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 Trevor Garvin, head of multi management at Net Group Investments. Welcome back, Trevor. It's a pleasure to be hosting you.

Speaker 1:
Thanks, Chloe. And always a pleasure to be on the programme. So, Trevor, perhaps to recap the two funds that you recommended or put forward, um, in our last investment there, namely the Negro Core Bond Fund as well as the 91 Global Franchise Feeder fund, did they fulfil the role that they were initially selected?

Speaker 1:
Thanks, Chloe. And I think in short, the answer is probably yes. So just to to recap. So the on the fixed income side For a while now, we have liked bonds or South African fixed income. Uh, the yields are pretty high around 10 10.5%. And although we've been overweight that as a class for a while, we added a bit to it about 6 to 12 months ago, when we chatted

Speaker 1:
and and yes, it's performed nicely. So I went to just have a a look at how it's done. So just to know so the first of all, it's about a 5.1 billion rand fund now. It's actually grown quite a lot over the last year and over the last. It's up, UH, 8.5% over the last 12 months, as at the end of June, and the average peer group bond fund is up 5.9. So it's upper performed by about 2.5%. The peers,

Speaker 1:
uh, in terms of the other side of the coin, which I guess is global equities. So again, about a year or so ago, we topped up on 91 global franchise fund. The idea and thinking behind that was given where the world is with raising interest rates, uh, slowing economic growth

Speaker 1:
and inflation starting to become a major problem. We wanted to tilt a bit more towards quality type of global equity stocks, which is what that fund manages and and focuses on companies that are have a large global footprint, very strong, consistent cash flows and should weather the storm let's call it a little bit better than others.

Speaker 1:
And in terms of just that fund's performance as of the 30th of June, the fund over the last year was up 29.5%. This is in rands. Some of that would have been by rand weakness because, uh, that's obviously in the rand numbers, and the average global equity fund is up 28.4 so it outperformed by about a percent or so.

Speaker 1:
So, overall, we still hold those holdings. We still hold those funds in those weights, and we're still happy to to hold them going into the future.

Speaker 1:
So, Trevor, then perhaps you can comment on your house view at NED Group and the positioning with regards to asset classes and perhaps the two funds that meet these two new views.

Speaker 1:
Yeah, with pleasure. So let's start off again on the local side. I guess so. From a South African perspective at the moment, in terms of our house view from equities perspective, uh, we sort of separate South African equities, and we tend to try and go into funds that are pure S a and then we go for the offshore funds for our global exposure.

Speaker 1:
So from a valuation perspective, uh, we think South African equities show still pretty good value. They haven't done badly, and they actually are up. But we still think relative to some other asset classes. They're pretty good. And our fund pick here is our old time long term favourite, which is Coronation Top 20 fund,

Speaker 1:
uh, which we've been adding and over the last few months to we have held this fund literally for close to 20 years, and it's performed amazingly over that period. So I I went to have a look. And over 20 years, the fund

Speaker 1:
has averaged 16% per annum for 20 years versus the peer group of about 14%. So a great fund, it's highly focused. It's only 20 shares. It's managed by Neville Chester and Nicholas Stein from Coronation, and the funds about 25 billion rand in size. So it's a pretty big fund, but it is focused on the top 20 or so large cap stocks of of the South African stock market, so liquidity is not an issue.

Speaker 1:
Um, just the top five holdings within the Coronation fund are process Standard Bank Ned Bank Anheuser Busch and Anglo American. They have liked financial services and banking stocks for a while now, coronation. And those have actually had a really good run the last quarter or so. So actually, the Coronation Ra house funds and specifically this funds had a pretty good run recently.

Speaker 1:
And yeah, we've we've always liked it and we still like it. And we've been adding to that one on the global side, Um, a little bit different again. Our pick there is the Net. Group Investments, Global Emerging Markets Equity Fund.

Speaker 1:
So we have been underweight this for a period of time. However, we do feel that from again, uh, economic perspective and evaluation perspective, global emerging markets seem to have some quite good upside. Uh, we know we're coming out of this high inflation environment.

Speaker 1:
Interest rates are I still think that we might have one or two interest rate hikes to still come, but we're getting closer to the top and then eventually, probably early next year, starting to get interest rates to come down across the various central banks globally. So we think that that will be good for emerging markets. We think economic growth will slowly start improving

Speaker 1:
and and, yeah, these emerging economies will start to grow. So from a valuation perspective, emerging market equities have quite materially underperformed developed market equities over the last three years or so. And these things move in cycles, and we think that that is the next opportunity when economies start to turn around

Speaker 1:
and and just yeah, in terms of that fund, it's managed by an asset manager called NS Partners. They're a London based asset management firm. The fund is about a billion rand or so in size. It does have a feed a fund so you can invest rands or dollars. Actually, Offshore and NS Partners have been managing emerging market equities for about 25 years or so, so they have a really long, consistent good track record.

Speaker 1:
And Ian BT is the lead fund manager on that fund. Um, and just in terms of where that fund is positioned,

Speaker 1:
I had a look. So it's top five holdings are Samsung Tai one Semiconductors, Tencent, Alibaba and a company called Varun Beverages, which is like a bottling beverage type company. And, uh, it makes up. Those five stocks make up about 28% of the fund. So it's also fairly concentrated. And in terms of regions, China, India,

Speaker 1:
Taiwan and South Korea are the make up about 75% of the countries within which the that fund is invested. And and finally, I guess, on that fund, the way that they approach the management of it

Speaker 1:
is a bit of a mix of both top down country analysis mixed with then fundamental stock picking. So they don't believe just in picking cheap stocks from a in emerging markets. They do actually think that there's value to be had from looking at the economy,

Speaker 1:
where in the world the cycle is, and specifically where each country in emerging markets is in their economic cycle, as it will affect, uh, the stock markets of those particular countries. So they they blend the higher level economics with their low level stock picking fundamental analysis.

Speaker 1:
And that's really your picks for this For this programme, um, one last question just to close up the session. Are there any special considerations that clients or even advisors would need to take into account when considering allocating to these specific funds for their clients? Portfolios?

Speaker 1:
Yeah, good question. I think different things for different people, obviously, and and you gotta look at the client's specific needs. But I think what's always very important is things like is the fun? Is fund sizing if you wanna call it that?

Speaker 1:
So how much should you be going into emerging markets? Uh, relative to the client's overall portfolio? And then I guess you could look at Do you just use one emerging market fund or two and that type of thing? So I think one's got to always be aware of how much you invest into a fund, and it depends on the risk and the asset class. So emerging markets is, of course, slightly riskier to develop markets.

Speaker 1:
Uh, just to put it into perspective, Emerging Markets makes up about 12% of the total equity market index. So that's, I think, a good proxy. Um, we actually have two emerging market holdings. We have a bit of a passive portion, and then this is the active portion, and I think you know around about five or 10% probably in terms of sizing for an emerging markets global fund

Speaker 1:
on the local side, with a fund like COO Top 20 it is highly liquid. It's the top 20 stocks. Um, great long term, consistent track record. So again, I certainly think you could look at that type of a fund as a core holding. If you wanna call it that within your domestic equity exposure, and then you could hold smaller for lack of a better word. Riskier type of funds around it as more satellite type of holdings.

Speaker 1:
Ok, Trevor, thank you very much for sharing with us. Your two top contexts. We appreciate your time.

Speaker 1:
It's a pleasure, and we look forward to reviewing them in the future.