Favourites fall below par
uch as I agree that too much quarteritis leads to unnecessary ulcers, it is useful to see how funds behave at some inflection points. The conversations between trustees, consultants and fund managers will be quite different from three months ago. All the funds in the Alexander Forbes Large Manager Watch gave negative returns in the year and quarter to December, so understandably there was a chorus asking to get out of the market and preserve capital. But the large managers all gave positive returns in the year and quarter to March 2019. With the shareholder weighted index (Swix) up 6% in just three months and global equities up 13% in rand terms, even the most inept manager would have been able to give positive returns. (Swix is used widely by fund managers as a benchmark of their equity performance.) Investors, however, are not yet enjoying the risk premium the textbooks tell us we should earn from high equity investments. With returns ranging from 8.5% for Stanlib down to 5.8% for Oasis, none came close to the 11.5% from the Investec Cautious Managed equity fund.
The December Manager Watch had an unusual running order, with Coronation bottom and Prudential below average. The recovery of some large caps such as Naspers and British American Tobacco is starting to help managers. Coronation had a bumper first quarter with an 8.9% return, well ahead of second-placed Sanlam Investment Management (SIM) at 7.2%. Over one year, SIM is still ahead of Coronation. SIM is now run as a self-contained asset manager with no captive Sanlam funds to manage, and it has no shortage of qualified managers such as Fred White in balanced and Natasha
MNarsingh in absolute return funds.
In fact, all three of the consulting industry’s favourite large managers, Allan Gray, Coronation and Investec, are running below average over one year — in sixth, seventh and eighth place respectively. Consultants need to look further afield. The safest option is Prudential and it is already gaining traction. It has a key advantage through its global tactical asset allocation team, run by the astute Dave Fishwick in London. Like everyone else, I suppose, I asked him if this was just a fancy name for market timing. But its role is establishing a fair price for asset classes.
Crawling back
It is probably too early to reconsider Foord. That’s not just my view, it is what the top consultants think: it is crawling back to respectability and is back in the middle of the pack. But Foord has a recent history of carrying unexploded landmines, such as Aspen. Dave Foord is too much of an old-school asset manager to spend time on geeky subjects such as modern risk management. Absa for years seemed to be in the large manager watch to make up the numbers. I was sceptical about its divided offices, with balanced fund managers Kurt Benn and Greg Kettles sitting on the beach in Cape Town and the rest of the team in Sandton, but the returns are coming, as the unit trusts show.
I would be delighted if CEO Ann Leepile got the chance to run this shop as an independent manager. There is no chance that Stanlib will be sold off, and it would be easy to dismiss its current run as a freak event. But the new head of investments, Mark Lovatt, is bringing in a lot of the lessons he learnt from the UK industry. Robin Eagar has stepped down as head of balanced. Whatever the reasons, his overly conservative approach to investment did clients no favours in the long run.
The recovery of some large caps such as Naspers and BAT is starting to help managers