A daring fund fearless of offshore
The fund aims to derive high long-term capital growth by investing in varied assets – including offshore – to preserve clients’ purchasing power in real terms and earn solid returns.
Fund manager insights:
The Aylett Equity Prescient Fund boasts over 40 equity holdings in various world regions. The majority of the fund’s holdings are Africa-based, 5% is held in developed Asian countries among other markets, and the remainder is in the US and UK. Shares are evaluated not by a fluctuating ticker, but by what they represent in terms of certificates of ownership.
“We seek great businesses that are well-run and managed, trading at a discount to their intrinsic value,” says Walter Aylett, the fund’s manager, who adds that the returns the fund derives from investments are not determined by the exit price, but by the price one pays. The fund assumes moderately high risk in its investments – and is mandated to always invest a minimum of 80% in equities while the offshore exposure is limited to 25%. The 25% offshore limit is split across foreign equities (17.5%) and foreign cash (1.4%).
Rand hedges comprise local stocks like Reinet and Royal Bafokeng Platinum. Oriental Watch Holdings, Melco International Development and L Brands are holdings of the fund on which Aylett says “the long-term prospects of the three businesses look good and offer the fund safety in terms of strong balance sheets, and rising income in the case of Melco”.
The developer, owner and operator of casino gaming and entertainment resort facilities in Asia, Melco, recently reported net revenue of R18.3bn for the second quarter of 2018 and increased its quarterly cash dividend by 7%.
Aylett says they don’t invest into the close of any measurement period, especially after the fund lagged the market by 2% in June. Yet, “despite this underperformance, our numbers looked pleasing across most periods.” This had all corrected by the next day with the fund outperforming the benchmark by approximately 0.4%, illustrating the difference a day can make.
When looking at the fund’s returns for the past six months to June he says “we believe there is a fairly large amount of latent value, and upside, to our portfolio returns over the longer term”.
Why finweek would consider adding it:
The Aylett Equity Prescient Fund just scooped an inaugural Alexander Forbes Investments Asterisk award for being the best equity fund (presented at the Financial Planning Institute of Southern Africa’s annual gala dinner in August). It was also a runner-up to the best equity house award for which it went head-tohead with industry heavyweights like PSG Asset Management and Fairtree Capital.
The fund demonstrated the greatest performance, risk management and manager skills over the medium and long term, Alexander Forbes said in a statement. The offshore holdings are a plus for the fund – allowing the fund to improve its risk-adjusted returns, decrease portfolio volatility and act as a safe hedge during periods of sustained rand depreciation. ■ firstname.lastname@example.org