Low-equity NFB fund wins award for risk-adjusted performance
making any significant changes to the portfolio throughout the period under review;
• Significant exposure to flexible-income strategies, which produced strong returns without much capital volatility; and
• Low exposure to local risk assets, particularly listed property and equities, where returns have been under pressure for the past 12 to 18 months.
Marais says it has been difficult to time periods of rand strength and weakness, during which offshore exposure alone would have resulted in good returns for investors, because the rand has depreciated over five years. “The offshore exposure has, however, been tactically traded – 10 to 15 percent of offshore exposure has been moved in and out at critical times: Nene’s firing, for example.”
The fund’s benchmark is the Consumer Price Index plus three percentage points a year over rolling three-year periods, but it has not managed to beat it over any one year.
Marais says the benchmark has been “a very high hurdle” to clear over the past year, but the relative under-performance is slight and is attributable mainly to a strong rand and recent exposure to local listed property that has not performed well. Marais says NFB Asset Managers’ investment philosophy is based on their key beliefs: “First, that asset allocation drives a significant portion of overall investment returns. We also believe that markets are inefficient and that they swing between periods of over- and under-valuation.”
Marais says markets revert to their average returns, but they don’t spend much time earning average returns.
“And we believe we are able to exploit these circumstances to the benefit of investors invested in the portfolios we manage. We do not believe in optimisation, back-testing or forecasting, as these are all materially flawed processes in one way or another,” he says. – Angelique Ardé