Financial Mail - Investors Monthly - - Analysis: Balanced Funds -

Ac­cord­ing to Pru­den­tial CE Bernard Fick this is a fund to which the whole of the in­vest­ment team con­trib­utes. The three man­agers named on the fact sheet are Marc Beck­en­strater, the chief in­vest­ment of­fi­cer, David Knee, the head of fixed in­ter­est, and Michael Moyle, the head of real re­turn.

Fick says the port­fo­lio is bench­mark cog­nisant, and is bench­marked against the peer group. It is prag­matic and “tilted to value with con­trolled risk ex­po­sure”. Naspers, for ex­am­ple, is its largest eq­uity hold­ing, though at 6% out of the 40% in­vested in SA eq­ui­ties. Eq­uity port­fo­lio man­ager Craig But­ters says that Naspers’s main un­der­ly­ing hold­ing, the so­cial media provider Ten­cent, is fairly val­ued in China, and in­vestors get the group’s other In­ter­net in­ter­ests, print and Pay-TV for free.

Other big hold­ings are MTN (3%), Bri­tish Amer­i­can To­bacco (2,5%), Stan­dard Bank (2%) and Old Mu­tual (2%). But­ters says the de­ci­sion to go over­weight on Old Mu­tual and un­der­weight on San­lam has worked. One of the shares the house missed was Stein­hoff, as it had not fore­seen the pur­chase of Pep­kor and the mar­ket’s strongly pos­i­tive re­ac­tion. But he says it was pleased that it had ig­nored the gold and plat­inum shares, pre­fer­ring non­min­ing re­sources such as Sappi, Mondi and chem­i­cal com­pa­nies. Its main diver­si­fied min­ing share is Glen­core.

A fur­ther 21% is in­vested in for­eign eq­uity, usu­ally through other funds such as the Sin­ga­pore-based First Ea­gle Amundi In­ter­na­tional Fund. Moyle says was over­weight in for­eign as­sets but the peers have moved up and al­most all have a full 25% al­lo­ca­tion off­shore. The bal­ance of Pru­den­tial off­shore is made up of 2,3% in for­eign cash and 1,8% in short for­eign bonds.

The fund is over­weight in do­mes­tic bonds, which make up 11,5% of the port­fo­lio. The fund is ex­tend­ing the du­ra­tion of its lo­cal bonds and also buy­ing bonds with higher coupons such as gov­ern­ment-guar­an­teed Eskom bonds, which pay an ad­di­tional 1,0% on their coupon. Last year Pru­den­tial was over­weight in prop­erty but it has steadily re­duced its po­si­tion as it be­lieves most prop­erty coun­ters are over­val­ued. It now holds a mod­est 2,3% po­si­tion in the as­set class, with no for­eign prop­erty.

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