Tuesday, 04 February 2014 - 20:00
Seed Weekly - Multi Asset Class Flexible: A Forgotten Category?
Unit trusts in the South African Multi Asset Class Flexible category are often overlooked for possible investment. The average retail investor typically invests into balanced or equity funds. Flexible funds are generally positioned between balanced and equity funds. Due to the wide investment mandates of these funds, a like for like comparison is fairly difficult.
The biggest advantage of the wider investment limits is that managers are able to better express their investment views. Where equity managers need to always be relatively fully invested (+80% in equity) flexible managers are able to reduce exposure should market conditions warrant the move.
Flexible funds usually represent a manager’s best view. They are able to allocate to asset classes where they see value and take away from asset classes that are facing headwinds. In theory a flexible fund should fare better in a bear market, but lag in a bull market.
This category is typically where hedge fund managers list their unit trust funds as they have the flexibility that is a hallmark of hedge fund managers.
Naturally the major risk of a wider mandate is that a manager has a greater scope to make poor calls, it is therefore more important in this category to have a solid understanding of what kind of return profile the manager is attempting to achieve than in other more restrictive fund categories.
How have flexible funds fared against other categories?
The Multi Asset Class Flexible category is a catch all category containing a wide range of funds, with different risk and return targets. For example there are equity, allocation, income, and property funds. The analysis below was done on 5 equity centric flexible funds where the managers actively manage the asset allocation and have similar risk and return targets.
From the chart above you can see the big dispersion of returns in the category. 2013 returns ranged between -2.5% and 35%, but almost half of all of the funds were able to outperform the average equity (green outlined square) and balanced (pink outlined circle) fund manager. Over the past 5 years only the top quartile were able to beat the average equity manager mainly as a result of the lower equity exposure during a period of strong equity returns.
The chart below show the draw downs of these funds compared to the ALSI and the average equity manager. As would be expected, most of the managers were better able to protect capital than the average equity manager.
From the end of 2007 – i.e. before the last market crash – until now, these managers were able to outperform the ALSI with lower levels of risk (below represented as volatility, but the same holds true using other risk measures). On a risk adjusted basis these funds therefore delivered handsomely to their investors.
The major drawback of this category – and hence why it doesn’t attract perhaps as much assets as it otherwise would – is that flexible funds generally aren’t Reg 28 compliant and they thus can’t be used for compulsory investments (life annuity, pensions, or retirement annuities). With markets currently in expensive territory, this is perhaps a category to look at for investors that have a long time horizon.
Seed clients are currently invested with a few of the highlighted managers across our various fund solutions – they have been rewarded for giving the managers broad mandates. As the multi managers we keep a close eye on both the managers’ positions as well as their outlook on the markets.
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Tue, 04 Feb 2014
Gold dropped on Tuesday
after posting a one-percent rally in the previous session, as
steadier U.S. equities and a stronger dollar prompted investors
to unwind some of their safety bets in bullion.
South African stocks extended their losing streak to a fifth straight day on Tuesday, with the blue-chip index falling below the psychologically important 40,000 level in a continuing retreat from emerging markets around the globe.
Pressure on Thailand's embattled
government mounted on Tuesday, when a flagship rice-buying
scheme vital to its support stumbled closer to collapse and the
opposition filed legal challenges that could void a disrupted
Russia said its ally Syria would soon ship more chemical weapons abroad for destruction after being accused of dragging its feet, while activists said civilians in Aleppo were fleeing deadly barrel bomb raids by President Bashar al-Assad's air force.
Ukraine's President Viktor Yanukovich, battling mass unrest against his rule, faced demands from the opposition on Tuesday for a constitutional change that would seriously curtail his powers.
