Financial Mail - Investors Monthly - - Analysis: Unit Trusts -

There are, con­fus­ingly, three In­vestec funds which op­er­ate in the bal­anced space. The largest of th­ese is In­vestec Op­por­tu­nity, run by Clyde Rossouw and Sumesh Chetty, the so-called “qual­ity” team.

The youngest is Dis­cov­ery Bal­anced, which repli­cates the main in­sti­tu­tional port­fo­lios run by Chris Fre­und and Rhyn­hardt Roodt and fo­cuses on earn­ings re­vi­sions.

The third, In­vestec Man­aged, is a hid­den jewel of the In­vestec sta­ble and is small by its stan­dards, with “only” R10bn. It is not even con­sid­ered one of the core In­vestec funds.

The main dif­fer­en­tia­tor of the fund is its fund man­ager, Gail Daniel. She is one of the founders of In­vestec As­set Man­age­ment; Rossouw used to carry her bags. Daniel says the fund is of­ten clas­si­fied on plat­forms as ag­gres­sive but she con­sid­ers flex­i­ble a bet­ter de­scrip­tion — the eq­uity al­lo­ca­tion moves a lot, in a range be­tween 40% and 75%.

Daniel’s style is hard to pi­geon­hole ex­cept per­haps as eclec­tic. She fol­lows earn­ings re­vi­sions, and uses the same team of an­a­lysts as Fre­und, but her stock se­lec­tion and as­set al­lo­ca­tion are unique. While it is fairly pre­dictable that Rossouw will not buy gold shares, Daniel of­ten does and cur­rently owns Har­mony and Gold Fields. Un­til re­cently she owned Sibanye Gold. Only Daniel could find sim­i­lar­i­ties be­tween Sibanye and Stein­hoff, ar­gu­ing that both need to keep mak­ing ac­qui­si­tions to make de­cent re­turns. She is not im­pressed with Stein­hoff’s ac­qui­si­tions other than Pep­kor but “tol­er­ates” the share.

Over the past quar­ter she has cut her fi­nan­cials ex­po­sure from 22% to 8% of eq­ui­ties, sell­ing out of Old Mu­tual and Standard Bank. She says Mu­tual’s man­aged sep­a­ra­tion might take longer than ex­pected, as reg­u­la­tors are con­cerned about the im­pli­ca­tions of the Ned­bank un­bundling so soon af­ter the Bar­clays re­treat from Absa, and the weak pound doesn’t help. In the banks she is con­cerned about weak as­set growth and the out­look for their African op­er­a­tions.

Daniel is not a prop­erty bull. She took a knock from her mod­est hold­ing in Cap­i­tal & Coun­ties, one of the JSE’s worst per­form­ers. She holds her off­shore as­sets through the Global Fo­cused fund, which is de­signed to com­ple­ment the lo­cal eq­uity se­lec­tion. It al­lows her to buy al­ter­na­tives such as LVMH for Richemont or Rio Tinto for An­glo Amer­i­can and BHP Bil­li­ton.

She holds Con­stel­la­tion Brands, a US busi­ness which owns the Corona beer brand, as an al­ter­na­tive to SABMiller or AB InBev. The Fo­cused fund also in­cludes BMW, which is un­usu­ally cheap right now, Daniel ar­gues. The Fo­cused fund is 75% eq­ui­ties, 22% US bonds and 3% dol­lar cash.

Daniel is not a big be­liever in South African gov­ern­ment bonds as they do not di­ver­sify the port­fo­lio or of­fer pro­tec­tion when the rand falls. As for cor­po­rate bonds, she says the credit risk is still mis­priced.

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