Rene Globler from Investec collects the Raging Bull for the Investec GSF Global Strategic Managed Fund from Plexus chairman Prieur du Plessis and PlexCrown Fund Ratings director Ryk de Klerk.


Raging Bull Award for the Best Offshore Global Asset Allocation Fund – the top-performing fund on a risk-adjusted basis over five years to December 31, 2011

A fund with a flexible approach to allocating assets based on its long-term view of how companies will perform, currencies, and trends that drive share prices collected the Raging Bull Award for the top-performing offshore global asset allocation fund.

The Investec GSF Global Strategic Managed Fund was the top performer on a risk-adjusted basis among foreign currency-denominated funds that invest across asset classes and countries and that are registered with the Financial Services Board to be marketed to South Africans.

The fund returned 2.28 percent a year over five years in rand terms and was ranked second among the 17 funds in its sector (according to ProfileData).

The fund achieved the top PlexCrown rating of five PlexCrowns because of its consistently good returns and low volatility.

Philip Saunders, the London-based manager of the fund, says the Global Strategic Managed Fund’s fairly flexible and active approach to investing has been helpful over the past five testing years.

The fund has been able to take its equity exposure as low as 50 percent of the fund in 2008 and as high as 75 percent in 2009, despite its benchmark being made up of 60 percent equities and 40 percent bonds.

“Our virtue over the past five years has been looking different to the benchmark,” Saunders says.

He says the fund decided in 2008 to move into investment-grade corporate bonds when these bonds began to offer much higher yields than government bonds. The decision proved to be a bad one in the wake of the credit crisis that year.

“We did not expect a 1930s scenario to be priced in. It was painful for us in the second half of 2008, but we continued to build our positions and the good results of that came through powerfully over the next few years,” Saunders says.

The Global Strategic Managed Fund had quite high levels of equity in early September 2010 because Investec did not agree with the consensus view at the time that there would be a double-dip recession. This exposure was cut back again in April 2011 prior to the volatility induced by continuing eurozone problems.

Saunders says investors became overly pessimistic in the latter part of last year, despite evidence that good company profits would continue. Share prices relative to expected company profits fell sharply and government bond yields also fell sharply.

As a result, the fund significantly increased its equity exposure and reduced its government bond exposure.

Investec takes a long-term view on how it should allocate across the asset classes and adjusts this to take account of shorter-term market movements, Saunders says.

Macro-economic factors, natural disasters, policy mistakes and overbought or oversold markets can all lead to shorter-term volatility. Saunders and his team make decisions on how to react to these factors.

Asset allocation, however, is only one way in which the fund can generate returns above the benchmark, Saunders says. Another way is through careful selection of stocks and other securities.

Investec chooses its shares and other securities from the bottom up – that is, by analysing each company’s fundamentals, Saunders says.

This is in contrast to a top-down process, where a manager decides how much to allocate to each of the market sectors it believes will out-perform and then chooses shares within those sectors accordingly.

Despite an essentially bottom-up approach, Investec also considers securities that fit within investment themes that it believes will out-perform, Saunders says.

Some of the themes Investec used over the past five years are listed private equity, absolute return fixed-income programmes, index-linked bonds and small-cap stocks.

Focusing on the fundamentals of the shares in which the fund invests helped Investec to moderate the fund’s exposure to emerging markets after they performed strongly in 2010, Saunders says.

Last year the fund benefited from global franchises and technology shares, he says.

Another tool in Investec’s return-enhancing kit is currency management. The exposure to currencies in which the fund invests is managed separately to the underlying assets, Saunders says. In this way the impact on securities of changes in currency values can be managed. – Laura du Preez