Tuesday, 14 July 2015 - 20:00

 

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Seed Weekly - The Seed Flexible Fund

We recently celebrated the Seed Flexible Fund’s five year track record and this week I will be shedding some light on its ins and outs. The fund is a multi-managed unit trust that targets a return of 5% pa after inflation over rolling 5 year periods. The Fund sits in the ASISA South Africa Multi Asset High Equity category alongside most balanced unit trusts.

Process and Asset Allocation

The investment objective is to provide investors with long term capital growth over a full investment period (5 years). Third party specialist managers are appointed to manage segregate mandates, including strategies that are not otherwise available to retail investors. The Fund is managed as a Regulation 28 compliant Fund and is suitable for investors in retirement products. The net equity weighting (including international equity) will never exceed 75% of the total market value of the fund. The Fund’s asset allocation is determined using Seed’s proprietary developed Tactical Asset Allocation (TAA) process, where those asset classes that offer the best risk/return prospects are over weighted versus a Strategic Asset Allocation (SAA) and vice versa. We do not take an “all or nothing approach” and therefore expect more consistent risk adjusted returns than strategies that aren’t always diversified across asset classes. Below is a graph depicting our current weights (as at 30 June 2015) in each of the asset classes (the blue bars) vs our historic highs and lows (green and red lines.)

With local equity being on the expensive side, it makes sense that our allocation here is close to the historic minimum. On the local property side we are overweight (vs the benchmark) while being underweight local bonds and cash. We are almost fully invested in offshore (including Africa) assets. Fund Metrics

Below is a risk reward plot showing the Fund vs its peers and some larger funds in the range. What is notable is how the Fund differs to its peers. It is clear that for similar returns (the y-axis), investors in the Seed Flexible Fund have experienced less risk. Some other advantages, which has been extensively covered in previous articles, includes our size (being relatively small (R792m) vs many peers (10 funds in excess of R10bn, with the largest one over R100bn)) as well as the fact that we make use of a multi-manager process.

Source: Morningstar Direct

The Fund’s performance has been excellent in the recent past (3 and 1 year) mainly due to equities and property generating returns well in excess of their long term averages. These asset classes comprise 70% of the Fund’s allocation and therefore have had a large impact on performance.

While past performance is no indication of future returns, we pride ourselves in taking utmost care by utilising qualitative and quantitative research, combined with investment experience, to make prudent investment decisions.

Kind regards,

Renier Hugo

Tel 021 914 4966
Fax 021 914 4912
Email info@seedinvestments.co.za

Seed is hiring: Click through to our LinkedIn profiles to see vacancies at Seed Investment Consultants and Seed Analytics

www.seedinvestments.co.za

Tue, 14 Jul 2015

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