There was a time when the choice of global equity funds was limited to the large SA houses. Allan Gray’s sister company Orbis had a dominant market share, even though its style is far from mainstream and often eccentric. Investec Guinness Flight, now Ninety One, built up its reputation slowly, though it earned school fees from fad funds such as the Wired Index Fund. It even hedged its bets by launching a Wireless Fund.
The giant Boston-based manager Fidelity has some reach, but only through its distribution agreement with Standard Bank and then Stanlib. Now Stanlib has a strong alliance with Columbia Threadneedle, sometimes pushy growth managers. Coronation wasted time in the fringe world of hedge funds before going on a dual strategy of long-only funds of funds and building its own direct global management team in Cape Town.
Now 115 fund classes have at least a six month track record, and 64 have a five year record. There is some duplication; the Ninety One Global Strategic Equity Feeder Fund, for example has no less than three classes. But investors now have a wide range of rand-denominated funds to choose from. These have several advantages over the Section 65 funds, denominated in foreign currencies.
They are much more flexible; investors can switch back and forth from domestic to global on their main platforms such as Momentum Wealth or Glacier. And they can do so on a daily basis, not that that would be recommended. There is no need to go through exchange control clearance as these are already rand products, and tax management is much easier as they form part of your basket of SA mutual funds.
The Corion Report publishes a snapshot of returns and flows on the first day of the new month, a good six weeks before the official Association for Savings & Investment SA (Asisa) figures are released. The best performers for the year to June 30 were the technology-focused Sygnia Fourth Industrial Revolution Fund (46.2% return) and Sygnia FAANG in third place (34.1%), both covered in a recent Bottom Line column.
But there are also some funds that are almost diametrically opposite these funds: PSG Global Equity, (35.2% return), Discovery Global Value Equity (33.8%) and Coronation Global Equity Opportunities (29.7%). Going back to March 31 2020, at the trough of the market, Discovery Global Value was the worst performer of the previous 12 months, down 25.2%, and the Coronation fund was also in the sin bin, losing 5.1% in rands over the period.
PSG Global Equity looks barely viable at R122m. Co-portfolio manager Greg Hopkins says while there has been a healthy price recovery since November 2020, when the global vaccine roll-out began, it is still off a low base, particularly for PSG, which had a dismal two years preceding this one. It has been a busy time for PSG, as many of its holdings were sold as they went above intrinsic value, such as DuPont, Compass Group and Amadeus IT. And it has added to the lagging global energy sector, as well as some of what it perceives to be undervalued shares such as Philip Morris, M&G and Centene.
Discovery Global Value is run by Ninety One’s London value team under Alessandro Dicorrado and Steve Woolley. It has an exposure of less than 6% to technology, and prefers Twitter to the popular technology giants. It has an unusually high 19% in financials, not the popular capital light businesses such as Moody’s and Visa, but Bank of America and Citigroup. It even has what looks like high risk exposure to Easyjet, the low cost leisure-focused European airline.
The recent success of Coronation Global Opportunities, a multimanager fund, isn’t entirely good news for the shop. It is trying to persuade clients to move to the directly managed Coronation Global Equity Select Fund. This returned a highly respectable 16% over the year, but was still way behind the Opportunities Fund.
Investors probably wouldn’t have paid much attention to most of the year’s losers. The worst, Global & Local, which actually lost 1.6% of client money, sounds more like a pub than a serious investment manager. Benguela at least eked out a 3.8% return, but it has a name that promises all the excitement of a pleasurable swim in an ice-cold current. Institutional BCI Global Equity Fund (4.1%) won’t win a Loerie for creative brand names, but it is managed by the Ashburton/FNB Wealth team and might have potential.
Marriott First World might sound like a hotel loyalty programme, but it is run by the best fund manager in Hillcrest, KwaZulu-Natal. It returned just 2.4% and is firmly in what is seen as the quality sector. But even the most astute investor in this sector, Clyde Rossouw, who manages the Ninety One Global Franchise Fund, only achieved a 5.1% return.
A portfolio dominated by defensive shares such as Coca-Cola, Unilever, Reckitt Benckiser and Procter & Gamble would not have done as well as an investment in more cyclical shares, which fell further and had more potential to recover. And as the Marriott fund doesn’t invest in emerging markets, it can’t sweeten results with racier Chinese counters.
• Cranston is a Financial Mail associate editor.
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