Financial Mail - - CROSSWORD 2031 -

en­eral eq­uity re­mains an im­por­tant cat­e­gory, even though the ma­jor­ity of new money has gone into the one-stop multi-as­set funds, mainly in the high eq­uity and low eq­uity cat­e­gories.

It is an easy de­fault to buy one of the pop­u­lar eq­uity funds such as Al­lan Gray, In­vestec and Corona­tion. They have been highly suc­cess­ful in spite of their size. The mar­ket has been nar­row, with a few large caps, such as Naspers, car­ry­ing the rest. But the next few years might be quite dif­fer­ent.

Re­search by No­bel lau­re­ates such as Ken­neth French and Eugene Fama show that small caps out­per­form over time. It is hard for the lum­ber­ing di­nosaur funds to add value by in­vest­ing any­where out­side the top 40 or to switch nim­bly be­tween styles such as value and mo­men­tum.

This month we look at five dis­tinct high-qual­ity funds.

They should all be on the radar of mul­ti­man­agers and top fi­nan­cial ad­vis­ers.

The out­lier is Dis­cov­ery Eq­uity, which is man­aged by In­vestec As­set Man­age­ment. But it has less than R2bn un­der man­age­ment and of­fers a clas­sic Fama-and-french fac­tor ap­proach.

There are some dif­fer­ences in method­ol­ogy, but it makes sense to look at this fund as a more di­ver­si­fied al­ter­na­tive to the Rafi in­dex, which also uses four fac­tors to as­sess shares.

There prob­a­bly wouldn’t be too much risk rec­om­mend­ing this fund as a mid­dle-of-theroad eq­uity prod­uct.

Other funds in this se­lec­tion prob­a­bly shouldn’t be pur­chased on a stand­alone ba­sis,

Gas they are just too feast-or­famine in na­ture.

El­e­ment Earth Eq­uity has wisely been keep­ing a low pro­file. At the end of 2015 no­body would have been boast­ing about its track record. But now it is a stan­dard bearer for or­tho­dox deep value. This was once the stomp­ing ground of Al­lan Gray, but now has a few other fol­low­ers — John Bic­card at In­vestec Value and pos­si­bly (though much more nu­anced) Piet Viljoen at RECM.

El­e­ment would make an ex­cel­lent coun­ter­foil to An­chor Cap­i­tal. The core of An­chor’s phi­los­o­phy is that it is “not value”. Its share port­fo­lio will have lit­tle in com­mon with El­e­ment, and its re­turn se­ries will be quite dif­fer­ent. An­chor also has a showbiz ap­proach (why on earth did it list on the JSE?) some­what dif­fer­ent from El­e­ment, which is stuck in an at­tic in the far end of Cape Town.

Lau­rium is a wel­come re­lief as it does not get caught up in these “value or not value” de­bates. It is just a strong, in­tel­li­gent fund man­ager that is per­haps a lit­tle con­ser­va­tive when it comes to tak­ing po­si­tions away from the in­dex. This is due to its hedge fund her­itage and the re­al­i­sa­tion that ac­tive fund man­agers shouldn’t feel the need to take bets they aren’t con­fi­dent they can win.

But any mul­ti­man­ager should se­ri­ously con­sider Lau­rium for its line-up.

Many have al­ready in­vested with Mazi Cap­i­tal, which at R49bn is more than dou­ble the size of Lau­rium and more than 20 times larger than El­e­ment. Founder Malun­gelo Zil­im­bola has the sliv­er­ware to prove his abil­ity as a fund man­ager — it could be luck, of course, but he has helped make his luck.

Zil­im­bola had an un­pleas­ant di­vorce from Pa­trice Moyal at Vi­sio a few years ago, but if any­thing, Mazi is now the stronger brand. It is cer­tainly time to look more broadly at the gen­eral eq­uity uni­verse. These five funds are a good place to start.


Malun­gelo Zil­im­bola, founder of Mazi Cap­i­tal.

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