Manager Research

In the second quarter of 2021 Taquanta and Ngwedi Investment Managers announced that they had engaged in a transaction which effectively merged the two businesses. The combined entity will operate under the Taquanta brand with the key outcome of the deal being that the Ngwedi investment team has joined Taquanta.

While this deal has the potential to produce positive synergies and reduce concerns regarding succession within the existing Taquanta team, we remain cautious on the outcome of this deal and the impact it could have on the newly combined business. We are generally sceptical of corporate actions within asset managers where there could be negative impacts on incentives, teams, processes, or product offerings.

With this caution in mind, we have placed the Nedgroup Core Income Fund, for which Taquanta is the investment manager, under review. There are a number of business related items which still require resolution, and we will await clarity on these before updating our rating on the fund.  This is likely to be early in 2022.

Nedgroup Core Funds - Benchmark Changes

The Nedgroup Investments Core Accelerated, Nedgroup Investments Core Diversified and Nedgroup Investments Core Guarded Funds have historically used inflation plus targets for their benchmarks. Nedgroup recently reviewed the funds’ benchmarks and determined that these inflation plus targets are long-term return objectives and are not appropriate to use as benchmarks for the funds.

From 15 August 2021 the Core range’s inflation plus targets will no longer be used as the published benchmarks for the range. They will use the ASISA category averages as the benchmarks going forward as peers are exposed to the same market performance and follow similar mandates. They believe that because the returns are net of fees, they also represent a more appropriate benchmark. We show the old and new benchmarks in table 1 below.

Table 1: Nedgroup Core Funds Benchmark Changes

While we are not generally in favour of peer relative benchmarks, this change does represent a move to a more directly related and measurable benchmark than an inflation plus target. A strength of the Nedgroup Core range is their strategic asset allocation process which aims to optimise inflation plus returns for investors. A concern with this benchmark change is the potential that this alters their optimisation process. We have tested this with Nedgroup and they have assured us that there will be no impact to the process as a result of the changes to these three funds. They will still be targeting the same return objectives when setting their strategic asset allocation structure.

In addition, each fund holds an allocation to Nedgroup Core Income fund where we have withdrawn the rating.  Given these indirect holdings all being below 10%, we have not made any changes to the fund ratings but will continue to re-evaluate due to the changes at Taquanta.

We have retained the Tier 1 ratings across the three funds.