Manager Research

Following our recent annual review of the Rezco Value Trend fund, we have decided to change the rating on the fund from a Tier 2 to a Tier 1, our highest rating. 

We have always regarded the fund highly, with our Tier 2 rating indicating a good fund where we have minor concerns that we would like to monitor over time.  When we first carried out a due diligence on the Rezco Value Trend fund, we had three key concerns that we wanted to monitor and reassess over time.  We are pleased to see that all three areas have evolved and reached a point where we are comfortable to rate the fund a Tier 1.  The three issues were:

1. Business Viability: The business was still relatively small with Assets under Management (AuM) of just over R1bn when we first rated the fund.  Small boutiques need to reach a critical mass in order to survive.  We wanted to see the business increase its foothold in the market as it transitioned from a private client business to a more broad based retail and institutional asset manager (with the associated increase in costs).  It is pleasing to see that the business has grown (AuM is approaching R5bn) and broadened its client base to mitigate this risk to a large extent.

2. Operations: The operational side of the business was still being developed.  This was quite normal for a business going through the transition, but the trading and administration functions were a work in progress.  Significant work has been done to introduce the systems and processes expected of an asset manager with retail and institutional assets, and we were impressed with Rezco’s systems and risk controls.  They have clearly geared the business up to allow themselves to grow into a substantial asset manager.

3. Depth of Investment Team: Our view was that the investment decision making in the business was heavily reliant on the Chief Investment Officer, Rob Spanjaard.  While we regard Rob very highly from both an asset allocation and stock selection perspective, the level of support offered at the time was not ideal.  The investment team was small and relatively inexperienced.  The investment team has expanded since and the analysts in the team have now been with the business since 2013, so the team is starting to build.  This is one area Rezco is still developing with another analyst having just joined the business in September 2015 and the business is currently recruiting another analyst into the business.  The team is still heavily reliant on the CIO but he has significantly more support than two years ago when we first rated the fund.  We would expect the focus on developing and enhancing the team to remain.