Tuesday, 08 April 2014 - 20:00
Charts
Seed Weekly - Fund Manager Warning Signs
In last week’s newsletter, Multi Management Unveiled, we discussed the benefits and drawbacks of multi managers in helping investors achieve their investment objectives. The article also alluded to other benefits of being invested into multi managed funds.
Finding the correct underlying managers and developing the optimal strategy for a multi managed fund is only the initial responsibility of a multi manager. After an underlying fund has been included into a multi managed fund, the multi manager needs to monitor, inter alia, the following aspects:
• Underlying fund performance
• Change in portfolio manager
• Change in assets under management (AUM)
• Style drift
Underlying Fund Performance
“Past performance is no indication of future returns” is well know and used phrase in the investment world. A portfolio manager might have outperformed his/her investment objective in the past, but will this continue going forward? A multi manager needs to monitor the performance of the fund and check if the performance deviates from expectations.
A multi manager shouldn’t only be concerned if the fund underperforms, but also if it outperforms when it shouldn’t. An example is when a conservative manager outperforms in a bull market – the manager may be taking on unnecessary risks.
Change in Portfolio Manager
The portfolio manager and investment team tend to be the most important part of a fund’s performance. When a portfolio manager leaves, the multi manager needs to have an opinion on the manager that’s taking over and the depth and expertise of the remaining investment team.
The graph below shows the drop in AUM of a fund after a change in portfolio manager was announced at the end of 2013. The investors (including multi managed funds) clearly didn’t feel comfortable with the new arrangements and disinvested.
The graph below shows a fund that had two manager changes, one in September 2009 and the other in October 2012. On both occasions the investors were content with the new managers coming on board and didn’t see the need to disinvest.
At Seed, when there is an unannounced portfolio manager change, the fund is automatically removed from all short lists and only after we are able to meet with the new portfolio manager we will either put the fund back on the short list or disinvest.
Change in Assets Under Management (AUM)
An asset manager earns most of their income from the investments that they manage. When there is a sudden drop in AUM, it will lead to lower income earned and possibly become a going concern risk. Even if the asset manager is able to stay afloat, their priorities will in all likelihood change to focus more on generating new business (i.e. spend less time managing existing funds).
Boutiques and medium sized managers that have a few pension/institutional clients dominating their AUM are most at risk. There is a local asset manager that lost close to 90% of their AUM when institutional clients pulled their investments.
One of a multi manager’s goals is to blend uncorrelated investment styles in order to reduce the volatility of the fund and increase returns over the long term. When a manager’s style drifts, the underlying funds can become correlated and the benefit of diversification reduced.
The graph below shows how a manager’s investment style can change over time. The fund started off investing into Small cap value companies and over the years moved over to Mid/Large cap growth companies.
The benefit of a multi managed fund is peace of mind for investors. Multi managers continuously monitor the investments in the fund (across a variety of metrics) and keep an eye out for new and improved strategies/managers to incorporate.
