Year of new contenders

ith almost all the asset classes giving negative returns, 2018 was not a year to be positioned as a raging bull.

It was a year for risk-off assets such as SA government bonds and cash.

And so there is a fair amount of turnover in the nominations for this year’s Morningstar fund awards.

After three victories in a row, Prudential is out of contention for the main prize for large houses. When the prize is awarded in Cape Town on the evening of February 27, there will be three very different contenders.

Large groups have at least 10 funds, including both those on a domestic management company and those domiciled offshore registered for sale in SA, known as section 65 funds.

None of the three finalists is there by accident; they have long track records. PSG, last year’s runner-up, is nominated again: can it improve its score enough to get the trophy? Each underlying fund is measured 80% in its return and 20% in risk, so that 48% of the score is for

2018’s outcome, and the rest is split

Wbetween the previous four years. And to qualify they need to have been in the top half of their categories for at least three of the previous five years. PSG has a strong lineup, except for its Global Flexible Fund and, unlike its competitors, it is run by a single cohesive team — even the international assets are selected for Cape Town.

And I see PSG (domestic) Flexible Fund is a contender for the award in its category. It would certainly be a marketing coup if Investec Asset Management wins the trophy. It is just a few months before it lists in its own right on the London Stock Exchange. It adopts a somewhat confusing multistyle approach. Last year its Global Strategic Equity Fund won the coveted Global Equity category, this year the so-called quality portfolio Global Franchise is in the running.

If I were a small fund manager, I would want to link with Nedgroup Investments. It provides excellent marketing and logistical support, allowing its fund managers to concentrate on investments. Some of the managers it uses are now substantial — Abax Investments, which runs Nedgroup’s Rainmaker, Entrepreneur and Flexible Income funds, has about R80bn under management.

Local firms in the running

Many would claim credit for a Nedgroup victory. But consider how much more successful this unit has been compared with the other big banks. FNB is only a marginal player in unit trusts with its Horizon funds. Standard Bank has a much bigger footprint through Stanlib, but its asset base has stagnated for years. Nedgroup in contrast keeps growing.

With no regular institutional assets, it now oversees R300bn. And Absa keeps talking of spinning off its asset manager, which still relies heavily on the Money Market Fund to pay the bills.

For once the candidates for smaller fund managers are all local small managers. Allan Gray has not been nominated. NFB, which has some excellent multiasset funds built largely on index funds, must be a strong contender. Another is its Sandton rival Platinum Portfolios, run by Mel Meltzer and Charolyn Pedlar, which provides what looks like a logical series of risk-profiled funds, including a worldwide flexible fund.

A further contender for the small fund group award is Fairtree, which has attracted managers keen to relocate to Stellenbosch.

There is a fair amount of turnover in the nominations for this year’s Morningstar fund awards