Manager Research

SIM has changed the portfolio manager on this fund after a period of underperformance made them question the nature of the fund vs what clients were expecting.  There were two inherent biases in the fund:  financials and emerging markets.  This caused the fund to have high volatility and also be exposed to a greater degree of risk than clients expected.  For example, a number of small cap Chinese shares were significant contributors to poor performance where their financial results proved to be unreliable.  The SIM Global team has learned a hard lesson from this and has made the changes to align the fund with client expectations going forward. Typically we would have an issue with this, where clients start to dictate fund management approaches.  In this case however it seems appropriate.  The fund will retain its high conviction approach with limited counters (40-50 typically).  The key changes to the fund have been the fund manager (Douw Steenekamp replaces Kokkie Kooyman), and there have been a number of self-imposed risk limits set.  The fund will limit exposure to emerging markets to 15%, and there will be small limits on the exposure within regions/countries relative to the benchmark (MSCI World).  We realise these are corrective actions but do also raise concerns where a fund manager needs to limit themselves in this way.  It does make sense in light of client expectations from the fund going forward – it will be more aligned to a typical global equity fund with less inherent bias.  We do worry that  the lower performance target and more conservative portfolio construction allied to this may disappoint clients in future as it is still a relatively aggressive equity fund.  On a positive note, the balance of the team have remained consistent and we will continue to monitor the fund and the extent to which the team can rebuild around Douw.