Kind regards,
Gerbrandt Kruger
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 08 Apr 2014
Top News
South African stocks rebounded on Tuesday after stumbling in the previous session, led by iron ore producers Kumba and Assore, which were lifted by a spike in futures prices triggered by stockpile jitters. Full story
South Africa's central bank expects volatility in the rand currency to continue although it does not believe intervening in the market would be effective, Reserve Bank Governor Gill Marcus said on Tuesday. Full story |
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U.S. Secretary of State John Kerry accused Russian agents and special forces on Tuesday of stirring separatist unrest in eastern Ukraine, saying Moscow could be trying to prepare for military action as it had in Crimea. Full storyIsraeli and Palestinian
negotiators ended another U.S.-mediated session on Tuesday with
no sign of a breakthrough in efforts to save peace talks from
collapse, but an Israeli official said they had agreed to meet
again. Full storyAn Australian ship which picked up possible "pings" from the black box recorders of a missing Malaysia Airlines jetliner has been unable to detect any further signals and time is running out to narrow the massive search, officials said on Tuesday. Full story |
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Markets | The dollar and euro fell
sharply against the yen on Tuesday as hopes for additional
stimulus out of Japan faded, while bargain- hunting. . . Full story | | Gold rose 1 percent on
Tuesday on a sharply lower dollar and as renewed tensions
between the United States and Russia over Ukraine. . . Full story | | Britain's blue chip share index
hit a two-week low on Tuesday, with Sports Direct leading losses
after a share sale by founder Mike. . . Full story | | European shares fell for a
second day on Tuesday as investors sold out of some of the
year's top performing regional indexes and. . . Full story |
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| U.S. stocks rose on Tuesday,
rebounding after three days of declines, as investors bought
beaten-down shares of social media and Internet companies.. . . Full story | | U.S. stocks opened mostly flat
on Tuesday, with the S&P 500 stabilizing after a three-session
selloff as investors looked ahead to the start. . . Full story | | European shares fell for a
second day on Tuesday, with building materials group
Saint-Gobain among the worst hit, as investors sold out of. . . Full story | | Britain's top equity index fell
on Tuesday, with sportswear retailer Sports Direct
sliding sharply after its founder sold a chunk of shares. . . Full story |
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SA Business | As a strike by South African platinum miners enters its eleventh week, the likelihood that employers will bow to demands for. . . Full story | | Massmart, South Africa's No.4 retailer by market value, plans to enter oil-rich Angola with two stores by 2015, a senior executive. . . Full story | | Business confidence in South Africa edged up to 92.7 in March from 91.9 in February, a survey by the South African. . . Full story | | South Africa's rand hit its strongest level against the dollar this year in Tuesday's early trading session as positive momentum continued. . . Full story |
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| South Africa's central
bank expects the rand to remain volatile although it is unlikely
to intervene in the market to try and stabilise. . . Full story | | South Africa's rand extended gains to over one percent against the dollar on Tuesday, tracking a firmer euro and as emerging. . . Full story | | Angola's Banco BIC, backed by
