Fund man­agers on point


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We’ve all seen fund houses ma­nip­u­late their per­for­mance data. It is not a re­li­able guide to fu­ture re­turns. But, equally, I don’t buy the ar­gu­ment that in­vest­ment is all about luck.

It’s true that many fund man­agers who look like masters of the uni­verse fall on their faces when the mar­ket moves from a growth to a value phase and back — but that is of­ten be­cause they can’t tell the dif­fer­ence be­tween a long-term ap­proach and stub­born­ness.

So the in­vest­ment per­for­mance sur­veys do pro­vide some use­ful in­for­ma­tion, in­clud­ing in­sight into which man­agers are per­form­ing best in cur­rent con­di­tions.

The Alexan­der Forbes Man­ager Watch, the old­est sur­viv­ing sur­vey, also cherry picks a few of the group’s mul­ti­man­ager funds. It is al­ways use­ful to look at the spread of re­turns. In the do­mes­tic-only bal­anced funds, re­turns var­ied from 11.95% for Pan African, which surely mer­its at least an in­ter­view, down to 2.45% for Stan­lib and 3.75% for Fo­ord Do­mes­tic.

With Fo­ord Do­mes­tic’s great rep­u­ta­tion built over many years, I would not rec­om­mend an au­to­matic switch — but I would like to know the rea­sons for its poor year. Stan­lib is also not do­ing well, and there is much greater per­sis­tence among poor per­form­ers than strong ones — bad per­form­ers aren’t just un­lucky. New Lib­erty head David Munro is try­ing to get Stan­lib’s mojo back.

I am not sure why any fund would choose to be do­mes­tic only: it is hard, from a fidu­ciary point of view, to de­fend not giv­ing fund mem­bers the 25% off­shore al­lo­ca­tion. As we have heard many times, SA rep­re­sents less than 1% of global mar­ket cap­i­tal­i­sa­tion. I am sure the do­mes­tic-only sur­vey, known as the SA Man­ager Watch, is in struc­tural de­cline and may be phased out soon. Al­ready, Old Mu­tual and San­lam do not have el­i­gi­ble prod­ucts.

A broader view

The Global Large Man­ager Watch is a much more crit­i­cal rep­re­sen­ta­tion of SA bal­anced pen­sion funds.

Fund man­agers can use all as­set classes to add value. In the Global Large Man­ager Watch, the nom­i­nal re­turns were pretty fee­ble, with the best per­former, Pru­den­tial, de­liv­er­ing 8.35%. A very con­ser­va­tive fixed-in­come prod­uct could have done bet­ter, as the all bond gave 10.2% and money mar­ket 7.6%. Stan­lib, in the bot­tom place, was lucky to scrape a pos­i­tive re­turn of 1.14%.

I am not sure how much longer MMI will be in this sur­vey. Un­der Sonja Saun­der­son it doesn’t be­lieve in bal­anced funds, but in goals-based port­fo­lios. The medi­ocre per­for­mance of the fund in re­cent years is an­other in­cen­tive to cull it. But it is en­cour­ag­ing to see both San­lam and Old Mu­tual do­ing well, with 7.4% re­turns. The gap is not big enough, per­haps, ahead of con­sul­tant favourites In­vestec, Coro­na­tion and Al­lan Gray, to see much switching.

Clients who need more ag­gres­sive port­fo­lios can look at the Dy­namic funds. Old Mu­tual Pro­file Edge 28 pushes the reg­u­la­tions to the max­i­mum and of­ten has a full al­lo­ca­tion to equity, prop­erty and al­ter­na­tives. There is also the more ag­gres­sive Coro­na­tion Man­aged. I’m not sure what hap­pened to Man­aged 2, and am still wait­ing for the launch of Man­aged 3.

The Old Mu­tual unit man­ag­ing bal­anced funds goes by the clunky name of OMIG Macroso­lu­tions. Well, it’s not quite as dread­ful as that of the shop that of­fers quants and in­dex funds. That is called Cus­tomised So­lu­tions. Imag­ine that — two of the most aw­ful Mbas­peak words in the same name. Yuck!

I don’t buy the ar­gu­ment that in­vest­ment is all about luck

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