Speaker 0:
with advisors and investors facing a bewildering choice from over 1200 investment funds, we ask South Africa's top fund allocators to share their top tips and ideas to find the winners. Welcome to investment.

Speaker 1:
Hello and welcome to the investment den. I'm joined today by Roof horn, head of S, a portfolio management at and Welcome back roof.

Speaker 1:
Thank you, Chloe. It's great to be back and thank you for the opportunity. So, Rola, perhaps we can recap the last two funds that you put forward, namely the amplified Offensive balanced fund as well as the 91 managed fund. How have these funds performed for you? And did they fulfil a role that you initially selected? Selected them for

Speaker 1:
Chloe? Yes, Thanks for asking that question amplified offensive balance managed by Matrix 91 managed managed by Gale and the 91 research team behind her. Well, um, you know, both of them have an absolute return mindset, and that's what what really, uh, what we enjoy about them and making them different relative to other managers that we have in our portfolio. If you look at what asset classes did this year, I mean depending on the date. If you If you take Thursday evening, uh, numbers, then the all C is up, maybe 3%. Uh, top 40

Speaker 1:
2.5. And the cap switch, maybe 1% Bonds, which everybody's kind of favourite over the last year S a bonds up 2.5% money market. The best asset class at five S a property, I think, minus one for the year to date. And then you take the the Matrix Fund absolute, uh, amplified defensive balance. It's up six and 91. Manage up. Eight. So happy from our perspective

Speaker 1:
when you compare them relative to the sector's amplified defensive balance this first quarter over six months, second quarter over one year. And I think six out of 100 and 50 odd funds over five years. So definitely still doing the job. And we've been, as you know, invested in these two funds for more than five years now,

Speaker 1:
um, 91 managed poor short term performance, taking a one or two year view. She's been more conservative relative to other managers and, um, to her, the macro conditions were con concerning, and she's, uh, at the moment actually moving up the the, uh, relative performance ranking tables because she's been conservative 22% in S a equity 33 in global equity. Meaning she was really not at the 75% where, uh, the peer group can be

Speaker 1:
and therefore underperformed. But, uh, in terms of how she does things and and how she protects, uh uh

Speaker 1:
uh portfolio. In this tough times, we're still happy. Uh, we may look at both funds. We always do it. We review both funds in terms of their positioning relative to others and relative to our portfolio composition, but at the moment, happy to have both in our, uh, low equity and high equity portfolios. So now, focusing on your two new funds, Um, namely the Shredders Global Energy Transition Fund, as well as the Jones Henderson Global Sustainability Equity Fund. Why have you selected these two funds as topics

Speaker 1:
important? Chloe, this is long term picks for our offshore dollar portfolios. Um, my colleague George Dull and I and Jaque being exposed to so many offshore asset managers over the last two months. I think we did 36 to 40 investment presentations in London and, uh, ja and fan and And we brought them back last year. We did the same. We had the clean energy theme last year, but it was too expensive to invest in,

Speaker 1:
Uh, same with this, um, sustainable equity solution. And, um, we feel, though, when you look at the world, um, what we need, um, is technology where everybody uses it every day. And energy efficiency is very important not just for South Africa, but for Europe, the US, the rest of the world. So the two themes digitise

Speaker 1:
organisation as well as energy is something we have to invest in into our future, whether it's local portfolios or offshore portfolios, local portfolios, the access is a bit concerning at the moment, but we work at that. But those are the two real reasons why these two fund managers were selected.

Speaker 1:
And I think bigger is better when it comes to these themes. Because you need large research teams, experienced investment managers and and and not just one guy, two court portfolio managers and and these two teams definitely tick the box in terms of research, people process and then the focus on the themes so focusing on the Schroder global

Speaker 1:
energy transition fund. Why is this fund specifically for you a top pick? And are there certain market environments when this fund would either be in or out of favour? OK, energy transition as a theme? There's really three reasons why we think it's got a lot of potential long term. First of all, as as mentioned, there's there's demand for efficiency in energy.