the billionaire daughter of the country's president and a
Portuguese cork tycoon, plans to ramp up its branch. . . Full story | | The International Monetary
Fund on Tuesday predicted the global recovery would strengthen
this year and next as output in richer nations picked up,. . . Full story |
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| German engineering
firms should be more aggressive in selling equipment to
fast-growing markets in Africa rather than leaving the field to
Chinese, U.S., Italian and French rivals, trade group VDMA said.. . . Full story | | South Africa's largest insurer Sanlam plans to conclude three or four acquisitions in other African countries this year as it chases faster-growing markets, a senior official said.. . . Full story | | The world's financial leaders are likely to discuss possible risks to Europe's economy from the crisis in Ukraine, but there are no plans to mention it in the final document from. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 48069.53 | 211.58 | 0.44% | JSE Top 40 | 17:00 | 43230.33 | 210.28 | 0.49% | JSE Gold | 17:00 | 1498.28 | 13.46 | 0.91% | JSE Financial | 17:00 | 35732.75 | 119.90 | 0.34% | JSE Industrial | 17:00 | 61711.01 | 304.00 | 0.50% | JSE Indust 25 | 17:00 | 54374.80 | 278.70 | 0.52% | JSE Resource | 17:00 | 56539.79 | 264.76 | 0.47% | DJ Futures | 19:50 | 16220.00 | -45.40 | -0.28% | DJ Ind | 19:54 | 16283.60 | 37.73 | 0.23% | SP 500 | 19:54 | 1853.73 | 8.69 | 0.47% | Nasdaq | 19:54 | 4116.31 | 36.56 | 0.90% | FTSE 100 | 17:35 | 6590.69 | -32.15 | -0.49% | DAX | 18:08 | 9490.79 | -20.06 | -0.21% | CAC40 | 18:08 | 4424.83 | -11.25 | -0.25% | Nikkei | 08:32 | 14606.88 | -201.97 | -1.36% | Shanghai | 09:28 | 2098.28 | 39.45 | 1.92% | Hang-Seng | 10:28 | 22596.97 | 219.82 | 0.98% | All Ords | 08:39 | 5409.20 | -6.90 | -0.13% | NZSE 50 | 07:48 | 5031.56 | -44.28 | -0.87% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1309.43 | 12.51 | 0.96% | Gold R | 19:59 | 13701.33 | 64.50 | 0.47% | Gold R/kg | 19:54 | 439605 | 598 | 0.14% | Silver $ | 19:59 | 20.0280 | .1670 | 0.84% | Platinum $ | 19:59 | 1440.00 | 17.25 | 1.21% | Palladium $ | 19:59 | 775.00 | 11.50 | 1.51% | R157 | 14:58 | 6.71 | -.01 | -0.22% | R186 | 14:58 | 8.32 | -.04 | -0.42% | R204 | 14:58 | 7.75 | -.04 | -0.51% | R207 | 14:58 | 7.98 | -.04 | -0.56% | Brent Crude | 19:50 | 106.99 | .27 | 0.25% | Rand / Dollar | 19:59 | 10.4639 | -0.0508 | -0.48% | Rand / Pound | 19:55 | 17.4727 | 0.0343 | 0.20% | Rand / Euro | 19:55 | 14.4200 | -0.0345 | -0.24% | Rand / NZD | 19:59 | 9.0793 | 0.0282 | 0.31% | Rand / AUD | 19:55 | 9.7845 | 0.0332 | 0.34% | Yen / Dollar | 19:59 | 101.9100 | -1.1080 | -1.08% | Euro / Dollar | 19:59 | 0.7248 | -0.0029 | -0.40% | Dollar / Euro | 19:59 | 1.3797 | 0.0055 | 0.40% | Pound / Dollar | 19:55 | 0.5969 | -0.0049 | -0.81% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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08/04/2014 | 179 | 167 | 85 | 431 | 249,143,891 | R15,573,173,208 | 190096 | 1413346 | 07/04/2014 | 153 | 231 | 54 | 438 | 232,926,830 | R16,717,611,401 | 180499 | 1243519 | 04/04/2014 | 222 | 135 | 66 | 423 | 253,468,255 | R18,195,463,130 | 182474 | 1769625 | 03/04/2014 | 215 | 190 | 62 | 467 | 269,288,369 | R18,386,947,973 | 203797 | 1875184 | 02/04/2014 | 221 | 157 | 67 | 445 | 338,575,573 | R20,838,248,515 | 220533 | 1733091 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 43,230.33 | 210.28 | 0.49% | Industrial | 61,711.01 | 304.00 | 0.50% | Mid Cap | 61,428.79 | 156.47 | 0.26% | Small Cap | 