Manager Research

Recently, Rezco has provided clients with an update on a few important areas of the company’s business. We have been extensively monitoring both of these developments for some time and they were most recently covered during our Regulation 28 review of Rezco’s funds.

These updates relate to Alis Exchange (Alis) - the artificial intelligence platform that was set up around five years ago which is used in various capacities across the Rezco fund range. And secondly, changes to Rezco’s corporate structure that carry with them some important implications for investors. We will deal with both areas separately in this update.

ALIS

The Alis business was set up by Rezco five years ago. Since then, we have spent a considerable amount of time assessing the investment proposition of Alis. We have not been able to develop the required level of comfort in Alis as a standalone portfolio management solution and we remain circumspect of the Alis business. However, what has given us comfort in maintaining our current rating view has been that Rezco has and continues to use Alis as a portfolio management tool for idea generation and not a standalone portfolio management solution. To us, this shows that Rezco’s portfolio managers are still applying their investment acumen to all portfolio management decisions within the fund range, which we think is very important.

Corporate Structure Changes

The major change to Rezco’s corporate structure is the company’s decision to open a Luxembourg investment office. The current CEO and CIO, Rob Spanjaard will primarily be based in the Luxembourg office. This hasn’t come as a surprise to us and we have discussed this change extensively with Rezco. It has become relatively common place for South African asset managers to open global offices in an attempt to diversify away from South Africa and build globally resilient investment businesses.

Although Rob’s relocation to Luxembourg doesn’t represent a day-to-day concern for us, given that he hasn’t primarily been based in Johannesburg for some time, we do question whether or not it may dilute the company’s investment focus over the next decade. However, Rob will still spend time with the team in South Africa on a regular basis, which gives us some comfort.

Ultimately, given both announcements, we are still comfortable maintaining our current rating views on Rezco. That research view is driven by (1) the independent and thoughtful nature of their decision making process (2) the investor centric nature of those decisions and (3) the level of involvement of senior figures, like Rob, in key business and investment decisions.

Lastly, it is worth reiterating that we have discussed these developments at length with Rezco and we will continue to monitor any changes to the business going forward.

Although we have not changed any of our ratings, a summary of those ratings is shown below.