US and Japan attract
IF THERE’S ONE THEME that’s started to emerge over the past few months for South African investors it’s that Japan and the United States are two markets that have been forgotten in the emerging market hype. The theory goes that while the world has been caught up with the concepts of the BRICs (Brazil, Russia, India, China and now South Africa) stocks in the US and Japan have been discounted, despite many of their heavyweights having exposure to those high growth sectors.
One fund that might fit the bill for investors looking to take advantage of this disconnect in markets is the Allan GrayOrbis Global Equity Fund, managed by Ian Liddle. The fund has 42% exposure to US equities, 20% to Japanese equities, 17% to European companies and 10% to China, giving investors a nice mix of developed and emerging markets.
Allan Gray’s record as a domestic money manager is well respected, but the Orbis Global Equity fund still has some work to do to convince the sceptics. Established in 2005, the fund has delivered a return of 5,6%/year in rand terms over the past five years and 4,6% in US dollar terms. Managers might argue it has still outperformed its own benchmark, even after the 2,38% in fees is taken into consideration. But like many of its offshore peers the product has hardly set the world alight.
In his December commentary, Liddle bemoaned poor timing on exits of positions, adding that the fund’s poor performance could be attributed to “fewer winners than losers and few big winners over the year”.
There’s plenty of evidence to suggest the US and Japan are smart places to invest in if you buy the view that an economic recovery is under way. Though Allan Gray has worked hard to build its reputation as a manager that delivers value, with a number of competitive offerings coming through in the offshore sector it’s going to have to work hard to prove it can deliver returns.