Tak­ing ad­van­tage of global trends The fund aims to de­liver a high long-term to­tal re­turn to in­vestors. It has a steep bench­mark of seven per­cent­age points above in­fla­tion and uses a bot­tom-up and top-down ap­proach to se­lect­ing stocks.

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Ac­cord­ing to Kyle Hulett, man­ager of the fund, the stock se­lec­tor analy­ses a com­pany’s fi­nan­cial fun­da­men­tals (bot­tom-up) and takes cog­ni­sance of the macroe­co­nomic en­vi­ron­ment that a com­pany op­er­ates in (top-down).

“I’m look­ing for com­pa­nies that have a dy­namic man­age­ment team, are in prof­itable in­dus­tries and are cur­rently do­ing well and en­joy­ing strong mo­men­tum,” says Hulett. “From a top-down per­spec­tive, I look at what’s hap­pen­ing to global cur­ren­cies, interest rates and global eco­nomic growth.”

The fund had a large al­lo­ca­tion to global bonds, global prop­erty and gold, ex­plains Hulett. This is due to his be­lief that interest rates will con­tinue to be low for a very long time and do­mes­tic eco­nomic growth is “non-ex­is­tent”.

“The rea­son I think growth won’t ex­ceed cur­rent lev­els is that debt is too high,” says Hulett. “Debt is the rea­son the world en­tered the 2008 US sub­prime cri­sis. Debt is the rea­son we had the Euro­pean sov­er­eign debt cri­sis in 2011.” In China, lo­cal gov­ern­ment fund­ing ve­hi­cles, which bor­rowed money from banks and shadow fi­nan­cial in­sti­tu­tions, led to the coun­try’s mu­nic­i­pal debt cri­sis last year.

The world has seen three debt-in­duced bear mar­kets over the past seven years, which were sur­vived by tak­ing on more debt, he ex­plains. Cur­rently global debt is higher than it was in 2008. “When debt is high, ev­ery re­sponse that the econ­omy has is mag­ni­fied. Volatil­ity is high. Growth is low as people at­tempt to re­pair their balance sheets.”

Hulett doesn’t ex­pect cen­tral banks to in­crease interest rates as much as they hope due to el­e­vated debt lev­els of gov­ern­ment, cor­po­rates and house­holds in a bid not to curb eco­nomic growth. When interest rates in­crease, gov­ern­ments, cor­po­rates and house­holds alike have less dis­cre­tionary spend­ing power, which lim­its the out­put of economies.

Hulett’s focus is on SA stocks with global rev­enue streams and buy­ing off­shore eq­ui­ties and fixed-in­come stocks through tracker funds. He has po­si­tioned the fund to take ad­van­tage of volatil­ity in the cur­rency, eq­uity and bond mar­kets.

Why fin­week would con­sider adding it:

The fund has per­formed well over the past al­most 12 months and posted a 35% in­vestor re­turn since the start of Jan­uary.

Hulett’s view on the in­ter­ac­tion be­tween debt and its lim­it­ing ef­fect on eco­nomic growth is a pru­dent macroe­co­nomic view; align­ing a fund to ben­e­fit from this harsh re­al­ity is at­trac­tive. With its steep bench­mark, namely seven per­cent­age points above con­sumer price in­fla­tion, the man­ager would need to work magic in com­ing years to de­liver th­ese types of re­turns to in­vestors.

The fund’s to­tal in­vest­ment charge, which is at the up­per end when com­pared with peers, should not pose a prob­lem if re­turns re­main el­e­vated at cur­rent lev­els.

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