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

Read­ers might no­tice the rather in­ap­pro­pri­ate name for this fund. To many, con­ser­va­tive means cash or near cash. Even a high net-worth in­vestor might con­sider a fund which can in­vest up to 60% in eq­uity far from con­ser­va­tive. Per­haps Con­ser­va­tive Bal­anced would have been a prefer­able name.

None­the­less, as co-man­ager Daryll Owen puts it, this is about as con­ser­va­tive a strat­egy as it rec­om­mends for long-term in­vestors.

Not that Fo­ord Con­ser­va­tive, run by Owen, Dave Fo­ord and Wil­liam Fraser, could be con­sid­ered racy. The Fo­ord Flex­i­ble Fund plays that role. And the con­ser­va­tive Fraser keeps his col­leagues’ more ex­u­ber­ant side in check.

The largest hold­ing in the fund, at about 17.8%, is the good old R186 gov­ern­ment bond. A smaller al­lo­ca­tion goes to the R2035. Like Coro­na­tion, the Fo­ord fund in­vests in­ter­na­tion­ally through its own funds, and it is in­vested equally be­tween the Global Eq­uity Fund and the (mul­ti­as­set) In­ter­na­tional Fund. And it has a larger hold­ing in the New­gold ex­change traded fund than its com­peti­tors, at nearly 5%. The trend is work­ing for Fo­ord, as the gold price was up 4% in Au­gust.

The fund has a num­ber of house favourites, such as Bri­tish Amer­i­can To­bacco, Cap­i­tal & Coun­ties, Richemont, Aspen and BHP Bil­li­ton. Owen says the fund fo­cuses on large-cap liq­uid shares and avoids higher-p:e shares such as Naspers, even though Fo­ord holds the share in other funds. It also avoids di­rect gold and plat-

inum shares, which are highly volatile.

The domestic eq­uity hold­ing of 15.2% is sub­stan­tially less than the 22.7% al­lo­ca­tion to for­eign eq­ui­ties. In fact, un­like many com­peti­tors, the fund is par­tic­u­larly light in real as­sets, at 43% of the to­tal. Yet 45% of the port­fo­lio is al­most equally split be­tween lo­cal bonds and lo­cal money mar­ket. The bond hold­ings have been in­creased re­cently. Owen says the el­e­vated liq­uid­ity po­si­tion pro­vides op­tions if volatil­ity in­creases. He says the port­fo­lio is well po­si­tioned to de­liver the tar­geted re­turns over the full in­vest­ment hori­zon.

The fund has a fee that varies from 0.5% to 1%, with each per­cent­age point ahead of the bench­mark (in­fla­tion plus 4%) giv­ing an ex­tra 0.1%, and ev­ery 1% of un­der­per­for­mance re­duc­ing it by 0.1%.

Over the past 12 months there has been un­der­per­for­mance, so the fee has been brought down by 0.58%.

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