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Fund manager insights:
Many investors are concerned about where future returns will come from.
Locally, political uncertainty, financially depleted state-owned enterprises and weak GDP growth remain top of mind, says Paul Bosman, fund manager.
Globally, the dominant narrative is that the prolonged era of accommodative monetary policy in developed markets is gradually coming to an end.
“Although we understand these concerns, we don’t prescribe to any single market view – and we certainly don’t try to time market movements,” says Bosman.
“We maintain a long-term outlook and continue to find new opportunities for inclusion in our funds across all asset classes. When these securities will reprice to the benefit of our clients is not possible to predict – it could be in 2018 or it could take a while longer.”
He explains that they are prudent, long-term investors. “Across the various asset classes and the funds we manage, we look for instruments with inherent quality trading at lower prices or higher yields than our estimates of their intrinsic value.”
According to Bosman this is called the “3 M approach” – they look to invest in companies that have a moat (a sustainable competitive advantage), good management, and that is trading at a margin of safety.
“We apply this process consistently, always starting from the bottom up, regardless of dominant market narratives or prevailing sentiment,” he adds.
Bosman says that although past returns are no guarantee of future returns, the fund maintains the investment philosophy and process that generated the satisfactory results for their clients in the past.
The PSG Balanced Fund is suited to long-term savings, as it can hold up to 75% in equities to achieve its objective of providing long-term capital growth with a reasonable level of income. It also invests in bonds, property and cash, both locally and in foreign markets (up to a maximum of 25%).
Bosman says given that the fund is well diversified, but maintains significant exposure to growth assets, it offers a robust home for retirement savings.
It also complies with Regulation 28 of the Pension Funds Act. Investors who consider this fund should have an investment horizon of five years or longer and should be comfortable with moderate market fluctuations, he explains.
Why finweek would consider adding it:
The fund has returned 14.5% per year since its inception. It was named the top risk-adjusted performer in the South African Multi Asset High Equity category over five years at the 2017 Raging Bull Awards, and the Best Aggressive Allocation Fund at the 2017 Morningstar Awards.
It remains invested in quality equities at attractive valuations – both locally and offshore – as well as in fixed-income instruments with attractive real yields.
This gives investors in the fund a good chance of achieving benchmark-beating returns over an appropriate time horizon of at least five years.
This article originally appeared in the 1 February edition of finweek. Buy and download the magazine here.
