Stringent processes based on global standards
Funds need to have delivered strong three- and five-year returns
dedicated fixed-income team, and fund manager James Turp has spent most of his career at a bank trading desk as well as Eskom and the Treasury. While he has not moved drastically from the all bond duration in this product, he has added value through trading and buying nongovernment bonds.
It was a repeat of the faceoff between NFB Managed and Discovery Moderate Balanced in the moderate allocation category, which NFB won. Discovery’s fund is run by Investec’s Chris Freund, who is part of the global 4Factor team. He focuses primarily on earnings revisions. He is about 55% invested in equities, just below the 60% limit. Freund still holds Naspers but well below previous levels at 5%. He is concerned that the new nationalism and centralisation in China will make it hard for foreign investors.
In the cautious allocation category, NFB was beaten by Absa Inflation Beater, an ultra
Tal Nieburg, head of Morningstar SA, says the objective of the quantitatively driven Morningstar International Fund Awards programme is to recognise those funds and fund groups that have added the most value within the context of a relevant peer group for investors over the past year and over the longer term.
“The awards are annual, so we believe it is appropriate to emphasise a fund’s one-year performance,” he says.
“However, we do not low-risk fund run by former Stanlib absolute return manager Eben Mare.
Mare says there may seem to be no difference between a low-equity and an absolute return fund. But as an absolute return fund, Inflation Beater is for people who really hate losing money. Its worst year (to January 2016) still had a positive 1.7% return. The asset allocation is just 3% in equities — it can believe that it serves investors well to give awards to funds that have posted a strong oneyear return, but have otherwise not delivered good results for investors.”
The awards methodology, therefore, emphasises the one-year period, but funds must also have delivered strong three- and five-year returns after adjusting for risk within the awards peer groups in order to obtain an award.
And they must have been in the top half of their respective invest up to 40% — and 80% in floating rate bonds, just 4% in inflation-linked bonds, which are not Mare’s favourite asset class and less than 5% in cash and money market. It aims for inflation plus 3%, which it has comfortably achieved last year with an 8.1% return.
There is a slightly higher heartbeat version of this fund called the Absa Absolute Fund aiming for inflation plus 4%. peer groups in at least three of the past five calendar years.
There are two types of Morningstar Fund Awards: Morningstar Category Awards and Morningstar Fund House Awards.
Morningstar Category Awards: These awards are given to the funds with the best risk-adjusted performance within their Morningstar categories or groupings of Morningstar categories, subject to qualitative review.