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