Saturday, October 25, 2014

Coronation retains crown, PSG dislodges Allan Gray

October 18 2014 at 06:10pm 

PF unit trusts IOLPFIllustration: Colin Daniel
PSG Asset Management has broken Allan Gray’s “monopoly” as the second-best manager of domestic collective investment schemes, while Coronation Fund Managers retained its top position in the PlexCrown survey for the quarter to September 30.
The survey rates collective investment scheme management companies based on the risk-adjusted performance of their funds across all the collective investment sectors over periods of three and five years.
Allan Gray was ranked the top management company for 16 consecutive quarters until September 30, 2012. Coronation knocked Allan Gray off its throne in the last quarter of 2012, and it has taken first position in each quarter since then, except when Allan Gray briefly stole its crown in the three months to September 30, 2013.
Coronation had the highest management company rating of 4.367 PlexCrowns among the 18 asset managers that qualified for an overall ranking (see table). It had assets under management of R576 billion at the end of June, while Allan Gray’s assets under management at September 30 were R465 billion.
Coronation had the second-highest rating of 4.992 PlexCrowns, behind Community Growth, in the broad South African interest-bearing sector, where 22 companies qualified for a rating.
It had the third-highest rating of 4.815 PlexCrowns, behind Ashburton and Rezco, in the broad South African multi-asset non-income sector, where 27 companies qualified for a rating.
Coronation’s overall rating was also supported by its having the seventh-highest weighted average rating of 3.846 PlexCrowns in the broad rand-denominated global and worldwide sector, and the seventh-highest rating of 3.428 PlexCrowns in the broad South African equity and real estate sector.
Fourteen of Coronation’s 17 funds that qualified for a PlexCrown rating received an above-average rating of four or five PlexCrowns. Nine of them were in the top three slots in their sub-categories. Coronation’s Industrial Fund (South African equity industrial), Jibar Plus Fund (South African interest-bearing short term) and Strategic Income Fund (South African multi-asset income) were in first position in their respective sub-categories.
Runner-up PSG received an overall rating of 3.969.
PSG, with R46.8bn in assets under management on September 30, qualified to be included in the overall management company rankings in the second quarter of 2013, when it debuted in fifth position. Thereafter, PSG and Nedgroup Investments duelled over third position.
PSG was runner-up to Foord in the broad South African equity and real estate sector, with a weighted average rating of 4.367 PlexCrowns. It was ranked sixth in the broad South African multi-asset non-income sector, with 4.133 PlexCrowns, and seventh in the broad South African interest-bearing and income sector, with 3.921 PlexCrowns.
Nine of PSG’s 11 funds that qualified for a rating had an above-average rating of four or five PlexCrowns. The following funds were awarded four PlexCrowns: PSG Multi-Management Equity Fund of Funds, PSG Wealth Creator Fund of Funds, the Flexible Fund, PSG Wealth Moderate Fund of Funds, Optimal Income Fund, PSG Wealth Income Fund of Funds and PSG Wealth Preserver Fund of Funds.
PSG’s Equity Fund and Balanced Fund achieved five PlexCrowns each.
Third-placed Allan Gray had a rating of 3.898.
Allan Gray shared the third-highest rating of 4.000 PlexCrowns in the broad South African equity and real estate sector with Ashburton. It shared fourth place, again with Ashburton, in the broad South African interest-bearing sector, with 4.000 PlexCrowns.
Allan Gray also shared fourth place, with 4.000 PlexCrowns, in the global and worldwide sector with Discovery.
Allan Gray was ranked 11th in the broad South African multi-asset non-income sector, with 3.708 PlexCrowns.
Four of Allan Gray’s six funds that qualify for a rating achieved a rating of four PlexCrowns. These were: the Allan Gray-Orbis Global Equity Feeder Fund, the Allan Gray Equity Fund, Bond Fund and Balanced Fund.
PlexCrown also rates offshore funds registered with the Financial Services Board as funds that can be marketed in South Africa. Thirteen managers qualified for an overall rating.
Oasis was the leading manager of foreign collective investment schemes in the quarter to the end of September, with an overall rating of 4.500 PlexCrowns. It was also in first place at the end of the second quarter.
Lloyds was the runner-up, with 4.222 PlexCrowns, and Investec was in third place, with 3.875 PlexCrowns.
Oasis had the third-highest rating in the broad offshore equity and real estate sector.
All three of its funds that qualified for a rating achieved above-average ratings of four or more PlexCrowns. The Oasis Crescent Global Property Equity Fund, with five PlexCrowns, was the leading fund in the global real estate sector. The Oasis Crescent Global Equity Fund (Ireland) and the Oasis Global Equity Fund (Ireland) received four PlexCrowns each.
PlexCrown Fund Ratings assigns each qualifying fund a rating of one to five PlexCrowns based on its performance on four or five different risk measures over periods of up to five years. The ratings are used to determine the average scores of each manager in each unit trust sector, with each fund’s rating weighted according to the size of the fund relative to all the manager’s funds.
These scores, in turn, determine an overall score for each manager in four broad fund sectors: South African equity and real estate, South African interest-bearing, South African multi asset, and global and worldwide. Fund scores are weighted in line with their size relative to the manager’s total assets under management.
An average score for the management of funds invested in the local market is determined from the average scores in the three sectors for local market funds, while an overall rating is determined from the scores for all four sectors, with sectors with more assets accorded higher weightings.
PlexCrown ranking of management companies
to September 30, 2014
Domestic companies
1. Coronation 4.367
2. PSG 3.969
3. Allan Gray 3.898
4. Nedgroup Investments 3.797
5. Prudential 3.596
6. Absa 3.581
7. Old Mutual 3.197
8. Investment Solutions 3.163
9. Sanlam Inv. Management 3.107
10. Marriott 3.065
11. Oasis 3.020
12. Momentum 2.843
13. Investec 2.763
14. Prescient 2.665
15. Discovery 2.583
16. Stanlib 2.577
17. Grindrod 2.092
Offshore companies
1. Oasis 4.500
2. Lloyds 4.222
3. Investec 3.875
4. Nedgroup Investments Int. 3.750
5. Stanlib 3.557
6. Investment Solutions 3.500
6. Orbis 3.500
8. Momentum 3.000
8. PSG 3.000
10. Franklin Templeton 2.808
11. Ashburton 2.333
12. Marriott 2.250
13. M&G 2.000

