INVESTEC OPPORTUNITY FUND
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.