Manager Research

Abax:

Dylan Oelofse, who has been an integral part of the Abax fixed income team since 2015, has resigned. The team is responsible for managing the Nedgroup Flexible Income fund and for the fixed income portion of the Nedgroup Opportunity fund. His departure leaves a gap from a skillset and breadth of coverage point of view with the remaining team now consisting of only two dedicated fixed income investment staff – Rashaad Tayob and Dean Marks.

Abax hired Lara Dalmeyer to join their broader multi-asset and fixed income capability. Lara managed hedge funds at Corion Capital before joining Abax on the 1^st of August. While she has a strong background in quantitative analysis and risk management, her investment experience managing the Corion Prosperitas and Corion Equitas hedge funds has largely been to equities and derivatives.

The concern is that the loss of Dylan’s fixed income experience hasn’t been compensated for in the broader team.

Absa:

Absa appointed Arshad Joosub as a dedicated analyst to their property franchise in May. Arshad spent the last 7 years as an assistant listed property portfolio manager at Investec Wealth & Investment. Note: this is Investec’s private client and wealth management business, which is entirely separate from Investec Asset Management.

We have long been concerned that portfolio manager Fayyaz Mottiar is stretched too thin in having both full research and portfolio management responsibilities for the Absa Property Equity Fund. Also, he hasn’t had someone to bounce ideas off of since Errol Shear left the business in April 2017.

While Arshad is still relatively inexperienced, we view the addition to the team as a positive in as far as the support provided to Fayyaz.

Allan Gray:

Allan Gray enhanced their focus on environmental, social and governance (ESG) issues by changing the investment process to allow CIO Andrew Lapping to veto investments made by other portfolio managers in companies determined to have unethical business practices. They have also employed a dedicated analyst to research and investigate ESG related issues in companies. Given the current concerns around corporate governance in South Africa, we believe these changes will add to their process.

Ashburton:

Ashburton is undergoing material change in many areas of the business. Part of this is a material change to the investment team with the resignation of Paolo Senatore in March. Paolo was the CIO of Ashburton since 2013 and has been instrumental in building the investment philosophy and process. Paolo wanted to return to his roots as a private client portfolio manager and joined the team at Melville Douglas as their Global Strategist.

The business appointed deputy-CIO Nkareng Mpobane as Paolo’s replacement. She has been a portfolio manager and analyst at Ashburton since 2012 and has 14 years investment experience, much of which was in private client portfolio management at RMB Private Bank.

Due to the ongoing changes and the loss of Paolo’s investment experience we have retained our Tier 3 ratings across their product range.

Coronation:

The benchmark of the Coronation Property Equity fund has changed from the SA Listed Property Index (SAPY) to the All Property Index (ALPI) on the 1^st of August. See our commentary on the property benchmark here. The fund is benchmark cognisant so any changes to the benchmark affects the fund’s exposure. The concern with the new benchmark is the indirect offshore exposure, which increases from 38% in SAPY to almost 50% in the ALPI.

Mauro Longano has been added as a co-portfolio manager on the Coronation Strategic Income fund. He is a registered Chartered Accountant and joined Coronation in 2014 as an analyst in the fixed interest team. The fund is now co-managed by Nishan Maharaj as Head of Fixed Income, Mark Le Roux and Mauro. We have been monitoring the development of Coronation’s fixed interest team for a while. We have previously expressed concern around key person risk in Mark, but with Nishan gaining more experience and the addition of Mauro as a co-portfolio manager there is a lot more depth to the team which allows for succession planning.

We are carrying out our annual review in the coming weeks and will spend some time with Mauro.

Denker:

The benchmark on the SIM Value fund was changed from the All Share index to a composite index, consisting of 87.5% Capped Swix and 12.5% MSCI World. This change makes sense given the fund can invest up to 30% in offshore equities. Several peer funds have already moved to a similar composite benchmark.

Foord:

Foord Equity’s benchmark was changed from the All Share index to the Capped All Share index. Several equity managers have changed their benchmark to capped indices in response to the large exposure to Naspers in the uncapped indices. The rationale for switching to the capped benchmarks is that it is more representative of the investment universe.

The other change is in the investment team with Brian Davey having retired in March after 23 years with Foord. Brian was a co-portfolio manager on the domestic equities team. His experience is a loss to the team. As a positive, Pravarshan Murugasen re-joined the domestic equity team after graduating with an MBA from Oxford.

Marriott:

The Marriott Core Income fund has been reclassified from Asisa’s Multi-Asset Flexible category to the Multi-Asset Income category. In our view this change makes sense as the category more closely resembles the fund’s typical asset allocation profile.

Reitway:

Portfolio manager Grant Lowton resigned from the business to pursue other interests. Grant joined Reitway in 2014 and was one of three portfolio managers responsible for managing their global property funds. His responsibilities have been reallocated to the rest of the team, which includes new portfolio manager Garreth Elston, who joined the business in June. Garreth has portfolio management experience in local and global listed property and unlisted real estate, having served as property portfolio manager of Absa’s Specialist Equity portfolios from 2005-2008 and Altre’s (Alternative Real Estate Capital Management) Real Return and Global Property funds from 2015-2017. Despite the added depth to the team, we have retained our Tier 3 rating on the fund.

Rezco:

Rezco announced that Wally Gray will be stepping down from an executive to a non-executive role at the end of 2018, although he stays on as Chairman. Wally founded Rezco as a private client wealth manager over thirty-five years ago. While Wally is credited with establishing Rezco’s principles and culture, he hasn’t been involved in day to day investment decision making for some time, instead having filled more of a client facing role. We don’t see this change as having any impact on the investment team or process and have therefore decided to keep the ratings on the funds unchanged.