A fund that wins big by not los­ing in the long term

Finweek English Edition - - FUND FOCUS -

The Old Mu­tual In­vestors’ Fund is un­doubt­edly one of t he sound­est long-term choices you could make in the do­mes­tic eq­uity fund sec­tor. It’s the old­est unit trust in the coun­try – the favourite of thou­sands of con­sis­tently sat­is­fied long-term in­vestors – and boasts an im­pres­sive R14bn un­der man­age­ment.

In spite of its size, it has gen­er­ated a 19.6% an­nu­alised re­turn over five years; 21.4% over three years; and 10.2% on one year. The an­nu­alised re­turn since in­cep­tion in Oc­to­ber 1966 is 17.8%.

The fund is cur­rently man­aged by Peter Lin­ley and Jonathan Lar­combe. Lin­ley has worked in the in­dus­try for more than 30 years in var­i­ous se­nior ca­pac­i­ties, in­clud­ing as chief in­vest­ment of­fi­cer at Old Mu­tual In­vest­ment Group. He has been in­volved with the In­vestors’ Fund for the past six years as head of Old Mu­tual Eq­ui­ties, a bou­tique within Old Mu­tual In­vest­ment Group.

Lar­combe, a qualif ied char­tered ac­coun­tant with 14 years’ ex­pe­ri­ence in f inan­cial mar­kets, has been ex­ten­sively in­volved with pri­vate eq­uity and man­aged the Global Tech­nol­ogy Fund. Prior to join­ing Old Mu­tual, he spent sev­eral years in Lon­don with Grant Thorn­ton and Credit Suisse.

Lin­ley at­tributes the In­vestors’ Fund’s long-term suc­cess to the many tal­ented i nvest­ment pro­fes­sion­als who have man­aged the fund over the years within a dis­ci­plined val­u­a­tion-based phi­los­o­phy. “The long-term suc­cess has not been the re­sult of one per­son, and I guess that has added ex­ten­sively to its sus­tain­abil­ity,” he says. The fund is fully in­vested in South African stocks.

The fund’s man­date, he points out, is to fo­cus pre­dom­i­nantly on the Top 100 shares on the JSE, although he is con­stantly on the look­out for op­por­tu­ni­ties among the smaller caps. De­riv­a­tives may be used for risk man­age­ment pur­poses.

“Sim­ply put, we buy stocks that are un­der­val­ued and sell stocks that are over­val­ued. A dis­ci­plined frame­work and long-term val­u­a­tion hori­zon is es­sen­tial given the sub­jec­tiv­ity of val­u­a­tions. In ad­di­tion, we favour high- qual­ity com­pa­nies with su­pe­rior earn­ings growth while we also care­fully an­a­lyse the sen­ti­ment to­ward in­di­vid­ual shares,” Lin­ley states.

He ex­plains though that his team’s ap­proach is not overly value-based. “The trou­ble with a pure value ap­proach is that it de­pends heav­ily on the sub­jec­tiv­ity in­cor­po­rated in any val­u­a­tion and is of­ten obliv­i­ous to mar­ket in­for­ma­tion. While we spend a huge amount of time de­ter­min­ing val­u­a­tion, we also look to ex­tra­ne­ous fac­tors that help long-term out­per­for­mance. The in­for­ma­tion is freely avail­able and ex­tremely use­ful and, used in­tel­li­gently, adds value and helps avoid value traps.

“If sen­ti­ment on a par­tic­u­lar stock is re­ally neg­a­tive, that might be of in­ter­est to us, f irstly, be­cause it may sim­ply be ne­glected by the mar­ket, and se­condly, fur­ther re­search may show that it of­fers

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