April 24, 2010
By Laura du Preez, Personal Finance
Allan Gray remained the top domestic investment house in the PlexCrown survey of unit trust management companies for the periods to the end of March.
Since Allan Gray first qualified for an overall rating in the management company rankings, this is the eighth quarter out of the past nine that it has occupied the top position.
PlexCrown Fund Ratings determines the leading unit trust fund manager from an overall rating calculated on the basis of the PlexCrown ratings a manager achieves for all its qualifying funds. Each fund is awarded a single rating of between one and five based on four different measures of risk-adjusted returns over periods up to five years.
For the periods to the end of March, Allan Gray had six funds that qualified for PlexCrown ratings. Allan Gray's Balanced Fund (A), Stable Fund (A), Orbis Global Equity Feeder Fund (A) and Orbis Global Fund of Funds (A) all scored the highest ranking of five PlexCrowns each, according to Rickus Ferreira, an analyst at PlexCrown Fund Ratings. Allan Gray's Bond Fund (A) and Equity Fund (A) achieved four PlexCrowns each.
Average ratings in various domestic and foreign unit trust sectors are determined, and the average of these ratings is used to calculate an average total domestic and an average total foreign score. The domestic score is accorded a weighting of 75 percent and the foreign score a weighting of 25 percent when the overall score is calculated.
According to Ferreira, Allan Gray's individual fund ratings gave it an overall average PlexCrown rating of 4.500 - the highest score achieved by qualifying fund managers for the periods to the end of March.
Prudential, with a rating of 3.792, was the runner-up in the management company rankings for the quarter to the end of March this year, Ferreira says.
Prudential has six funds that received a PlexCrown rating. Prudential's Dividend Maximiser Fund (A) and Equity Fund (A) achieved five PlexCrowns each. Two funds achieved four PlexCrowns each and two funds were awarded three PlexCrowns each.
Coronation, with an overall rating of 3.583, climbed back up the rankings to be among the top three companies, Ferreira says. It ousted Nedgroup Investments, which had to settle for fourth position, with an overall rating of 3.563. Coronation's Balanced Defensive Fund (A), Balanced Plus Fund (A) and Equity Fund (A) achieved five PlexCrowns each. Among its other funds, five achieved four PlexCrowns each, five achieved three PlexCrowns each and two scored only two PlexCrowns each.
Offshore ratings
With a score of 4.250, Orbis, Allan Gray's offshore sister company, achieved the top spot based on the average PlexCrown ratings among offshore managers that are registered with the Financial Services Board and can be marketed in South Africa, Ferreira says. The good performance of Orbis's equity and fixed-interest funds helped it to achieve this position, he says.
Investec, with a rating of 3.722, was placed second among the offshore managers. It did well in global asset allocation, total equity and total fixed interest.
Ashburton was rated third in the offshore management company rankings. It scored well in global asset allocation and total equity, Ferreira says.
Wednesday, April 28, 2010
Monday, April 12, 2010
Insuring your investment portfolio
This is a verbatim copy of GrayIssue no. 104 from Allan Gray. It is an interesting look at insurance, specifically insurance against risks of investment losses.
Sun International, a long-term holding in our clients’ portfolios, recently reported their financial results. These revealed tough operating conditions in their markets and notably the temporary closure of their rapidly growing Chilean operation due to the recent earthquake in that country. As an unexpected event, no analyst could have forecast this.
On further investigation, we found that Chile experienced many large earthquakes over the last century and is a known ‘earthquake zone’. Fortunately, Sun International considered this and had earthquake insurance for both property and loss of profit. Insurance premiums well spent in hindsight.
Balancing the risk of losing money with the risk of missing out on future returns
This example has interesting parallels with our current view of local investment markets. Our December GrayIssue (issue no. 99) discussed the two basic and opposing risks that investors need to balance: the risk of losing money and the risk of missing future returns. In our asset allocation funds we try to manage the trade-offs that naturally occur when navigating between these two extremes for our clients. Readers of our recent commentaries would know that we currently focus a larger part of our attention on managing the risk of loss.
