Manager Research

We have recently completed our review of the Rezco Value Trend, Managed Plus, Stable and Equity funds. We have maintained the Tier 1 rating on the Rezco Equity Fund and have downgraded the Rezco Value Trend, Managed Plus and Stable funds to Tier 2.

As a reminder, a Tier 2 rated fund is still a good fund and remains investable, but there are some concerns which we are monitoring.

Rezco is an independent business with a supportive shareholding structure that creates alignment between investors and the investment team. Rezco’s CIO, Rob Spanjaard, maintains a significant stake in the business and is still a key individual. However, it is pleasing to see that Simon Sylvester has started to take on more responsibility and is now the CEO of the business. Previously, Rob held both the CIO and CEO positions, and we have been critical of this in the past.

Since our last review of the fund range, we have seen some changes to the team dynamic. Most notably, Rob has relocated to Luxembourg although he has maintained portfolio management responsibilities. Ultimately, we were able to gain comfort that his relocation will not impact the quality of the investment process.

During this review, we have become somewhat more circumspect about the growth trajectory of the business and the headwinds that smaller asset management businesses in South Africa face when trying to reach a sustainable level of assets under management. Ultimately, over the last two years the business has struggled to grow following a weak performance cycle and the retail distribution strategy has struggled to gain traction.

For the most part, we have maintained a positive view on Rezco’s investment process. Rob, Simon and the investment team have demonstrated that they understand how to manage both local equity and multi-asset mandates with a protection mindset that is quite rare in the South African market.

Where we have become more sceptical is in relation to the offshore investment process that the multi-asset funds follow. A few years ago, Rezco started building out an artificial intelligence (AI) investment capability which has developed into a separate business called Alis. Alis is a significant input into the offshore investment process used by the multi-asset funds – Value Trend, Managed Plus and Stable.

Over the last four years, Alis, and by virtue the global investment process, has been through several iterations and while we have been comfortable to give Rezco benefit of the doubt in the past, it has become increasingly difficult for us to develop a level of comfort around the expected investment outcome of the offshore portion of the multi-asset funds over a reasonable time period.

Given that the offshore portion of the multi-asset funds is an important determinant of the ability of the multi-asset funds to deliver competitive returns for investors, gaining comfort on the investment process is important.

Ultimately, we continue to maintain a positive view on Rezco’s business structure, although we do recognize that the business faces growth headwinds. In addition, we continue to believe that Rezco’s core edge lies in both asset allocation and a long standing and clear SA equity investment process. However, continued changes to the offshore investment process have made us more circumspect about expected outcomes. For those reasons, we have decided to downgrade the multi-asset funds.

It is worth highlighting that the Equity fund is an SA-only equity fund. We have not seen changes to the fund’s investment process and Rezco has continued to demonstrate a strong ability to manage the fund. As a result, we were comfortable maintaining the Tier 1 rating.

The table below highlights the changes to our current rating views.