NAV on 2021/09/17
|NAV on 2021/09/16
|52 week high on 2021/08/17
|52 week low on 2020/10/30
|Total Expense Ratio on 2021/06/30
|Total Expense Ratio (performance fee) on 2021/06/30
Ninety One Fund Managers SA (RF) (Pty) Ltd.
South African--Multi Asset--High Equity
Peer group median
Gail is a portfolio manager at Ninety One with responsibility for the Managed Strategy. She joined the firm in 1991, where she worked on the Trading Desk and contributed her analytical skills to the investment team. One year later, Gail joined the investment team and moved wholly into investments where she took responsibility for a selection of institutional portfolios and later, the Investec Managed Fund. She managed the Investec Worldwide Fund from its inception in 1995 until October 2000, when she was promoted to head of equities in South Africa. Gail served in this role until 2007, at which stage she focused on portfolio management and the development of the Investec Equity Fund and the Investec Equity Hedge Fund, which she managed successfully until October 2009. Gail graduated from the University of the Witwatersrand in 1990 with a Bachelor of Arts degree in Mathematics, Economics and Psychology, and gained her Honours in Economics from the University of South Africa in 1991. She also holds an MBA degree from the University of Cape Town Graduate School of Business.
Investec Managed comment - Jun 13
Market review The MSCI AC World NR Index returned -0.4% in dollars over the quarter. Emerging market equities underperformed developed market equities, with the MSCI Emerging Markets NR Index losing 8.1% over the quarter. The Citigroup World Government Bond Index (All Maturities) gave up 3% over this period. The All Bond Index lost 2.3% in rands over the quarter while inflation-linked bonds shed 5% from severely overvalued levels. Cash, as measured by the STeFI Composite Index, returned 1.3% for the quarter. Listed property ended the review period almost flat, having recovered May's losses with a bounce in June. South African equities ended almost unchanged in the second quarter, but volatility was high during this period. The sector laggards remain mostly confined to resource stocks with gold (-33.5%), platinum (-23.9%), coal (-10%) and diversified miners (-10.8%) all experiencing double-digit losses in rands. Year to date, the resources sector is trailing the overall market by 19.4 percentage points. Industrial stocks mostly held their ground over the quarter and defensive stocks, on average, achieved strong absolute returns. Financials lagged, with banks down 6.2% and life insurers flat for the quarter after a particularly weak June.
Portfolio review The second quarter of the year required active asset allocation, with May producing positive returns. However, these gains were erased and turned into losses as markets came under pressure in June. It took comments from US Federal Reserve Bank Chairman Ben Bernanke to finally get bonds to trade at more 'normalised' levels. Although we believe that the bulk of the sell-off has occurred for the bond market, we hold the view that bonds are expensive and yields should rise more from here. South African inflation is at the upper end of the Reserve Bank's 3%-6% band. A 3% risk premium above inflation would take us to 9% on long bonds. Inflation at 6% seems like a generous assumption. Wages only settle above that, and the rand remains vulnerable even though it has depreciated. South Africa has high financing requirements with large current account and budget deficits. Rising US long bonds will make financing more difficult. The benign environment for financing that emerging market governments around the world have benefited from is now under threat. The low risk premium that bonds have enjoyed seems to have come to an end. Property shares eventually sold off and we think a multi-year bear market is under way in listed property. We have been running a total equity weighting of between 55% and 65% for several months now. Although the market has risen for some months, the returns have come from specific shares and sectors, so a high equity weighting has not been beneficial. We are very underweight resource shares. During the quarter we were also very underweight South African banking shares and only increased our weighting to this sector in June. The portfolio has exposure to US financials, which are also cheap. The big difference is that the macroeconomic circumstances in the US are lending more support to these shares than is the case locally. We remain concerned about China on two fronts regarding the resource shares in the portfolio. Firstly, there is a problem in the banking sector that will have an impact on the demand for commodities. Chinese banking regulation is opaque. The rest of the world adheres or attempts to adhere to various regulations under the Basel framework on banking supervision. The situation in China is unclear. Most banking systems are moving towards Basel III, while progress in China has been slow. The second source of concern is that China is starting to supply more and more of the country's own commodity needs at a time where supply is still growing from Western countries. We are positioned for a multi-year bear market in commodity prices. The weakness in commodity prices is likely to weigh on the rand. Gold had its worst quarter in 103 years. Of course, the metal could bounce back from here, but we believe the primary trend is down. Gold is an asset where sentiment is crucial. This is due to huge stockpiles above ground. Just as prices approaching the $2500-level seemed difficult to justify, so will prices near $1000 be difficult to digest. We have no exposure to gold shares in the portfolio and less than 2% exposure to the gold exchange traded fund (ETF). The ETF holding has, in the past, been as high as 8.5%. Defensive rand hedge shares performed reasonably well over the quarter, but are now also subject to earnings downgrades in hard currency terms, as the earnings from emerging markets are marked down due to negative currency movements. We have taken profits on some of our SABMiller shares.
Portfolio activity We further reduced our exposure to South African retailers during the quarter. While most of the companies are very well run, the tailwinds they have enjoyed are turning into headwinds. With hindsight, Marikana appears to have been the straw that broke the microlenders' backs. The country really needs employment growth, which is simply not materialising. Microlenders will find funding harder to secure so growth rates are headed down. This will affect most of the local retail sector. As mentioned earlier in our commentary, we further reduced our position in resource shares.
Portfolio positioning We are neutral to underweight equities and underweight bonds. We have no exposure to property and have a maximum offshore weighting. Within the equity portfolio, we are overweight US banks and underweight South African banks. We are overweight non-resource rand hedges, as we remain concerned about the rand. Outflows from the local bond and equity market have barely commenced and funding the twin deficits in this environment will be onerous. It is hard to see the rand getting stronger unless there is a resumption of lower yields in the US or a return to infrastructure-led growth in China. Liquidity concerns in China and the prospect of quantitative easing being scaled back in the US mean conditions have become more challenging. Let's hope Europe continues to bumble along. As always, we will be watching the macro environment intently and following earnings revisions.
The Ninety One Managed Fund aims to provide investors with stable growth of income and capital over the long term. The objective is to achieve returns well in excess of the fund's peer group average, measured over three to five year periods.
The fund invests in a mix of South African equities, bonds and money market instruments, as well as international equity and fixed interest investments. Regulation 28 currently limits equity exposure to 75% of the fund (90% with listed property) and international exposure to 25% (for retirement funds exempted from the 15% limit). The allocation of assets is actively managed with a strong bias towards equities.