Saturday, September 20, 2014

Passive funds an active threat for fund managers

(Reuters) - Warren Buffett built a fortune of nearly $60 billion from astute stock picking, but when the 83-year-old dies, the vast majority of the money he leaves his wife will be parked in a fund that simply moves in step with an index.

The afterlife plans of the man nicknamed the Sage of Omaha, revealed in a letter to his investors earlier this year, underline a sea change afoot in the investment industry.
Fed up with high fees and poor performance, investors are increasingly shunning active fund managers who promise to beat the stock market in favor of cheaper, passive funds, which simply track it.
Such funds account for about a quarter of the money invested in the UK stock market, up from 15 percent a decade ago. The switch is accelerating, with index funds attracting inflows of $3 billion in the first half of this year, while active UK-focused funds saw $4 billion leave, a Reuters analysis of data from fund tracker Lipper showed.
The passive wind blows even stronger in the United States due to years of underperformance by active funds, which has led to institutions parking half of their equity allocations in index trackers, according to data from State Street.
And the shift is spreading to other parts of the world, putting at risk revenues earned by money managers, banks and brokerages that service funds and more than half a million jobs related to fund management in Europe alone.
Industry experts expect Europe, where active mutual funds are still the dominant force, making up 80 percent of allocations, to move more in sync with the United States, following the lead of Britain, the region's top capital market.
"It's only a surprise that investors have taken this long to realize that the puffery around long-term outperformance, star managers, etc., is just that ... puffery," said Peter Douglas, founder of investment consultancy GFIA.