Speaker 1:
Um, there's consumer demand as well as government. Push in terms of, uh, policy, uh, decisions made by the EU and the US. So that's the the the main thing. And then, from our perspective, you can buy the index. But the index is expensive, and it's and it's populated with the with the current winners, which are could be over leveraged as well. With the team you have, you have, uh, lead manager. Uh, Mark has got, like, 19 years experience, if I'm not mistaken

Speaker 1:
and these co portfolio manager 16 years, Um so the team also have access to all the research analysts within the team. And therefore, when you look through the the the the the the fund,

Speaker 1:
um, what we thought was expensive a year ago is now more market related. their earnings. Uh, updates are now saying 9 to 13% earnings potential in in their current portfolio, so it's well diversified as well. Uh, you know, when you look at the energy themes, there's distribution, there's electrification, there's generation. And then there's battery storage as well as hydrogen. And what's the last one? Clean mobility. Their whole portfolio is well diversified

Speaker 1:
to each one of those, uh, uh, themes. So it's It's widely diversified when you look at the index talking of MECR. World energy transition is 2% of the MECR world. When you look at the actual clean energy index, it's it's more populated with the popular Uh uh uh uh, What you call it sectors. Whereas the showers find this well diversified, they focus on cash generation and earnings generation and to to to make sure that the leverage within the portfolio is not too excessive.

Speaker 1:
And they've outperformed the peer group as well In a in an ideal portfolio. Uh, I would combine the index with them, though, because they they are focused on mid caps, so they're avoiding the large gap for the reasons mentioned may be too leverage, maybe too expensive. So, um Yeah, it's a great, great A great fund, like, got a lot, lot of long term potential. OK, so how would you implement the use of this fund into your solutions that might optimal

Speaker 1:
that fund on the offshore dollar portfolio will only be exposed to our growth portfolio. So those clients with a 5 to 7 year investment arising in dollars and sterling and euros Uh, but, um, 5% may be exposure. It's a theme, you know, and it's and it's and it's and it needs time and patience for it to perform. But we may be lucky, you know, and and get 15% which is the earnings potential for the next three years.

Speaker 1:
Uh uh. But I would warn against that. And and and again, you know, at the moment it's important to know that we didn't invest in this fund a year ago. We we had the exposure. But now we want to, and we're gonna pro. Probably replace some of the good performing funds in our portfolio, those ones with high tech exposure, high quality growth exposure, and rotate

Speaker 1:
a small portion to to this fund. OK, so your second fund, the Janis Henderson global Sustainable equity fund. Why is this fund a topic for you? And what is the investment approach that the manager employs in managing this fund?

Speaker 1:
First of all, you know, Oscar and I, we're all dogs in the industry, and our whole ESG theme has been a bit of a challenge because you you want that exposure in your portfolio. But whenever we we analyse whether it's an ETF or fund, it tends to underperform the MECR world, which is our benchmark.

Speaker 1:
Uh, what surprised me with this fund is that if you take a three year rolling and a five year rolling, uh uh uh, a backward looking performance, your This fund has outperformed the MECR world over that period, three year rolling five year rolling 80% of the time. So that's nice. So so the performance has come through, and the main reason for that is probably because it's more high conviction, 50 stocks and not 3000 or 400 stocks. It's really high conviction. Which brings us back to Henderson again,

Speaker 1:
the portfolio managers again 16 and 13 year experience in this team, and an important also a third, uh, analyst that that that's uh, been exposed to this team from a qualification and experience perspective. Her name is a or A. I'm not sure how you pronounce it. And, uh, they have exposure to more than 60 research analysts based on,

Speaker 1:
uh, with their big team, whether it's geographical or sector exposure. So they have a lot of resources, and they have a lot of know how in terms of the sustainable equity uh, companies, um, and therefore that makes them different. And and the fact that they are are outperformed is just wonderful. And they section 65 approved. So So now we can invest in them formally.

Speaker 1:
So the close of the session, then, Rola, what style does this fund exhibit and how are Are there any concerns with regards to style tilt of the fund,

Speaker 1:
we are concerned both these funds, um, are growth quality orientated due to the investment style. So in an environment where value outperforms growth and and quality, these funds may underperform. But that's why we we're gonna take AAA through the cycle. Look at the exposure to these funds.

Speaker 1:
Uh, but that said the fund managers with their experience, um, uh, are looking at at funds that are securities with less debt, less leverage, higher earnings potential and are well exposed in in in the relative themes. Uh, also important is like when when you look at the the Janice Henderson Fund, they were exposed to Microsoft and Navid prior to the beautiful returns it it was exposed to over the last year.

Speaker 1:
Also, Tesla. So their process have have really demonstrated good stock picking skills through the cycle. So we we we think it's repeatable. And therefore, um, I said, maybe in a value orientated market, it may underperform, but through the cycle, it should do the job. OK, thank you very much for taking us through your two top panics. We appreciate your time.

Speaker 1:
Pleasure, Chloe.