Sanlam portfolios take the lead
Several Sanlam portfolio managers brought home accolades for being the top performers in their funds’ categories after the 21st Raging Bull Awards ceremony held in Johannesburg on January 25.
The prestigious Raging Bull Awards recognise the top managers in the South African unit trust industry, measured on their long-term performance. The awards for straight performance in asset-specific categories were for the three-year period to the end of 2016.
The following Sanlam Investment Management (SIM) funds won certificates:
- The Enhanced Yield Fund: Best South African Interest-bearing Short-term Fund;
- The Small Cap Fund: Best South African Equity Mid- and Small-cap Fund; and
- The SIIP India Opportunities Fund: Best Offshore Far East Equity General Fund.
The SIM Enhanced Yield Fund was also named the Best South African Interest-bearing Short-term Fund in 2014. The fund is managed by Melville du Plessis, a Chartered Financial Analyst (CFA), and also a certified financial risk manager and Chartered Alternative Investment Analyst.
Melville says the track record of the fund demonstrates its ability to outperform during increasing and decreasing interest rate cycles, as well as in favourable and unfavourable credit market environments. Its benchmark is the Short-term Fixed-interest Index (Stefi) plus 0.5 percent year, and since its launch in May 2011 the Enhanced Yield Fund has beaten the Stefi by 1.36 percent a year, which is an unusually large outperformance for a fixed-interest fund, which is limited to investing in cash, and government, corporate and inflation-linked bonds. One of the ways the fund avoided underperformance was by having either no or very limited exposure to counters such as African Bank and First Strut.
The SIM Enhanced Yield Fund is actively managed, and the enhanced yield is pursued by using a combination of interest rate and credit opportunities. Credit added roughly 45 percent of the outperformance and interest rate management about 55 percent of the outperformance during 2016, while the two components add value fairly equally over the long term.
Although it’s impossible to have perfect foresight with regards to what the future holds, Melville believes that appropriate risk management and avoiding undue concentration risk are two of the most efficient ways to avoid underperformance. The highest and lowest annual returns since the launch of the fund have been 10.43 percent and 5.51 percent respectively.
This is the second year in a row that the SIM Small Cap Fund, managed by Vanessa van Vuuren, has won the certificate for the Best South African Equity Smaller Companies Fund. Vanessa is a CFA charter-holder and holds two honours degrees – one in organisational psychology and one in financial analysis and portfolio management. She credits the success of the fund to the extent of the SIM equity team’s coverage and the strong research culture embedded within the team.
Because the small-cap sector is generally under-researched in the industry, Vanessa says there are ample undervalued companies – and hence exciting opportunities – in the sector. She ascribes a significant part of the outperformance of the fund to the appropriateness of the mandate, which allows her to invest in early-stage smaller companies.
The returns over the three-year period were driven by the Small Cap Fund’s selection of smaller companies based on the strength of their business models, their implicit growth potential and the price SIM was paying for the potential. Examples of companies that performed well over this period are Adapt-IT (50 percent a year), Advtech (41 percent a year) and Curro (22 percent a year).
All SIM’s funds are driven by one house-view process, and the awards reaped by the SIM Enhanced Yield and Small Cap funds demonstrate that SIM owns superior fixed-interest and equity capabilities.
The SIIP India Opportunities Fund is an Irish-domiciled international equity fund that invests predominantly in Indian equities or in companies mainly operating in India. It is managed by SIM.