De­fen­sively po­si­tioned

Finweek English Edition - - UNIT TRUSTS -

SO­CIAL UN­REST IN Africa, debt ceil­ings in the United States – plus, of course, the sov­er­eign debt cri­sis in Europe – are enough to put off even the most bat­tle­hard­ened in­vestor when it comes to putting his money into the stock mar­ket. The easy an­swer is to say in­vestors should, in­stead of fol­low­ing the herd, look for un­der­val­ued stocks and wait for the mar­ket to cor­rect the “mis-pric­ing”. Of­ten eas­ier said than done.

When things are as volatile as they are right now, it some­times makes sense to rely on those who have “been there and done that” to look af­ter your money. If that’s what you’re look­ing for then it’s hard to look be­yond John Bic­card and the In­vestec Value Fund. Bic­card has long been ad­mired as one of South Africa’s premier stock pick­ers and the 1 419,4% in­crease in the fund since in­cep­tion in 1997 is a tes­ta­ment to his skills. By com­par­i­son the FTSE/JSE All Share In­dex de­liv­ered 579% – so there’s some very real skill here.

It’s al­ways in­ter­est­ing to lis­ten to Bic­card’s com­men­tary and his most re­cent feed­back to in­vestors is note­wor­thy. He says: “While much has been writ­ten about US mon­e­tary pol­icy, lit­tle is said about China, where long-term in­ter­est rates of 4% re­main a full 10% be­low nom­i­nal growth in the Chinese econ­omy. That sit­u­a­tion, we be­lieve, can­not be sus­tained and is one that sug­gests rates are too low in China. We agree with the con­sen­sus view that most of the prob­lems in the world are con­cen­trated in the ‘old world’ (ie, the US and Europe). How­ever, we be­lieve that as a re­sult of the mas­sive out­per­for­mance of emerg­ing mar­kets and com­modi­ties most of the risk isn’t in de­vel­oped world eq­ui­ties but is rather in the ‘crowded’ trades that have been a ben­e­fi­ciary of the flood of money com­ing from the zero yield US and Ja­panese mar­kets. Of rel­e­vance to SA is that the rand and com­modi­ties fall into this ‘carry trade’ bas­ket, with the flood of money into the coun­try leav­ing them both ex­posed when the tide even­tu­ally turns.”

Those are very rel­e­vant points for South African in­vestors who have punted the emerg­ing mar­ket story by fi­nan­cial ad­vis­ers for the past decade or so. Bic­card’s an­swer is to use his 20% off­shore al­lowance to buy value plays in the US, Europe and Ja­pan. On the do­mes­tic front he’s gone with high div­i­dend stocks in the likes of Vo­da­com, AVI and Oceana Fish­ing, rand hedge stocks (in­clud­ing Sa­sol, An­glo Amer­i­can, ArcelorMit­tal and Sappi) and gold shares “that hedge us against an over­val­ued rand and a US Fed that con­tin­ues to de­value the re­serve cur­rency of the world”.

You can get into the fund with a R500/month debit or­der or a R10 000 lump sum, so it’s ac­ces­si­ble to peo­ple who have a bit of ex­tra cash to start nurs­ing. The to­tal ex­pense ra­tio of 2% plus 1% per­for­mance fee isn’t cheap but if your in­vest­ment is re­turn­ing an an­nu­alised re­turn of 27% net of fees it’s hard to ar­gue against.

When it comes to in­vest­ing it’s easy to get caught up in the hype of head­lines and be­lieve growth sto­ries that have al­ready run their course. “Value” is of­ten found when in fact it doesn’t ex­ist and some­times that can lead to a lot of dis­ap­point­ment for long-term in­vestors who buy into that method­ol­ogy. The In­vestec Value Fund has shown it can de­liver con­sis­tent value and of­ten sticks to the un­com­pli­cated while the rest of the world is chas­ing head­lines.

If you aren’t sure where to park your money but know you want a sound method­ol­ogy then this fund might well be your start­ing point.

JOHN BIC­CARD

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