We have been early movers and the market has continued to rise
It is fair to say we have unfortunately been an early mover as the overall market has continued to rise, though in a less linear fashion. If we take a fresh look at valuations, as at 12 March 2010, we find that:
• The FTSE/JSE All Share Index (ALSI) price/earnings ratio is 18.8 compared to its long-term average of 11.5
• The ALSI dividend yield is 2.1% compared to its long-term average of 4.5%
• The earnings of the overall market are not obviously low by historical standards
We believe the market is already discounting a strong and sustained earnings recovery
This is confirmed by our bottom-up research, with many shares discounting a strong and sustained recovery in earnings next year. Some shares are arguably pricing something even better. If the earnings recovery matches expectations, it is tough to see why investors should expect to achieve returns in line with historical averages, given that many current values have already discounted future strong and sustainable earnings.
What if the future turns out differently? What if an unexpected event occurs, the financial equivalent of the earthquake in our Sun International story? There is little margin of safety in current valuations to absorb or ‘insure’ against an event like this.
Expecting the unexpected
An observer of financial history would know that unexpected adverse events have occurred on many occasions in markets, just as earthquakes have always occurred in Chile. While forewarned with such knowledge, we cannot predict their timing or even if such events will indeed occur at all.
Our fixed income weighting is our insurance
We do however have the choice, just as if we ran a casino in an earthquake zone, to ‘buy’ some insurance for our portfolios when values reach levels that have historically suggested a high probability of risk of loss. One can consider the above average weighting that we currently hold in fixed income (cash and bonds) as our insurance.
This insurance has a short-term price, but we believe it is worth it in the long run
Of course, insurance is not free, and there are trade-offs in all decisions. The recent lower returns of our funds relative to other managers reflect the ‘cost’ of our insurance. This is due to our high weighting to fixed income compared with a portfolio that has had higher exposure to equities.
If no ‘earthquake’ happens and the future earnings environment that the market is discounting materialises, the approximate 7% yield on the fixed income portion of our asset allocation funds provide compensation for our insurance. Insurance is expensive to buy when risk of loss is obvious and unfolding. We hope our early move towards investing in some insurance against risk of loss in equities will prove to be prudent should the market experience any aftershocks.
9 April 2010
Sun International, a long-term holding in our clients’ portfolios, recently reported their financial results. These revealed tough operating conditions in their markets and notably the temporary closure of their rapidly growing Chilean operation due to the recent earthquake in that country. As an unexpected event, no analyst could have forecast this.
On further investigation, we found that Chile experienced many large earthquakes over the last century and is a known ‘earthquake zone’. Fortunately, Sun International considered this and had earthquake insurance for both property and loss of profit. Insurance premiums well spent in hindsight.
Balancing the risk of losing money with the risk of missing out on future returns
This example has interesting parallels with our current view of local investment markets. Our December GrayIssue (issue no. 99) discussed the two basic and opposing risks that investors need to balance: the risk of losing money and the risk of missing future returns. In our asset allocation funds we try to manage the trade-offs that naturally occur when navigating between these two extremes for our clients. Readers of our recent commentaries would know that we currently focus a larger part of our attention on managing the risk of loss.
We have been early movers and the market has continued to rise
It is fair to say we have unfortunately been an early mover as the overall market has continued to rise, though in a less linear fashion. If we take a fresh look at valuations, as at 12 March 2010, we find that:
• The FTSE/JSE All Share Index (ALSI) price/earnings ratio is 18.8 compared to its long-term average of 11.5
• The ALSI dividend yield is 2.1% compared to its long-term average of 4.5%
• The earnings of the overall market are not obviously low by historical standards
We believe the market is already discounting a strong and sustained earnings recovery
This is confirmed by our bottom-up research, with many shares discounting a strong and sustained recovery in earnings next year. Some shares are arguably pricing something even better. If the earnings recovery matches expectations, it is tough to see why investors should expect to achieve returns in line with historical averages, given that many current values have already discounted future strong and sustainable earnings.
What if the future turns out differently? What if an unexpected event occurs, the financial equivalent of the earthquake in our Sun International story? There is little margin of safety in current valuations to absorb or ‘insure’ against an event like this.
Expecting the unexpected
An observer of financial history would know that unexpected adverse events have occurred on many occasions in markets, just as earthquakes have always occurred in Chile. While forewarned with such knowledge, we cannot predict their timing or even if such events will indeed occur at all.
