Weather­ing un­cer­tainty

The fund aims to of­fer su­pe­rior re­turns over the medium to longer term by in­vest­ing in shares from around the world. FUND IN­FOR­MA­TION:

Finweek English Edition - - MARKET PLACE - Ed­i­to­rial@fin­week.co.za

Fund man­ager in­sights:

De­spite the re­cent in­vestor eu­pho­ria and in­dices at­tain­ing his­tor­i­cal highs on ex­pec­ta­tions of 2017 herald­ing a new in­fla­tion­ary, pro-growth regime, global eq­ui­ties face a va­ri­ety of prospec­tive head­winds and chal­lenges, says Ian Hes­lop, fund man­ager of the Old Mu­tual Global Eq­uity Fund.

How­ever, ac­cord­ing to Hes­lop, the op­por­tu­nity set has broad­ened, par­tic­u­larly for those man­agers with an in­vest­ment process fo­cused on stock se­lec­tion.

“In seek­ing to pre­pare or an­tic­i­pate the ef­fects of these prospec­tive op­por­tu­ni­ties and un­cer­tain­ties to re­turn struc­ture, flex­i­bil­ity and di­ver­si­fi­ca­tion of ap­proach to stock se­lec­tion is likely to re­main a main­stay in mit­i­gat­ing volatil­ity and main­tain­ing the con­sis­tency of port­fo­lio re­turns,” he says.

Ac­cord­ing to him many ac­tive man­agers us­ing big macro calls can be tripped up by how hard it has been to get fore­casts right, for ex­am­ple on Brexit and Don­ald Trump’s victory in the US pres­i­den­tial elec­tions.

“At Old Mu­tual, rather than try­ing to fore­cast bi­nary events and then fore­cast the im­pact of the event on the mar­ket, we look to un­der­stand how the mar­ket is evolv­ing as the events un­fold. In our opin­ion, un­der­stand­ing how in­vestor be­hav­iour is chang­ing is bet­ter than fore­cast­ing the oil price. We also use a very flex­i­ble ap­proach, with the port­fo­lio not be­ing wed­ded to any par­tic­u­lar style.”

Hes­lop says good di­ver­si­fi­ca­tion across a num­ber of in­vest­ment styles has helped them to avoid be­ing hit by the big style ro­ta­tions over the past few years and is at the heart of what they do.

“We build port­fo­lios with the ex­press un­der­stand­ing that noth­ing works all the time. The funds are di­ver­si­fied across a num­ber of styles or themes to re­duce the risk of sig­nif­i­cant draw­down when one style (e.g. value, growth, qual­ity etc.) is out of favour for what­ever rea­son. We look to tilt the port­fo­lio away from styles likely to un­der­per­form given the cur­rent mar­ket en­vi­ron­ment.”

He says an in­vest­ment in the fund is a good way to add di­ver­si­fi­ca­tion to a South African in­vestor’s hold­ings.

“An off­shore fund nat­u­rally di­ver­si­fies hold­ings into dif­fer­ent cur­ren­cies and also dif­fer­ent sec­tors or in­dus­tries than those seen in the SA mar­ket.”

Why fin­week would con­sider adding it:

For the fifth con­sec­u­tive year, the Old Mu­tual Global Eq­uity Fund was re­cently awarded top per­for­mance by a Do­mes­tic Col­lec­tive In­vest­ment Scheme for the three-year pe­riod end­ing 31 De­cem­ber 2016 in the cat­e­gory Best (SA-Domi­ciled) Global Eq­uity Gen­eral Fund at the 2017 Rag­ing Bull Awards.

The fund has re­turned 27% per an­num over the five years to end De­cem­ber 2016, com­pared to the MSCI World In­dex’s re­turn of 23.4% per an­num over the same pe­riod. It re­turned 12.2% per an­num over 10 years to end De­cem­ber 2016, ver­sus the in­dex at 11.6% per an­num.

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