NFB and Mazi Capital beat mightier rivals to shine in funds awards
● Two prestigious Morningstar awards in important multiasset categories were scooped by NFB, a small asset manager that invests in both the actively and passively managed funds of other managers.
The award for the best equity fund also evaded the bigger asset managers, going to boutique manager Mazi Capital for the performance of its Prime Equity Fund.
NFB’s low-equity and high-equity multiasset fund of funds won the awards in Morningstar’s cautious allocation and moderate allocation categories.
Morningstar’s categories are slightly different to those of the Association for Savings and Investment South Africa and used by the local unit trust industry — the equity allocations are usually slightly higher or lower.
NFB is an established manager serving private clients and smaller institutional investors such as charities and medical schemes.
The manager of Mazi’s equity fund, Malungelo Zilimbola, launched Mazi (meaning cow in Xhosa) in 2006.
Zilimbola invests in undervalued shares but says he researches a wider range of companies than his competitors and considers trading conditions and company leadership. Before he invests, he considers what could go wrong with the company and in the Asisa category what the optimum investment size should be.
The Mazi Prime Equity Fund achieved a return of 12.28% a year on average over the five years to the end of January. It was ranked 21st out of 188 funds.
Both the NFB Ci Cautious Fund of Funds and the NFB Ci Balanced Fund of Funds have exposure to the local equity market through a low-cost fund, the Ci Equity Index, which tracks the Shareholder Weighted All Share index. Their exposure to offshore shares and bonds is also through index trackers — the rand-denominated Sygnia Itrix MSCI World Index ETF and the Ashburton Inflation ETF that tracks a range of inflation-linked government bonds, respectively.
The Cautious Fund of Funds has a lower weighting in the local and offshore equity market trackers — currently at 26%, while the Balanced Fund of Funds has around 54% in these local and offshore funds.
Paul Marais, MD of NFB, says controlling costs has contributed to the funds’ performance — total investment costs have been 1%, roughly two-thirds of its peer group.
Marais says passive exposure to the market benefited both funds to different degrees over the past five years, particularly in the form of an index weight to Naspers.
Marais says NFB does not try to call the currency and left its offshore exposure, apart from a handful of tactical trades, unchanged throughout the period.
Both funds also have exposure to actively managed flexible income funds managed by Coronation, Investec, Prescient and Atlantic and to the actively managed Sesfikile Property Fund, which Marais says had a “fantastic” 2017. Marais says the income funds have produced returns comfortably in excess of inflation.
The Balanced Fund returned 10.03% on average a year over the five years to the end of January and is ranked 24th out of 145 funds in its Asisa category, while the Cautious Fund had a higher average annual return of 8.99% a year and was ranked 12th out of 133 funds.
PSG and boutique manager Centaur were the other winning multiasset funds.
The PSG Balanced Fund won in Morningstar’s aggressive allocation category (funds that are allowed to have more than 65% in equities) and Centaur BCI Flexible won in the multiasset category where a fund’s exposure to different asset classes is unconstrained.
The award for the best bond fund was made to Coronation for the risk-adjusted performance of its Bond Fund.
The Morningstar category awards are annual but consider performance over periods of up to five years.
The Chicago-based company says the focus is on the one-year period but to better serve investors it avoids giving awards to funds that have posted a strong one-year return but have otherwise not delivered good results.
The awards methodology therefore takes into account the three- and five-year riskadjusted returns, to recognise funds that have shown they have the ability to earn strong long-term returns without undue risk.
Zilimbola invests in undervalued shares but says he researches a wider range of companies than his competitors
Earlier this week I finally got to see Black Panther. It was everything and more. The movie is about a fictional country where black people are endowed with a magical metal they cleverly exploit to build unimaginable technology that benefits their people. However, they hide it from the rest of the world, and following all sorts of events, the young king of Wakanda is eventually convinced that their gift ought to be shared with the world for all to benefit from it.
The movie is as entertaining as it is poignant. The messages in the plot are unavoidably powerful.
Thanks to this work of art, I found myself thinking a lot about how we have been conditioned to believe things that in actual fact are just rubbish.
Can you believe that a whole country once agreed with then prime minister of South Africa Hendrik Verwoerd when he said: “There is no place for [the Bantu] in the European community above the level of certain forms of labour . . . What is the use of teaching the Bantu child mathematics when it cannot use it in practice? That is quite absurd. Education must train people in accordance with their opportunities in life, according to the sphere in which they live.”
A few nights ago I received a text message from Malungelo Zilimbola, the founder of asset management firm Mazi. He had taken a picture of an award his company had won and the text simply said: “We did it”. At first I didn’t understand exactly what “we” had done.
It turns out that Mazi Asset Management, which manages only R47-billion of a R10trillion industry, had scooped the award for the best South African equity fund at this year’s Morningstar Awards.
This is a big deal. Here is the context.
The Morningstar Awards pit the entire country’s asset managers against each other and Mazi came out on top — beating every single one of the big boys.
This was not the BEE category. This was not the emerging asset manager category. Black-owned and managed, Mazi, founded in 2006, is the country bestperforming equity fund. Full stop. Oh, and this is the third time they’ve won the award in four years.
The prestige of the Morningstar Award comes from not only looking at how much the asset manager has grown their clients’ wealth. It also looks at whether the manager has done this consistently over a long period and whether the manager managed to grow the wealth without exposing their clients to undue risks.
And to think that these great riskadjusted returns were achieved in an environment where everything that could go wrong went wrong over the last three years — Brexit, Trump, severe droughts, the recession, three finance ministers in four days, sovereign credit downgrades,
Steinhoff fraud and corruption, and on top all of that, off with the most contested presidential election in the history of the governing party.
So with all of this, why is Mazi only managing a fraction of the assets that the likes of Coronation, Investec, Allan Gray and Prudential manage? Kahle, kahle, what is the problem? Could it be that asset owners are ignoring Mazi — the Black Panther in the room who could have better solutions for our economy?
But let’s first explore who the asset owners are in our context. These are mostly the pension funds made up of gainfully employed, hard-working South Africans. This is the teacher with dreams of seeing her children having a better future, the policeman desperate to secure employment for his daughter who has graduated but is unable to find work.
Studies in the US have shown that there is a high correlation between economic growth and investing savings into the economy. Observing from the sidelines it seems to me that we, as asset owners, are giving our money to the wrong people to manage. It seems that the mindset of the larger asset managers is to take a short-left out of South Africa by investing our money in other parts of the world, meaning that we can’t use our money to create jobs and eliminate poverty by investing it in our economy. In the pursuit of so-called superior returns they send jobs out of our own country, with our own money — and we let them.
This makes no sense.
Mazi has not only won the best performance award for its equity fund but it has also been instrumental in the establishment of new companies seeking to invest actively in the South African economy — most recently Hulisani, which focuses on the energy sector. Isn’t that what we need, investment in the local economy in order to create jobs?
I am therefore left to conclude that due to their diverse thinking when compared to the established peers, the likes of Mazi are able to generate meaningful solutions for our economy. But because they don’t look like or speak like the so-called trusted asset manager, they get sidelined, even though they beat them on performance — the single most deliverable for any asset owner.
This supports the ideal of empowerment not being a colour issue but rather being about growing the economy in order for all to participate and realise opportunities regardless of colour — contrary to the dumb doctor Verwoerd’s assertions.
In the movie, Black Panther guides his people to harnessing great outcomes from their fortuitous endowment. We’ve got our own vibranium in the assets we own — bigger than most African states. It is time we give them to those who harness them for all our benefit.
They get sidelined even though they beat the big boys on performance