Our fixed income weighting is our insurance
We do however have the choice, just as if we ran a casino in an earthquake zone, to ‘buy’ some insurance for our portfolios when values reach levels that have historically suggested a high probability of risk of loss. One can consider the above average weighting that we currently hold in fixed income (cash and bonds) as our insurance.
This insurance has a short-term price, but we believe it is worth it in the long run
Of course, insurance is not free, and there are trade-offs in all decisions. The recent lower returns of our funds relative to other managers reflect the ‘cost’ of our insurance. This is due to our high weighting to fixed income compared with a portfolio that has had higher exposure to equities.
If no ‘earthquake’ happens and the future earnings environment that the market is discounting materialises, the approximate 7% yield on the fixed income portion of our asset allocation funds provide compensation for our insurance. Insurance is expensive to buy when risk of loss is obvious and unfolding. We hope our early move towards investing in some insurance against risk of loss in equities will prove to be prudent should the market experience any aftershocks.
9 April 2010
Monday, January 25, 2010
Our yearly model portfolio for 2010
At the beginning of each year we publish our model share portfolio for the year. This year's portfolio is as follows:
| Name | Weighting | Share price |
| Adcock | 8% | 5420 |
| Datacentrix | 8% | 480 |
| DAWN | 8% | 720 |
| Digicore | 6% | 310 |
| Grindrod | 8% | 1778 |
| Lewis | 6% | 5300 |
| Pinnacle | 12% | 299 |
| Sasfin | 12% | 3900 |
| Sovereign Food | 8% | 815 |
| Steinhoff | 8% | 2077 |
| WBHO | 8% | 10749 |
| 1 Time | 8% | 105 |
Thursday, August 27, 2009
This Month’s Fund Focus - ABSA Select Equity Fund
ABSA Asset Management offers 22 unit trust funds, many of which offer average performance. However, ABSA Select Equity fund has achieved a superior performance since it started in February 2004. Although its fund size is relatively small, it has a lower total expense ratio (TER). As long as its investment philosophy and fund manager remains the same, it is a unit trust suitable for longer-term investing.
Unit trust fund name: ABSA Select Equity Fund
Category: Domestic Equity - General
Benchmark: FTSE/JSE All Share Index (including income)
Inception date: 23 February 2004
Portfolio Manager: Errol Shear
Fund Size: R394 million
Fund characteristics:
The Fund invests in shares on the stock exchange with the intention of providing investors with long-term capital growth and escalating dividend income. Exposure to equities typically exceeds 75% of the fund and comprises a diverse combination of shares selected following independent research.
Fund objective:
Aims to achieve superior investment performance through careful selection of the best value the JSE has to offer
Total expense ratio:1.13%
Risk rating: Short-term (one-year): Medium high ; Long-term (five-year): Medium low
Daberistic Fund Rating: 4 stars
Top 10 holdings:
ABSA, Anglo American, BHP Billiton, Foschini, Mr Price, Naspers, Remgro, Sasol, SAB Miller, Standard Bank
Fund performance (annualised): This fund Sector average
6 months -0.9% 3.0%
1 year -4.4% -16.8%
3 years 11.1% 4.4%
5 years 24.4% 18.4%
Source: ABSA; FundData; data as at 30 June 2009
Suitable for investors:
Seeking long-term capital growth, with ability to tolerate short-term market volatilities
3-year plus investment horizon
Our recommendation:
Short-term (1-year): Lighten; Long-term (5-year): Hold
Daberistic Fund Rating: This is the rating developed by Daberistic Financial Services. It is based on the fund’s investment philosophy, fund manger’s academic qualifications and experience, the funds’ historic performance and risk characteristics.
¶ - poor;
¶¶ - inferior;
¶¶¶ - average;
¶¶¶¶ - superior;
¶¶¶¶¶ - excellent.
Our recommendation: This is the recommendation given by investors who want to invest tin this fund over the short- or long-term:
Buy – Investors should buy into this fund
Hold – Investors in this fund should continue to hold, but no more buying
Lighten – Investors should sell part of the holding
Sell – Investors should sell the entire holding.
