12% hedged. He says fi­nan­cials are look­ing cheap from a price to book stand­point. Picks in­clude Old Mu­tual, Bar­clays Africa and FirstRand.

Power says he is con­fi­dent that value can be un­locked in Old Mu­tual, and be­lieves that In­vestec has been un­fairly treated by the mar­ket — though it has a size­able UK bank­ing op­er­a­tion, it faces dif­fer­ent is­sues from the other banks. Its size­able as­set man­age­ment and wealth man­age­ment busi­nesses give it some sta­bil­ity.

On the other hand, some of the industrial shares which help drive the fund’s per­for­mance, such as Stein­hoff, Reinet and BAT, do not have the same up­side. The fund has suf­fered in the short term from the 9% hold­ing in off­shore fo­cused prop­erty shares such as Intu, Re­de­fine In­ter­na­tional and Schroders Euro­pean Trust, though it would not be a suit­able time to sell out of th­ese po­si­tions as the prices are strug­gling to re­cover and the yields are com­pelling.

The fund has ex­po­sure of less than 5% to re­sources, though it has had some suc­cess with sec­ond-tier gold com­pany Pan African. In gen­eral, he be­lieves there is an in­suf­fi­cient mar­gin of safety, even though some re­source busi­nesses have made progress cut­ting costs. Power is wor­ried about the prospects of do­mes­ti­cally fo­cused in­dus­tri­als such as Hu­daco as earn­ings con­tinue to dis­ap­point.

The in­ter­na­tional ex­po­sure is a mix of di­rect shares and in­vest­ment through ex­change traded fund Euro Stoxx. Many of the for­eign bonds are SA re­lated, such as the Old Mu­tual and Eskom off­shore cur­rency bonds, which have given a 9%-10% yield. It avoids sov­er­eign as 63% of them around the world have neg­a­tive yields.

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