Financial Mail - Investors Monthly
FUND REVIEWS
Nedgroup Investments Balanced, Element SCI Balanced, Long Beach Prescient Managed Fund, Discovery Balanced Fund, High Street Prescient High Equity Fund
“Element has adapted to changing times while still remaining true to its value management roots
At R490bn the highequity multi-assets unit trust category is the largest unit trust sector in SA, larger even than the money market category, now at about R422bn.
High equity remains the best one-stop investment for the average saver, as it gives a large exposure to equities — up to 75%, much higher than the 40% for stable funds. But high equity is still an approved vehicle for pension fund saving under Regulation 28 of the Pension Funds Act. And over 10 years with a 7.9% return, these funds outperformed general equity funds, which gave 6.9%, something that isn’t supposed to happen according to modern portfolio theory.
There are 258 funds in the category, so it is not easy to pick the right one. But going the one-stop route is still preferable to the much more complex process of appointing different managers for different asset classes.
Coronation Balanced Plus would be a good default fund. It has a conservative valuationbased approach, but it is certainly not a sleepy index hugger. It has been covered several times in IM.
This week there is an eclectic selection, including some you may never have heard of. Others give no clue to the underlying house in their name.
Two outstanding performers among the boutiques have been High Street and Long Beach. High Street, mainly consisting of alumni of the UAL Merchant Bank, chose their name to signify a phenomenon, the high street, which still flourishes overseas but is on life support in SA. Its High Equity fund has focused overseas as much as it can.
David Hansford claims he named Long Beach after the Noordhoek beach near where he lives. Still, it does no harm to give a hint of California-style sophistication. Anyway, you will be buying these funds for their returns, not their names.
Element is a shop I have respected through its good and bad times (though it may not see matters that way). It has adapted to changing times while still remaining true to its value management roots. It will not have to join failing value managers such as RECM, Bridge and Counterpoint.
You might be wondering who at Discovery runs its balanced fund. It is outsourced to Ninety One, a shop that already has two large and successful balanced funds, Managed and Opportunity. But in fact neither of these replicates the highly successful strategy the shop offers its institutional clients from the SA Equity and Balanced team under Chris Freund, Hannes van der Berg and Samantha Hartard. This team looks at earnings revision, snapping up shares after analysts have upgraded them.
Equally, Nedgroup Investments Balanced isn’t managed in the bowels of the bank but by Truffle, one of the more promising mid-sized boutiques, with about €30bn under management. With the core having worked together for more than a decade at RMB Asset Management, it is gelling well. ●