World Markets (Spot Prices)
|JSE Top 40||17:00||39945.44||-486.11||-1.20%|
|JSE Indust 25||17:00||50890.80||-687.86||-1.33%|
|Rand / Dollar||19:59||11.0771||-0.1849||-1.64%|
|Rand / Pound||19:55||18.0451||-0.2908||-1.59%|
|Rand / Euro||19:55||14.9726||-0.2597||-1.70%|
|Rand / NZD||19:59||9.0975||-0.0024||-0.03%|
|Rand / AUD||19:55||9.9032||0.0464||0.47%|
|Yen / Dollar||19:59||101.5900||0.5350||0.53%|
|Euro / Dollar||19:59||0.7397||0.0004||0.05%|
|Dollar / Euro||19:59||1.3521||-0.0005||-0.04%|
|Pound / Dollar||19:55||0.6125||-0.0004||-0.07%|
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The JSE Today
* Includes all listed instruments on the JSE
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||53,531.75||-602.60||-1.11%|
|Oil & Gas ||39,775.31||-419.23||-1.04%|
|Oil & Gas Producers ||21,386.45||-225.41||-1.04%|
|Basic Materials ||28,277.62||-380.61||-1.33%|
|Forestry & Paper ||28,563.72||-113.65||-0.40%|
|Industrial Metals ||23,836.87||-274.11||-1.14%|
|General Industrials ||123.31||-1.33||-1.07%|
|Consumer Goods ||53,394.21||-1156.01||-2.12%|
|Automobiles & Parts ||9,646.59||-206.07||-2.09%|
|Health Care ||69,117.93||-627.56||-0.90%|
|Index Name||RP||Move||% Move|
|Food Producers ||64,665.28||-993.79||-1.51%|
|Personal Goods ||999.86||-24.37||-2.38%|
|Consumer Services ||10,620.34||-124.64||-1.16%|
|General Retailers ||53,320.22||-726.28||-1.34%|
|Travel & Leisure ||5,417.81||-79.63||-1.45%|
|Support Services ||2,487.64||17.39||0.70%|
|Non-life Insurance ||46,223.27||1048.96||2.32%|
|Life Insurance ||29,991.20||1.29||0.00%|
|General Financial ||3,036.40||-18.41||-0.60%|
|SHARIAH TOP40 ||3,876.42||-37||-0.95%|
|FTSE/JSE SHARIAH ALL||3,976.04||-37||-0.93%|
|FTSE JSE Fledgling ||6,399.56||-38||-0.58%|
|FTSE/JSE Alt X ||1,227.04||-3||-0.20%|
|SA LISTED PROPERTY ||465.87||-0.07%|
|CAPPED PROPERTY ||412.37||-0.38%|
|FTSE/JSE RAFI 40||8,852.16||-79||-0.89%|
|Capped Top 40||21,104.61||-242||-1.13%|
|Capped All Share||22,497.19||-252||-1.11%|
|JSE TABACO ||6,760.84||-101||-1.47%|
Click here for the Sharenet Index Summary page
Latest Consensus Changes**
|NED||NEDBANK GROUP LTD||BUY||03/02/2014|
|LEW||LEWIS GROUP LIMITED||HOLD||03/02/2014|
|SBK||STANDARD BANK GROUP LIMIT...||HOLD||03/02/2014|
|BGA||BARCLAYS AFRICA GRP LTD||HOLD||03/02/2014|
|Expected||Company Name||Fin. Date|
|05/02/2014||NEPI||December 2013 (Final)|
|05/02/2014||RESILIENT||December 2013 (Interim)|
|06/02/2014||ADAPTIT||December 2013 (Interim)|
|06/02/2014||ARCMITTAL||December 2013 (Final)|
|06/02/2014||MITTALSAP||December 2013 (Final)|
|ASCEN A||03/02/14||21/02/14||03/03/14||ZAR 0.1995|
|ASCEN B||03/02/14||21/02/14||03/03/14||ZAR 0.1036|
|ABL||African Bank Investments Ltd.||06/02/2014||Confirmed|
|ABLP||African Bank Investments Ltd.||06/02/2014||Confirmed|
Stock Exchange News Service
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