Manager Research
all members of our manager research team have over ten years of investment experience.
Following our recent review of Prescient's investment capability, we have retained the majority of the ratings on the funds as before. However, there are two funds which have been upgraded to Tier 2 following the review.
Prescient have displayed concerted effort to simplify, organise and align the business which is a significant positive looking ahead. They have moved to close non-core strategies and improve the culture across the business. However, we retain some concerns which do reduce our confidence levels in general. Specifically: We have seen significant change in the organisation over time. With the current shareholding structure in place for a short period, we would prefer a longer horizon to assess and to build comfort in the stability of the business. We also have lingering questions around culture and leadership which seems to impact the business and its ability to attract and retain staff. This impacts our outlook on staff retention as well as succession. Ultimately, we see the business moving in the right direction, (especially over the past 2 years), but we remain watchful to ensure that the corporate structure and incentives will enable long term investing and success for clients as well as there being a measure of stability going forward.
Income
Prescient remain an income centric business with a clear edge in this area of investment. As such we have retained our positive ratings for both the Prescient Income Provider Fund and the Prescient Global Income Provider Fund (feeder included). We are comfortable that the investment proposition is underpinned by a strong risk management process and significantly experienced key decision-maker in Guy Toms. We remain more comfortable with the local income process than global. We don’t see the Prescient Global Income Provider Fund as a genuine global fund given its more SA-focussed client base and process. The resulting research breadth and depth cause us to be more cautious in recommending this particular offering.
Multi-Asset
Prescient’s multi-asset offering has evolved over the past few years as Bastian Teichgreeber has rebuilt both the process and team. The various multi-asset funds have now been brought into a singular overarching process. This was not always the case and it resulted in funds managed by the same team having fundamentally different processes. We show an outline of the fund range in the table below:
Fund | Sector | CPI Target | Return Target |
Prescient Balanced Fund | MA High Equity | CPI+5% | Peer Relative |
Prescient Absolute Balanced Fund | MA High Equity | CPI+5% | Absolute Return |
Prescient Absolute Defensive Fund | MA Low Equity | CPI+4% | Absolute Return |
Prescient Positive Return Quantplus Fund | MA Medium Equity | CPI+3% | Zero 12m loss |
The multi-asset funds now all start with a strategic asset allocation and then deviate from this only when the team identifies high conviction opportunities. We find that the process is robust, encompasses all major segments and has few observable gaps. Bastian and his team were impressive in their ability to answer questions and be tested and were also honest about outstanding gaps. The improvements since the last review are encouraging. Specifically, the attention to detail, risk awareness and controls are strong. They are operating within their circle of competence (income, risk management and derivatives). In addition, they display a client-centric approach with a proactive view on fees and costs and team culture appears to be building positively.
The key differentiator across the multi-asset fund range is the use of portable alpha to deliver a more consistent alpha profile than peers are able to generate. This means that these funds have a relatively high probability of giving an investor index plus returns rather than the standard index minus costs that a passive option offers.
We have three concerns across the multi-asset funds which result in them missing out on a Tier 1 rating. Firstly, we need to see this process bedded down over an extended period of time. This will let us assess the value-add potential of the asset allocation process through the cycle. Secondly, we need to see the same level of diligence that has been applied to the local portion of the portfolio applied to offshore. Finally, there is key man risk in Bastian. It is clear to us that Bastian has driven the direction of the multi-asset team and built a strong culture within the group.
These concerns result in Tier 2 ratings across the locally based multi-asset funds. This means that we recommend these funds to clients with an awareness of the concerns raised.
We retain a Tier 3 rating on the Prescient Global Positive Return Fund. We have a very low level of comfort in the objectives, viability and management process of the fund and as such cannot recommend to clients.
The rating for the Prescient Global Equity Fund (and feeder) has been withdrawn following fundamental changes to the process and team that manages this fund.
The table below provides a summary of the ratings on the funds:
Fund | Old Rating | New Rating |
Prescient Income Provider Fund | Tier 1 | Tier 1 |
Prescient Positive Return QuantPlus Fund | Tier 2 | Tier 2 |
Prescient Balanced Fund | Tier 2 | Tier 2 |
Prescient Absolute Defensive Fund | Tier 3 | Tier 2 |
Prescient Absolute Balanced Fund | Tier 3 | Tier 2 |
Prescient Global Income Provider Fund | Tier 2 | Tier 2 |
Prescient Global Income Provider Feeder Fund | Tier 2 | Tier 2 |
Prescient Global Positive Return Fund | Tier 3 | Tier 3 |
Prescient Global Equity Fund | Tier 3 | Withdrawn |
Prescient Global Equity Feeder Fund | Tier 3 | Withdrawn |
Prescient Investment Management Rating Updates
12 Feb 2020