Benefitting from rand hedges The fund aims to achieve long-term capital growth for more aggressive investors. It has been awarded the 2015 Raging Bull Award for the best local multi-asset flexible fund.
The fund has been scaling down its offshore exposure, says Christo Malan, one of the fund’s managers and chairman of Autus Wealth. Offshore equities comprised about 16% of the fund’s underlying holdings at the end of March.
“We were of the opinion that the rand was totally undervalued,” explains Malan, adding that the fund’s offshore exposure was as high as 25% at one stage before he started selling it down. “We are content with the current level,” he says. Some of the fund’s largest holdings are Western Cape-based companies where owners are still involved in the day-to-day running of the businesses. These include PSG Group, Naspers*, Mediclinic and Capitec, among others. A number of these stocks, including Mediclinic, generate a large portion of their income outside SA. Malan also likes the fact that these companies carry negligible bad debt on their books.
Naspers is one such company, he explains: “If you want to watch something, you need to pay first. If you want to play a game, you need to pay first. If you want to read something, you need to pay first.” The company generates the bulk of its revenue outside SA, which stands it in good stead. “They’re one of the most innovative companies out there, and Autus regard Koos Bekker as one of the best entrepreneurs in business,” he says.
Going forward, the local stock market seems expensive, he explains. “We’re pure stock pickers and only invest after analysing a company thoroughly,” he says. “Priceto-earnings ratios in the local equity market point to the fact that it is expensive.”
Nevertheless, there are opportunities out there, he says, adding that Pioneer Foods’ share price has tumbled this year and may indicate it is a buy opportunity. Mediclinic is another stock that he thinks is underestimated due to the company’s international footprint, which includes the UK, Switzerland and Dubai.
Why finweek would consider adding it:
The fund’s bottom-up approach, or stock-picking approach, has stood it in good stead. With the local equity market having had a tumultuous time recently, it will be hard to get a fund whose returns equal the long-term average of around 12% per year. A focus on rand hedges has benefitted the fund in the past and delivered above-average returns to investors. In addition, the fact that it has acted prudently with regard to the undervalued rand has given the fund a buffer. However, keep in mind that the fund is on the expensive side.