Aylett & Co takes top honours

High exposure to multiple resource shares led to the fund winning in the aggressive allocation category as well

In the hard-fought SA equity category, Aylett & Co beat off the challenge from Clucasgray. Walter Aylett founded his business 14 years ago after a spell at Coronation, believing it was important to run his own show and have total control of the process.

The fund benefited from a recent high exposure to resource shares such as Anglo American, BHP and Royal Bafokeng Platinum as well as smaller shares such as Transaction Capital. He has recently been buying Tsogo Sun and Reinet.

Aylett had a reputation as a follower of hi-tech shares such as Dimension Data in his Coronation days but he now talks Warren Buffett-style certificate of ownership.

He has been bringing money back from offshore, which now accounts for about 14% of assets on the equity fund. But he has remained a buyer of Hong Kong stocks such as Melco International, which invests in Macao casinos and timepiece retailer Oriental Watch. Aylett has never held Naspers as he believes management is guilty of a poor allocation of financial resources.

Clucasgray Equity was ahead of the peer group over five years with a return of 5.9% compared with 3.2% for the peer group. Fund manager Andrew Vintcent says there are still opportunities on the JSE, whether they are holding companies trading at a discount, such as Zeder and Long4life; those which offer value within acceptable risk such as Clover, Absa, MTN and MMI; or as well as some higher-quality shares which are still available at a reasonable price such as Naspers and Old Mutual.

The two finalists in the global equity category, both sing from the “quality” song sheet. They prefer businesses with low financial leverage and strong brands. It reflects the recent outperformance by quality shares of the value end of the market.

The Melville Douglas Global Equity Fund focuses on more stable cash generators, and recently enjoyed a boost from its holding in Starbucks. Co-fund manager Justin Maloney says two themes have helped performance, managedcare businesses in the US such as Unitedhealth and Anthem (which make up about 9% of the fund) and payment networks — along with the related credit scoring business Experian, these make up more than 12% of the fund. Global Franchise, run by Clyde Rossouw, has a similar investment philosophy to the giant Investec Opportunity. So it is not surprising to see an overlap in shares and themes between the two. Rossouw says he has taken an evolutionary approach to the fund.

Like Melville Douglas, he doesn’t hold any of the new generation internet giants. He even takes some contrarian positions such as 21st Century Fox, which Disney would like to buy in spite of its spread of old media assets. 40% of the portfolio at inception is still there. Rossouw says it is a standalone fund, not a gimmicky “buy the brands you know” fund. It is concentrated with 25-40 shares but it focuses on companies with high customer loyalty, low debt and resilience, not just brand. It has proved to be stable.

Like Melville Douglas, it owns Visa, and Verisign, which also plays an important role in the payment ecosystem. Rossouw, however, is even less benchmark conscious. He has no conventional bank exposure, accessing the sector through US broker and money market manager Charles Schwab, while Melville Douglas has a large position in both Jpmorgan Chase and Prudential Plc. Aylett also won the aggressive allocation category. The fund loaded up on bonds during the year, which make up 11% of the portfolio.

In second place is a newcomer to the awards, the Obsidian Balanced Fund, run by Richard Simpson and Royce Long — originally as a hedge fund shop — they only started offering long-only portfolios in 2010. The two portfolios divided their time at RMB Asset Management between top-down and bottom-up, their flagship product is a multistrategy hedge fund. Long says much of the recent strong performance can be attributed to missing the big bombs, such as British American Tobacco, Resilient and Aspen. Obsidian has a five block equity selection process which helped to avoid these. Simpson says the house aims to protect in tough years, and the balanced fund had a modest postive performance in 2018, when the JSE fell 8.5%.

Bonds are not a popular category for unit trust investors but they do have their category at Morningstar, while the more popular flexible income funds are not measured. Allan Gray Bond was the winner, even though the fund does not have a full-time fixed income team. Fund manager Mark Dunley-owen says the fund has actively added value as it does not stick rigidly to the all bond duration (about seven years), though it has traded above its average, around

5.7 years. Runner-up Absa has a