Weekend Argus (Saturday Edition)
Investec thrives on reliable securities
Raging Bull Award for the Best (FSCA-approved) Offshore Global Asset Allocation Fund on a riskadjusted basis over five years to December 31, 2018
THE INVESTEC GSF Global Multi
Asset Income Fund is domiciled in Luxembourg and denominated in US dollars. It was launched in July 2011.
According to its December 2018 minimum disclosure document, the fund invests worldwide in a mix of assets, including bonds, equities and related derivatives, and cash. Normally the fund will invest no more than
50% of its value in equities.
Over the five years to December, it delivered 3.1% a year on average in US dollars. Last year, it returned 0.5% (against the MSCI World Index’s drop of more than 10% in US dollar terms).
Personal Finance interviewed the fund’s manager, John Stopford, head of Multi-Asset Income at Investec
Asset Management.
Outline your investment philosophy/strategy.
The fund is focused on delivering a defensive return profile consistently. Return is driven primarily by security selection, emphasising investments capable of generating income with capital upside potential. Building the portfolio from the bottom up is unusual for a multiasset strategy, but we believe that the huge choice available at [this] level, rather than relying on asset allocation decisions, gives us a greater ability to tailor the portfolio towards meeting a particular objective. The fund targets low volatility through diversification and security selection, but aims to limit drawdowns by running less risk in more stressed market environments.
To what do you attribute the fund’s outperformance in 2018?
Last year was unusually difficult for financial markets. The fund was helped by owning securities with resilient cash flows. It was also defensively positioned within equities, held little exposure to expensive corporate bonds, and didn’t rely heavily on government bonds, which performed poorly given concerns about the withdrawal of quantitative easing on all asset prices.
Were there any stand-outs in the portfolio?
The fund benefited from security selection in equities and bonds, holding exposure to defensive stocks and to government bonds in markets such as Australia, which outperformed. Equity hedges to reduce market risk worked well, as did limited bond duration. The fund also held cheap call options in the yen and on equity indices.
How are you positioning for the year ahead?
We are cautiously positioned going into 2019. The equity bull market may have ended and high-yield credit already looks to be in a bear market. Economic indicators suggest weak growth in the first half of the year and the risk of a global recession is building over the next one to two years.
Monetary policy has become a headwind and trade policy is also creating uncertainty. A continuation of the bull market probably requires more stable growth, more supportive monetary policy and a resolution of trade tensions. Some of these are likely, but they may take time and more market weakness is probable before they are seen.
The outlook for the dollar and US Treasuries looks more mixed, also providing some relief for emerging markets. Volatility is likely to continue to pick up across asset classes, but we see opportunities at security level.