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

When the Mo­men­tum unit trusts were split be­tween the new em­pow­er­ment man­ager Aluwani, which broke away from Mo­men­tum, and the core Mo­men­tum As­set Man­age­ment busi­ness, the fi­nan­cial fund was given to Mo­men­tum’s se­nior port­fo­lio man­ager Nor­man MacKech­nie and Werner Burger, who is an as­sis­tant port­fo­lio man­ager on the house view funds.

More than half of the port­fo­lio is in four groups. There is a 20% ex­po­sure to Old Mu­tual and its bank­ing sub­sidiary Ned­bank, about 16% to Stan­dard Bank, 15% to FirstRand/RMB Holdings and 10% to In­vestec. Stan­dard Bank, In­vestec and RMB Holdings are the largest over­weights, Brait, San­lam and Capitec the largest un­der­weights.

Banks were the worst-per­form­ing sub­sec­tor of the fi­nan­cial in­dex with a neg­a­tive re­turn of 12.8% in 2015 in con­trast to the 18.8% pos­i­tive re­turn from gen­eral fi­nan­cials and 8% from prop­erty. The top 10 is rounded off by Reinet, San­lam and MMI.

MacKech­nie says both banks and in­sur­ers have de­r­ated over the past year: banks will see lower growth and tighter in­ter­est mar­gins, as well as pres­sure on non­in­ter­est rev­enue. But he ex­pects them to main­tain div­i­dends, par­tic­u­larly as they have higher pro­vi­sions than they have had at this stage of the cy­cle.

He is also con­cerned that the African oper­a­tions will not give the easy re­turns they seemed to prom­ise a few years ago — an in­di­ca­tion of this was the profit warn­ing from Ned­bank as­so­ciate Ecobank.

Yet there has been nowhere to hide as other fi­nan­cials such as Sas­fin and PSG have un­der­per­formed over cer­tain time pe­ri­ods. Re­cently MacKech­nie added to the hold­ing in Coro­na­tion, af­ter it fell, but sold out of Dis­cov­ery. In De­cem­ber 4% of the fund was in­vested in Dis­cov­ery, which faces chal­lenges such as Ping An.

The po­si­tion in MMI is un­der­weight as there con­tinue to be chal­lenges from its fledg­ling short-term in­sur­ance busi­ness as well as health — he would like to see a re­fo­cus on the life and in­vest­ment busi­ness.

In com­mon with its peers the fund has an ex­po­sure to prop­erty which is well be­low bench­mark, with a few ex­cep­tions such as Emira, which now of­fers a yield sim­i­lar to the 10-year gov­ern­ment bond. But it re­cently sold Cap­i­tal Prop­er­ties and light­ened Intu and Nepi. It also sold out of Alexan­der Forbes.

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