TRUFFLE MET BALANCED
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.