IN­VESTEC OP­POR­TU­NITY FUND

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

If any­one is look­ing for a less-tra­di­tional bal­anced fund, In­vestec Op­por­tu­nity might be it. Fund man­agers Clyde Ros­souw and Sumesh Chetty have built a fund with an en­tirely dif­fer­ent fo­cus from that of its peers. It was the first team to talk about qual­ity shares. Also, an in­te­grated team is based in Cape Town, and Lon­don. It looks at shares from a global per­spec­tive.

For ex­am­ple, be­cause the fund looks at tech­nol­ogy shares holis­ti­cally it does not con­sider Naspers a “must own”. In fact, it sold its po­si­tion in 2013. Ros­souw says Ten­cent, which is a pro­tected busi­ness in China, might not con­tinue to grow as some an­a­lysts ex­pect. And there is no jus­ti­fi­ca­tion for it to trade on dou­ble the mul­ti­ple of a peer such as NetEase.

But as In­vestec Op­por­tu­nity is a do­mes­tic fund it still buys in some sec­tors that it would avoid glob­ally. In re­sources it con­sid­ers Sa­sol and As­sore to be strong fran­chises on a rel­a­tive ba­sis. Ros­souw says he does not be­lieve bank­ing is a strong in­dus­try glob­ally, as it has high lever­age and thin mar­gins, but he is pre­pared to own Stan­dard Bank and FirstRand lo­cally. With hind­sight he wishes he had spot­ted Capitec ear­lier, as it has all the char­ac­ter­is­tics of a clas­sic dis­rup­tor, and its fi­nan­cials are ex­em­plary. He also sees short-term in­surer San­tam as a highly dom­i­nant fran­chise.

These po­si­tions might not be traded at all in any given quar­ter. Ros­souw says the hur­dle for a qual­ity com­pany is lower in SA than it would be for a global port­fo­lio, but shares such as Aspen Phar­ma­care, Medi­clinic and Tiger Brands have some of the char­ac­ter­is­tics of qual­ity shares. But they may never match for­eign hold­ings in the fund (held through the global fran­chise fund) such as Philip Mor­ris In­ter­na­tional, John­son & John­son and Swedish Match.

The fund also in­vests in higher-growth tech­nol­ogy-fo­cused shares such as Visa and Price­line, which owns Book­ing.com.

The fund is multi-as­set and sticks to Reg­u­la­tion 28, but it doesn’t usu­ally look for out­per­for­mance (al­pha) from bonds. Fixed in­come is a buf­fer to re­duce volatil­ity and keep unit prices more stable. Right now the bond ex­po­sure is low du­ra­tion and fo­cused on high-qual­ity names.

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