Fund managers on point
THE GROUP WILL BUY A 75% STAKE IN CHEVRON’S SA UNIT AND 100% OF CHEVRON BOTSWANA FOR US$973M
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