SIM fund successfully feeds into great ideas
SIM GLOBAL BEST IDEAS FEEDER FUND (A class)
Raging Bull Award for the Best Foreign (South African-domiciled) Equity Fund – the top-performing fund on straight performance in the foreign equity general sub-category over three years to December 31, 2011
Despite one of its worst performance years ever, a fund with a focus on the best investment ideas around the world took the honours as the top-performing foreign general equity fund over the three-year period at this week’s Raging Bull Awards ceremony.
The Sanlam Investment Management (SIM) Global Best Ideas Feeder Fund managed by Kokkie Kooyman was the top performer in this sub-category with an average return of 9.5 percent a year over three years to the end of December 31, 2011 (according to ProfileData).
The feeder fund invests in a US-dollar denominated fund, the Sanlam Global Best Ideas Fund, which is managed by Kooyman and domiciled in Ireland.
Kooyman achieved this top average annual return for the feeder fund despite what he describes as the Global Best Ideas Fund’s worst year ever in 2011.
Kooyman says the Global Best Ideas Fund generally has a higher weighting in smaller shares and shares in emerging markets as these are often the most mis-priced and offer the potential to earn good returns when their prices return to fair value.
He says most of the shares the fund owns are relatively unknown to investors around the world. When the market as a whole gets a fright – as it did last year with the unfolding debt crisis in Europe – there are no buyers for these little-known shares and their prices fall heavily, he says.
Kooyman says the Global Best Ideas Fund also had a bad year in 2008, but this was followed by an excellent year in 2009 when the fund was 78 percent up on the previous year.
There are already signs that the fund will likewise have a good year in 2012, he says.
Strong performance in 2009 and 2010 enabled the feeder fund to beat its benchmark, the Morgan Stanley Capital World Index, by an average of 5.4 percentage points a year over the three years to the end of 2011.
Kooyman, who also manages the Sanlam Global Financial Fund, is known for his expertise in financial shares.
Not surprisingly, a large chunk of the Global Best Ideas Fund is in financial shares around the world: the fund had about 50 percent of its assets in this sector at the end of December last year.
A financial share that proved to be one of Kooyman’s best ideas was Adira Dinamika, an Indonesian company that provides finance to people buying motorcycles.
“It is one of the best-run companies I have come across and pays an extraordinary dividend. It was sold down aggressively in 2008 and has gone up 760 percent over the past three years, while shares in the FTSE/JSE All Share index and the S&P500 index (the top 500 shares in the United States) have appreciated by only about 12 percent over this period,” he says.
Another financial share Kooyman invested in over the past three years was the US-based World Acceptance Corporation. The company provides small loans to Americans and Mexicans with limited access to other sources of income.
Kooyman says he bought this share only last year, but it has returned 180 percent over the past three years, with most of that earned in 2011.
Among his other best ideas, Kooyman cites a Chinese share, DBA Telecommunications, which has returned 314 percent over the past three years. DBA installs vending machines for smart cards, which are increasingly being used as China becomes more automated.
The Global Best Ideas Feeder Fund’s latest fact sheet notes that while a number of shares generated good performance for the fund last year, their gains were wiped out by substantial share price falls in China and India particularly.
Kooyman says the main reason prices fell sharply in the last quarter of last year was around fears that these high-growth economies would slump under the pressure of higher interest rates caused by food inflation and the fall in exports to Europe and the US.
Food inflation was a lot stronger than anticipated and kept going for a lot longer. This led to both countries’ central banks hiking interest rates, Kooyman says.
One of two big changes Kooyman made to the Global Best Ideas Fund last year was to increase its exposure to financial shares from its usual 35 percent to 50 percent.
“These shares were so sold down, they screamed value to us,” he says.
The other change Kooyman made was to increase the fund’s exposure to larger companies such as Microsoft.
Kooyman says bigger companies have also been sold down to such an extent that their risk is very low, and he has decided to invest in these companies to counterbalance the risks that the smaller companies present.
Historically, the fund has been about 65 percent invested in smaller shares and only 35 percent in larger companies. The holdings in larger companies now represent over 50 percent of the fund, he says.
Kooyman says smaller companies are at risk during uncertain times because funding may dry up.
He says he has also tweaked the ratio of emerging market to developed market shares from its typical 60:40 percent ratio to 40:60 percent. – Laura du Preez