51,520.40 | -50.84 | -0.10% | Resource 20 | 56,539.79 | 264.76 | 0.47% | Industrial 25 | 54,374.80 | 278.70 | 0.52% | Financial 15 | 13,735.07 | 51.13 | 0.37% | Financial & Ind. 30 | 58,360.33 | 281.85 | 0.49% | All Share | 48,069.53 | 211.58 | 0.44% | Oil & Gas | 43,472.01 | 186.16 | 0.43% | Mining | 33,833.95 | 138.35 | 0.41% | Gold Mining | 1,498.28 | 13.46 | 0.91% | Platinum Mining | 49.74 | -.20 | -0.40% | GENERAL MINING | 9,785.79 | 41.89 | 0.43% | Oil & Gas Producers | 23,374.10 | 100.10 | 0.43% | Basic Materials | 29,826.18 | 56.68 | 0.19% | Chemicals | 24,177.05 | -37.40 | -0.15% | Forestry & Paper | 30,145.87 | -1007.62 | -3.23% | Industrial Metals | 21,341.76 | 605.68 | 2.92% | Industrials | 44,128.63 | 169.77 | 0.39% | General Industrials | 139.94 | .76 | 0.55% | Consumer Goods | 57,358.46 | 264.36 | 0.46% | Automobiles & Parts | 9,445.06 | 4.53 | 0.05% | Household Goods | 360.72 | 1 | 0.32% | Health Care | 76,046.74 | -797.42 | -1.04% | Beverages | 186.19 | 2.08 | 1.13% |
| | Index Name | RP | Move | % Move | Food Producers | 68,391.50 | 243.46 | 0.36% | Personal Goods | 999.76 | -8.39 | -0.83% | Consumer Services | 10,833.08 | 170.98 | 1.60% | General Retailers | 61,772.84 | 872.55 | 1.43% | Travel & Leisure | 5,502.34 | -15.49 | -0.28% | Media | 232.48 | 5.04 | 2.22% | Support Services | 2,645.11 | 15.04 | 0.57% | Telecommunications | 10,383.07 | 42.13 | 0.41% | Financials | 35,732.75 | 119.90 | 0.34% | Banks | 63,057.81 | 1086.97 | 1.75% | Non-life Insurance | 49,033.27 | 30.63 | 0.06% | Life Insurance | 33,838.90 | -326.02 | -0.95% | General Financial | 3,592.73 | -2.67 | -0.07% | Technology | 40,083.76 | -107.61 | -0.27% | SHARIAH TOP40 | 4,180.06 | 11 | 0.27% | FTSE/JSE SHARIAH ALL | 4,271.24 | 9 | 0.20% | COAL MINING | 18,640.27 | 224 | 1.21% | FTSE JSE Fledgling | 6,625.94 | -17 | -0.25% | FTSE/JSE Alt X | 1,212.42 | 4 | 0.33% | SA LISTED PROPERTY | 499.58 | | 0.24% | CAPPED PROPERTY | 432.39 | | 0.14% | RESOURCE | 30,876.37 | 127 | 0.41% | DIVIDEND PLUS | 222.02 | 2 | 0.90% | FTSE/JSE RAFI 40 | 9,697.82 | 35 | 0.37% | Capped Top 40 | 22,876.31 | 114 | 0.50% | Capped All Share | 24,335.03 | 108 | 0.44% | JSE TABACO | 7,590.28 | 171 | 2.31% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | ARL | ASTRAL FOODS | BUY | 03/04/2014 | TBS | TIGER BRANDS LTD | BUY | 02/04/2014 | LEW | LEWIS GROUP LIMITED | HOLD | 02/04/2014 | BAW | BARLOWORLD LIMITED | SELL | 02/04/2014 | AGL | ANGLO AMERICAN PLC | BUY | 01/04/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 09/04/2014 | CIL | February 2014 (Interim) | 09/04/2014 | EFFICIENT | February 2014 (Interim) | 11/04/2014 | OANDO | December 2013 (Final) | 11/04/2014 | PHUMELELA | January 2014 (Interim) | 11/04/2014 | PURPLE | February 2014 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | ZEDER | 07/04/14 | 23/04/14 | 05/05/14 | ZAR 0.0450 | ASTRAPAKP | 04/04/14 | 23/04/14 | 05/05/14 | ZAR 4.0049 | VIVIDEND | 04/04/14 | 23/04/14 | 05/05/14 | ZAR 0.2400 | NTC PREF | 01/04/14 | 30/04/14 | 12/05/14 | ZAR 3.5667 | ILRPREF1 | 31/03/14 | 16/04/14 | 29/04/14 | ZAR 12.2033 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | BEE-SASOL | 07/04/14 | 04/04/14 | 14/04/14 | ZAR 8.0000 | SASOL | 10/03/14 | 04/04/14 | 14/04/14 | ZAR 8.0000 | BIDVEST | 27/02/14 | 04/04/14 | 14/04/14 | ZAR 3.7800 | EXXARO | 06/03/14 | 04/04/14 | 14/04/14 | ZAR 3.1500 | STANBANK | 06/03/14 | 04/04/14 | 14/04/14 | ZAR 3.0000 |
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Upcoming AGMs** Code | Company Name | Date | Status | CND | Conduit Capital Ltd. | 09/04/2014 | Confirmed |
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