Diversified and diverse
mandates.
The worldwide multi-asset flexible
category is the least restrictive of all
local unit trust categories. Managers
of these funds can invest in listed
equities, bonds and property as well
as cash instruments in any market
anywhere in the world.
The benefit of this is that these
funds are able to position
themselves entirely based on
the manager's best view. The
lack of restrictions means that
fund managers can follow their
convictions about which asset
classes and which markets are
likely to offer the best risk-adjusted
returns, whether they be in South
Africa or offshore.
On the other side of that coin,
however, is that investors are
giving their fund managers a lot
of freedom. And given the scale of
opportunity that exists in global
markets, they have to trust that
their fund manager is good enough
to sift through all of the potential
investments that could be made to
select the appropriate ones.
In general these portfolios are
managed aggressively and
weighted towards equities, but
their performances can vary
significantly. Over the last five years,
the difference in the annualised
returns between the best and
worst of them is just over 12%
a year. Compounded, that is a
huge variance.
For investors, there are therefore a
few very important considerations
when looking at funds in this
category. Since fund managers have
such discretion, their approaches
are going to differ widely. You must
understand what the manager's
mandate is, how they approach it
and what they are trying to achieve.
You should also be very cognisant
of the benchmark they are using.
Most use inflation-plus benchmarks,
which essentially makes them
absolute return funds more
than global equity offerings. It is
therefore important to be aware
of whether they manage their
funds accordingly.
Top performing worldwide multi asset flexible funds to 31 July 2015
Fund
3 Year annualised total return
Imalivest MET Worldwide Flexible
Fund
29.75%
Flagship IP Worldwide Flexible FoF
28.72%
Flagship IP Worldwide Flexible
Fund
26.35%
Platinum MET Worldwide Flexible
Fund A
25.06%
Coronation Optimum Growth Fund
A
24.28%
Nedgroup Investments Bravata
Worldwide Flexible Fund A
22.61%
Foord Flexible FoF R
21.34%
Quantum BCI Worldwide Flexible
FoF
20.80%
Marriott Worldwide Flexible FoF
19.54%
Efficient BCI Worldwide Flexible
Fund
18.81%
FTSE/JSE All Share Index
18.10%
Worldwide multi asset flexible fund
category average
20.23%
MSCI World Index (in ZAR)
29.61%
Source: Morningstar
The above table shows the top-performers in this category over the last
three years.
This is a small category, with just 19
funds that have track records going
back three years, but even over this
time frame one sees quite a large
variance in performance. There is
a more than 10% difference in the
annualised returns of the best and
tenth-bet funds.
The strong returns generated by the
Imalivest fund are mainly due to its
high exposure to offshore equity. At
the end of July, it had 85.82% of its
portfolio in foreign stock markets,
in addition to 4.43% on the JSE. This
gave it a total equity exposure of
over 90%.
It is noteworthy that all of these
funds out-performed the local
stock market index and showed
returns comfortably ahead of a
CPI+5% target, but only one of
them fared better than MSCI's
global benchmark. To some extent
this highlights the importance
of investors understanding the
mandate of these funds and how
they position themselves.
The Flagship fund of funds is even
more exposed to international
equity, with a particular focus on
the US market. Its latest fact sheet
indicates that 99% of its assets
were in offshore equity funds, with
69% in the US. It makes extensive
use of index tracking products to
get targeted exposure to particular
sectors and country indices.
ISSUE 6 – SEPTEMBER 2015
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