Unit trust fund name: ABSA Select Equity Fund
Category: Domestic Equity - General
Benchmark: FTSE/JSE All Share Index (including income)
Inception date: 23 February 2004
Portfolio Manager: Errol Shear
Fund Size: R394 million
Fund characteristics:
The Fund invests in shares on the stock exchange with the intention of providing investors with long-term capital growth and escalating dividend income. Exposure to equities typically exceeds 75% of the fund and comprises a diverse combination of shares selected following independent research.
Fund objective:
Aims to achieve superior investment performance through careful selection of the best value the JSE has to offer
Total expense ratio:1.13%
Risk rating: Short-term (one-year): Medium high ; Long-term (five-year): Medium low
Daberistic Fund Rating: 4 stars
Top 10 holdings:
ABSA, Anglo American, BHP Billiton, Foschini, Mr Price, Naspers, Remgro, Sasol, SAB Miller, Standard Bank
Fund performance (annualised): This fund Sector average
6 months -0.9% 3.0%
1 year -4.4% -16.8%
3 years 11.1% 4.4%
5 years 24.4% 18.4%
Source: ABSA; FundData; data as at 30 June 2009
Suitable for investors:
Seeking long-term capital growth, with ability to tolerate short-term market volatilities
3-year plus investment horizon
Our recommendation:
Short-term (1-year): Lighten; Long-term (5-year): Hold
Daberistic Fund Rating: This is the rating developed by Daberistic Financial Services. It is based on the fund’s investment philosophy, fund manger’s academic qualifications and experience, the funds’ historic performance and risk characteristics.
¶ - poor;
¶¶ - inferior;
¶¶¶ - average;
¶¶¶¶ - superior;
¶¶¶¶¶ - excellent.
Our recommendation: This is the recommendation given by investors who want to invest tin this fund over the short- or long-term:
Buy – Investors should buy into this fund
Hold – Investors in this fund should continue to hold, but no more buying
Lighten – Investors should sell part of the holding
Sell – Investors should sell the entire holding.
Tuesday, March 24, 2009
Successful Investing Seminar
Following the successful conclusion of our first-ever Successful Investing Seminar in early February, we will be running this four-part seminar on Sucessful Investing again in April/May 2009, with Yours Truly being the presenter. This seminar targets:
- Investors who want to gain all-round, in-depth knowledge on the subject of investment;
- Investors who want to manage their own investment portfolios and be successful;
- People who want to study to become CFA;
- Finanial planners who want to become specialists in investment planning.
The seminar will consist of 4 four-hour sessions, from 9am to 1pm, on the following days:
Saturday 18 April 2009
Saturday 25 April 2009
Monday 27 April 2009
Friday 1 May 2009
Venue: Oak Park, 352 Oak Avenue, Ferndale, Randburg
The seminar will cover:
- The concepts of money and investments;
- Investments and financial planning;
- The basics of investments;
- Various types of investments;
- Fundamental analysis;
- The Warren Buffet Way of investing;
- Introduction to technical analysis;
- Behavioural finance and investor psychology;
- The practical steps of selecting an investment and putting together a portfolio.
Some comments from the previous participants:
"... Very informative ..."
"... The course is very comprehensive ..."
"... the course contents and the interactions among participants have helped me broaden my investment horizon ..."
If you are interested in finding out more about the seminar, please email info@daberistic.com.
Regards, Kevin Yeh
- Investors who want to gain all-round, in-depth knowledge on the subject of investment;
- Investors who want to manage their own investment portfolios and be successful;
- People who want to study to become CFA;
- Finanial planners who want to become specialists in investment planning.
The seminar will consist of 4 four-hour sessions, from 9am to 1pm, on the following days:
Saturday 18 April 2009
Saturday 25 April 2009
Monday 27 April 2009
Friday 1 May 2009
Venue: Oak Park, 352 Oak Avenue, Ferndale, Randburg
The seminar will cover:
- The concepts of money and investments;
- Investments and financial planning;
- The basics of investments;
- Various types of investments;
- Fundamental analysis;
- The Warren Buffet Way of investing;
- Introduction to technical analysis;
- Behavioural finance and investor psychology;
- The practical steps of selecting an investment and putting together a portfolio.
Some comments from the previous participants:
"... Very informative ..."
"... The course is very comprehensive ..."
"... the course contents and the interactions among participants have helped me broaden my investment horizon ..."
