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Fund in Focus: Strength derived from diversity

Jul 16 2018 13:01
Timothy Rangongo

Fund manager insights:

While strength lies in numbers for some, Mazi Capital’s Prime Equity Fund counts its diverse team of just 30 as one of its secret weapons to sustaining high long-term capital growth.

“Our strength lies in the diversity of our team. We are a black-owned proudly South African asset manager that actively pursues diversity. 

This helps in affording us varying approaches to investment as we all don’t necessarily think the same,” says one of the fund’s portfolio managers, Francois Olivier.

The portfolio grew by close to 20% from R836m at the end of May to a little over R1bn at the time of publication, despite a difficult start to the year for equity markets, with the positive sentiment resulting from the political changes in December being eclipsed by fears of a global trade war due to the utterances of certain world leaders.

Over the first quarter of 2018 the fund lost 5.7% yet outperformed the benchmark by 1.1% (gross of fees). Olivier attributes this to the fund’s exposure to specific retail companies (Cashbuild – held since inception – TFG and Truworths). 

The high court judgment in favour of the last two retailers against the National Credit Regulator and the department of trade and industry on improving access to credit by relaxing affordability assessment regulations had a positive impact.

Mazi achieved a 12.28% annualised return over the past five years by employing a long-term valuation-driven approach in selecting investments for their clients – they seek investments that trade below their fundamental value and hold that the first step to long-term investment success is by avoiding overpayment upfront.

A volatile first quarter for South African equities marred by revelations (actual and alleged) of market manipulation, among others, did not impair the fund’s performance.

This was thanks to its expeditious reaction time (offloading Steinhoff the minute former CEO Markus Jooste admitted to making “big mistakes”). 

It also drowned out noise by sticking with Aspen throughout fears that the company also dabbled in cooking numbers, which dragged the pharmaceutical’s share price down by over 7% – only to recover upon posting good results.

The fund is currently heavy on consumer services (34.68%) and financials (34.32%), followed by resources (11.83%) – and intends to be fully invested in local equities, forgoing its 25% maximum offshore exposure plus 5% for Africa.

Why finweek would consider adding it:

The fund lives up to its Nguni name, which means cow, by producing rich and creamy capital growth despite the high risk assumed.

Apart from maintaining a four-star rating and 21 out of 188 ranking by Morningstar, it has scooped Morningstar’s best SA equity fund award three times, in addition to the Raging Bull and ABSIP Best Performing Fund Manager awards.

This article originally appeared in the 19 July edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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