Manager Research

Prudential have announced sweeping changes to the way they will approach the investment process for international assets.  The demand for direct offshore investment continues to grow and Prudential have taken steps to improve their offshore offering and the way they implement offshore in their local funds.  Prudential have never had global funds of their own to offer clients and, up until now, Prudential’s offshore exposure in their local funds has been through a selection of active offshore funds managed by global fund managers and through Exchange Traded Funds (ETFs). 

Prudential have established PGF Management Company, a Irish-domiciled fund management company, as well as the Prudential Global Funds ICAV (Irish Collective Asset Management Vehicle).  This has enabled Prudential to launch global funds (sub-funds of the ICAV) which will be used as building blocks by the South African investment team in their local funds and as stand-alone global products.  The offshore funds will charge an asset management fee of 0.65% p.a.

M&G Investments (which is the asset management subsidiary of Prudential plc) have been appointed as investment managers of the sub-funds.  Marc Beckenstrater, the recently departed Prudential SA Chief Investment Officer, has joined M&G’s Multi-Asset team in London and will be the portfolio manager for these new sub-funds, making the asset allocation and security selection calls with the support of the broader M&G team.  Effectively, the asset allocation decision of the split between SA and offshore assets will be made by the SA team, but after that Marc will make the asset allocation calls on the offshore portion.

Prudential have indicated that the restructuring of portfolios will begin soon and expect to be in line with the new process by the end of June 2017.

 

In our opinion, the changes are positive for Prudential and their clients. We have always raised concerns around their offshore implementation, with the view that while their asset allocation and regional calls were sound, the implementation through the broad range of funds and ETF was less than optimal.  They were hamstrung by the FSB’s requirements on the offshore funds that could be included in local unit trust funds, but this is no longer an issue with the creation of a specific range of global funds.  In addition, we rate Marc highly and his knowledge of the SA team and the funds will ensure a consistent implementation of their investment philosophy.  Therefore, we have retained the Tier 1 ratings on the funds affected, namely the Prudential Balanced Fund and the Prudential Inflation Plus fund.