Patchy economic recovery since the 2008 crisis and increased regulation, such as a proposed clampdown on a fund's activities in times of a crisis to ensure stability, have hampered active managers' ability to outperform.
Weak gains have already made it harder to justify fees that are sometimes 10 times or more than the cost of a passive fund, which in the case of the most liquid exchange-traded funds can be less than 0.1 percent on a headline level, before factoring in brokerage, transaction and tax costs.
While some active funds have cut their charges or introduced cheaper products in response to the threat, the gap is still large.
Leading index fund providers such as Vanguard, Deutsche Bank and BlackRock have cut fees this year to grab market share, putting further pressure on the active managers to do more.
"You can't charge what you could in the past," said Chris Iggo, chief investment officer for fixed income at AXA Investment Managers, which manages 582 billion euros ($764.39 billion).
"In a way it's a good thing. For many years the fund management industry had it easy ... Return on capital in fund management has been very nice."
Vanguard, whose S&P 500 index fund Buffett favored in his letter to investors, and BlackRock have taken in the bulk of new money to European fund houses since the summer of 2013.
The biggest equity fund investing across Europe, Vanguard European Stock Index Fund, managed $22.4 billion at the end of July, more than twice the size of Fidelity Funds-European Growth, the biggest actively managed fund for the region.
The growth in passive funds is reflected in the industry's net revenues, which have remained flat globally for the last four years, according to the Boston Consulting Group, even as funds under management hit a record $69 trillion in 2013.

The biggest problem for active fund managers charging more for their services is consistently beating the market.
A study of fund returns in local currency over the last 10 years using data from Lipper shows only 35 percent of the funds investing in Britain have outperformed the FTSE All Share Total Return index, which includes dividend payouts from constituents.
That percentage declined to 29 percent in the first half of the year.
Active funds investing across continental Europe, meanwhile, have performed even worse, with just a fifth of them gaining more than the MSCI Europe Total Return index since 2003.
The star managers that do manage to beat the crowd often fail to maintain their outperformance.
Of the 107 top quartile funds, or those ranking among the top 25 percent by gain from investing in British stocks in 2013, only 18 managed to repeat the feat through June-end this year.
Two of them held that spot for the previous five years, and none managed to achieve the feat over the last 10 years.
A similar pattern is found when looking at other regions around the world, Reuters data showed.
For Buffett, this meant one thing for the average investor.
"The goal of the non-professional should not be to pick winners – neither he nor his 'helpers' can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal," he said in his letter to investors.
The struggle to pick a winner consistently has led some leading institutional investors to change how they invest, with some of them putting the bulk of their funds, as much as 70 percent in some cases, in passive investments, said Laurence Wormald, head of research at Sungard APT.
Money managers of all stripes are also developing new products to offer cost-conscious investors a middle ground between the pure passive and active. So-called "smart beta" funds track a bespoke index that has been tweaked to weight it in different ways, using factors such as stocks' cheapness or price momentum.
Net flows into U.S.-based smart beta equity funds stood at $234 billion in the first seven months of the year, already exceeding the total inflows of $208 billion recorded last year, according to data from BlackRock.
In spite of the strong demand for low-cost passive funds, active fund managers will continue to play a key role in the global investment industry because the possibility of higher returns is always attractive, particularly in a low yield environment.
In addition, there is only so far the market can go passive before the price of a stock - still the most popular asset class for passive investing - becomes detached from fundamentals, thereby allowing an active manager to profit more handsomely.
The ability to profit in such as manner has been evidenced most recently by firms such as Glaucus Research and Gotham City Research, who have spotted corporate fraud through a deep investigation into company accounts, such as at Gowex.
"Passive investing is obviously at the mercy of these frauds," said Michele Gesualdi, chief investment officer of hedge fund investor Kairos.
"If you are with a long-only active fund or a hedge fund, then certainly you have a chance to avoid these frauds or maybe finding them as shorts," he added, referring to short-selling, the ability to sell a borrowed stock and profit when it falls.
Still, some 3,200 money managers in Europe will need to broaden their expertise across asset classes and develop new products to reassure investors they are adding value.
"That's the acid test," said Thomas Ross, head of European distribution at U.S. money manager William Blair, which manages $62 billion, largely for institutions.
"Can you beat the benchmark after fees? If you can, you'll fare well, and if not, the market will move against you and you'll be indexed."

(Editing by Carmel Crimmins and Will Waterman)

Monday, June 30, 2014

Pruspective May 2014 – Prudential

Prudential funds’ review & market performance AS AT 31 may 2014
Please click link for Pruspective May 2014

Some insight into how our clients invest

Current we managed about R80 million of clients’ wealth. Below is an indication of how our clients invest, by asset class.

About 50% of our clients’ assets are invested in South African assets, while the other 50% are invested offshore.