If you are interested in finding out more about the seminar, please email info@daberistic.com.
Regards, Kevin Yeh
Friday, March 13, 2009
ABSA Select Equity Fund
A fund that performs well relative to its peers in a down market deserves a closer look. ABSA Select Equity Fund is such a fund.
I have been following the development of ABSA Select Equity Fund for some time, and it's time for me to recommend it to investors who want to invest for longer term. It has outperformed the JSE All Share Index, and it seems to follow a very sound investment philosophy.
ABSA Select Equity Fund
Fund Manager: Errol Shear
Fund Size: R260m. Not a big fund, and the fund has not attracted a lot of attention, but I think as long as they do not change the fund manager, this fund will continue to perform well.
I have been following the development of ABSA Select Equity Fund for some time, and it's time for me to recommend it to investors who want to invest for longer term. It has outperformed the JSE All Share Index, and it seems to follow a very sound investment philosophy.
ABSA Select Equity Fund
Fund Manager: Errol Shear
Fund Size: R260m. Not a big fund, and the fund has not attracted a lot of attention, but I think as long as they do not change the fund manager, this fund will continue to perform well.
Friday, March 6, 2009
A tale of two life assurers
Over the past week a number of companies in the financial sector have announced their results. Two companies that have drawn my attention are Old Mutual and Sanlam. If you compare the performance history of these two companies, it makes quite a constrast in their investment case.
Sanlam is the second largest life assurer listed on the JSE. It was demutualised in 1998, and listed on the JSE at the price of R6 per share. On the other hand, Old Mutual is the largest life assurer listed on the JSE. It demutualised and listed on the LSE, JSE, ZSE, MSE and NSE. It listed on the JSE at the price of R14.10.
The dividend history of the two companies is as follows:
Year Sanlam Old Mutual
1999 25 20.77
2000 30 49.5
2001 35 72.3
2002 37 66.05
2003 40 56.01
2004 50 61.82
2005 65 61.34
2006 77 88.83
2007 93 102.07
2008 98 42.8
The closing share price as at 31 December 2008 is R17 for Sanlam and R7.60 for Old Mutual.
Assuming simplistically that the dividends are paid at the end of the year, the annualised rate of return produced by Sanlam and Old Mutual since listing are 15.61% and -0.25% respectively.
The return produced by an investment in Sanlam shares is respectable, while the return produced by an investment in Old Mutual shares is negative, both in nominal and in real terms.
The strategy followed by Sanlam, especially over the last few years, has been successful, and stands the company in good stead going forward. The strategy followed by Old Mutual has mixed results.
As an investor, I do not see the investment case for Old Mutual over the long term.
The above also shows how investors should not blindly invest in (large) companies due to their market capitalisation. Over the long term an indifferent investment approach can result in indifferent or pedestrian performance.
Sanlam is the second largest life assurer listed on the JSE. It was demutualised in 1998, and listed on the JSE at the price of R6 per share. On the other hand, Old Mutual is the largest life assurer listed on the JSE. It demutualised and listed on the LSE, JSE, ZSE, MSE and NSE. It listed on the JSE at the price of R14.10.
The dividend history of the two companies is as follows:
Year Sanlam Old Mutual
1999 25 20.77
2000 30 49.5
2001 35 72.3
2002 37 66.05
2003 40 56.01
2004 50 61.82
2005 65 61.34
2006 77 88.83
2007 93 102.07
2008 98 42.8
The closing share price as at 31 December 2008 is R17 for Sanlam and R7.60 for Old Mutual.
Assuming simplistically that the dividends are paid at the end of the year, the annualised rate of return produced by Sanlam and Old Mutual since listing are 15.61% and -0.25% respectively.
The return produced by an investment in Sanlam shares is respectable, while the return produced by an investment in Old Mutual shares is negative, both in nominal and in real terms.
The strategy followed by Sanlam, especially over the last few years, has been successful, and stands the company in good stead going forward. The strategy followed by Old Mutual has mixed results.
As an investor, I do not see the investment case for Old Mutual over the long term.
The above also shows how investors should not blindly invest in (large) companies due to their market capitalisation. Over the long term an indifferent investment approach can result in indifferent or pedestrian performance.
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