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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, then I'm joined today by Francois Van, head of the Global Manager Research at Sun Multi Managers. Welcome back, Francois.

Speaker 1:
Hi, Chloe. Thank you for having me. So, Francois, perhaps you can take us through your two top fund perks. You've selected two global equity funds. Um, and maybe we can start off with the Amplify SC I Global equity fund. Sure, Chloe. So amplify Global Equity Fund, um, gives access to one of the managers that multi managers have actually identified. So, uh, just for for the listeners, information amplify is a platform that gives access to unique leading and independent as managers.

Speaker 1:
And so, for the Global Equity Fund, we have identified Sara Asset Managers based in Houston, Texas. Uh, they have a very interesting background because it was formed by fais sara, which is of Egyptian, um, heritage, uh, who studied at Harvard University and then started the firm in 1958. Um, he was instrumental within the firm until he passed

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were last year. He was still a co CIO and the chairman at that point. Um, and the business is about 25 billion billion of, um, assets under management, uh, which makes them quite substantial, but also they have a real focus on just sustainable growth investment.

Speaker 1:
So this fund is benchmark agnostic and therefore has an active investment approach. How would a funder of this nature be implemented into your solutions at a multi managers? So within our investment framework, we follow a core satellite approach. Uh, this is obviously a satellite position for us within our quality growth investment style. So ultimately, we try to any style exposure. So we will blend,

Speaker 1:
um, a fund like this with value based investors or value based investment styles as well. Um, but we do identify the fact that because it's a concentrated portfolio, there can be times at which, uh, performance deviates away from our benchmark, which is the energy of our world

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next. But once again, if you identify a manager that really, um, shows skill, uh, that should be eliminated. And I think a manager like Sara historically you know, we we can go back to their track record, which dates back all the way to 1993 for the specific, um,

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strategy. And over the last 10 years, so since 2014, they've actually outperformed the index every single calendar year, which is quite unique for a quality growth management, especially because last year was a very tough year for growth growth as an investment style. Um, but they managed to outperform last year, and then, as investment styles changed again into this year, they continue to outperform.

Speaker 1:
So you've mentioned that this fund employs a sustainable growth strategy. What is the ideal holding period for a fund of this nature? So this sustainable growth strategy focuses on leading companies that are within structurally attractive industries that are benefiting from sustainable, um, and above average earnings growth.

Speaker 1:
Um, that does mean that it's a little bit of a longer term investment horizon, and typically investing in such a strategy should be be viewed within a 5 to 7 year investment horizon. So which sectors is this fund then? Quite constructive on so also very unique. And if you can remember previously, I've put forward uh, GKG global equity

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strategy, which also is with quality growth. And what also made that strategy different is the fact that they invest in energy. Uh, a lot of quality growth. Investment managers don't invest in energy because they deem it from a historical basis to be too volatile with earnings that are too unpredictable.

Speaker 1:
Um, but is overweight the energy sector There are overweight consumer staples and the overweight information technology. And their view on the energy sector is very similar to that. You know, when you look at the supply and the demand dynamics, not enough supply have come to the market, and the demand has increased over over the last few years. So they started to invest, um, in

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select energy companies at the end of 2021. And then as, uh, Ukraine got invaded by Russia, they increased their exposure, and they have maintained that coming into this year. So this fund only holds 25 holdings. Is concentration risk perhaps a concern? Well, concentration risk should always be viewed in terms of is, does it mean that there's potential for capital impairment

Speaker 1:
or doesn't mean that you underperform your benchmark? So I think in this situation, it's more the potential for underperforming the benchmark, because the amount of research and focus they do on the companies that they invest in is of very

Speaker 1:
good depth. Um, they, um, are very focused. So they've got an investment analyst team of 15 individuals and six portfolio managers that are just really focused on these 25 to 35 companies that they invest in. So I think in terms of that, the risk is, uh is pretty much eliminated and also because they focus on companies with very strong balance sheets.

Speaker 1:
OK, so focusing on to your second topic the Global Factor Enhanced fund. How is this one different from the first fund? And why is that a topic for you? Sure, it's very different, and I think a lot of investors will know as a as an index provider, more passive in in orientation.

Speaker 1:
Um, and they do focus on factor investing as well, So the global factor enhance strategy is actually outsourced to a company called Padang Gora Asset Management, which is Boston based. It was formed at the end of 1989 and this strategy is much more diversified. So Typically, it will have somewhere between 100 and 5300 underlying stock. It tries to mimic the the index much closer,

Speaker 1:
but just with small out performance on a very consistent basis. And that's the one thing we really like about. The strategy is that since 9 to 9 to 9, they have actually showed a batting average. Now, batting average is how often you outperform on a monthly basis, so their batting average is 60% or 60% of the time they're up

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the index given their, um, their quantitative investment style. So with this, um being a factor based approach that they that they employ to manage this fund, what are the key factors that they employ? And are they employed across the fund or on a stock specific basis?

Speaker 1:
Sure. So I think what makes them unique is they've got quite a lot of factors that they look at. So from a broad perspective, they look evaluation quality. They throw ESG and management together into one broad category factor. And then there's competitiveness, sentiment and momentum. But underneath those six broad categorizations, there are almost 80 different factors that they look at. Since 2010. They've also started to include more, um, alternative data into the way that they look at

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at, um, the underlying factors. And so they bring in, uh, natural, um, language programming they look at, um um, at machine learning. They brought in a I. But ultimately, all their decisions is always made on a academic and fundamental, uh, capacity. So then what type of role would this fund, um, play in for? For the solutions that SMM I as I mentioned, we follow the core satellite investment approach, and this is definitely

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for us a core position. Um, we We like to either allocate to, um portable alpha or then core type managers like this that have shown a history of consistent outperform doesn't mean it's going to outperform by a large margin. But it also the chance of outperforming is is limited. So how is this fund then allocated across sectors and which sectors are they constructed on? So there's very broad diversification within the underlying portfolio, and they only have 1%

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um, over allocation to any specific, um, sector. At this time in general, they can only make a 4% deviation, and within the stock selection. Also, they can only make a 2% deviation from index weights. Uh, so currently, no real, um,

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central exposure That is very different from the market. Um, but this has also helped them to keep up with, uh, the MS C I World index performance this year and actually continue to show a little bit of out performance. Thank you very much for taking us through your two top fun picks. We appreciate your time. My pleasure.