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.

Finweek English Edition - - Marketplace - By Ti­mothy Ran­gongo

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. ■ ed­i­to­rial@fin­week.co.za

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