Manager Research

We had a review meeting with ABSA Asset Management recently, covering their absolute return, multi-asset, equity and listed property capabilities. Following our engagements with the business we have downgraded the ABSA Property Equity Fund from Tier 2 to Tier 3. Our positive rating on the fund prior was informed by portfolio manager Fayyaz Mottiar’s insight into the property market and his willingness and ability to implement his views with high conviction (which is rare in the property space). However, our concerns are primarily driven by a deterioration in our views around the business and the portfolio construction process.

The business has been in a state of flux for a while now, and we expect more structural changes going forward. Business changes can have a material impact on investor outcomes and serves as a distraction to the investment process. The ongoing changes in addition to a relatively new and untested remuneration structure doesn’t give us confidence that the current team will be retained over the investment horizon of the fund.

In addition, while Fayyaz has insight into the listed property sector we find his portfolio construction process increasingly tactical and opportunistic, which seems detached from the detailed research he does on stocks. This has not only lead to a concentrated portfolio at times (9 shares in December 2018 for example) but also in a high exposure to singular return drivers like the Resilient group of companies in 2017 and 2018. The difficulty in evaluating a process like this, is that we struggle to separate skill from luck, which brings the repeatability of the process into question.

The table below summarises our ratings on the funds: