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.

Finweek English Edition - - MARKET PLACE - *fin­week is a pub­li­ca­tion of Me­dia24, a sub­sidiary of Naspers.

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.

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