Offshore strategy pays off for Ivy

Ivy Asset Management says it has been proved right to have been short on South African property exposure over the past two years, with the boutique fund manager having benefited from offshore investments and from returns from specialised and disruptive stocks around the world.

In its balanced fund as much as 75% was allocated offshore, while 25% was allocated locally.

“It’s very difficult to invest in SA as long as we have uncertain policies, weak economic growth and a volatile currency. You have to navigate these risks when you pick South African property stocks to invest in.

“This is why we have invested more offshore, be it through our global property products or through our local ones — in which case we would buy into South African-listed but offshore-invested stocks,” said Chris Segar, a director at Ivy, in an interview with Business Day.

Ivy, which has assets under management valued at R1bn, has wealth and advisory, asset management, offshore investment and private equity divisions.

Currently, Ivy’s overall allocation to property in a balanced fund is only 6%.

The SA property index, which includes all the property stocks listed on the JSE, has year to date delivered a negative return of about 16%, standing out as the worst asset class for South African investors compared with equities, which are flat; bonds, which have gained 2.7%; and cash, which has returned 3.3%. Total return includes both capital and income growth.

Segar said more clients who had reached retirement were becoming concerned about the environment in which local property funds were operating.

“Offshore property stocks also face challenges. Online shopping penetration is gaining momentum quickly in western Europe and the US, which is one reason we have avoided retail stocks. In SA, consumer confidence is also generally weak, which makes investing in retail stocks here less viable too,” he said.

Bruce Main, a director at Ivy, said two stocks that his team believed would be disruptive for the real estate market were Digital Realty and Ventas.

Digital Realty is a Californiabased real estate investment trust that invests in carrierneutral data centres, providing co-location and peering services, while Chicago-based Ventas invests in retirement estates, healthcare companies and research institutions.