Just months after it achieved a three-year track record, the Mazi Capital MET Equity Fund has claimed a Raging Bull Award as the top-performing fund over three years among the funds in the South African equity general sub-category.
The fund returned 23.21 percent a year over the three years to the end of December. Over the same period, the sub-category benchmark, the FTSE/JSE All Share Index, returned 16.42 percent, according to ProfileData. The annual average return of all the South African equity general funds over the period was 14.46 percent.
Mazi Capital is a boutique asset manager founded by Malungelo Zilimbola in 2006. It is one of the first black-owned hedge fund management companies in South Africa.
Mazi is the Nguni word for cow, and it was chosen because, in Nguni culture, cattle are viewed as a symbol of sustainable wealth and prosperity.
In addition to the Equity Fund, the company manages hedge funds and institutional portfolios.
The fund is administered by Metropolitan Collective Investments, because Mazi Capital does not have its own unit trust licence, and so the fund has “MET” as part of its name. Metropolitan’s collective investments are likely to move to Momentum Collective Investments following the merger of Metropolitan and Momentum as MMI.
Mazi Capital is a long-term valuation-based manager, which means it buys shares when they are valued on the share market at less than what the asset manager determines is the value of the business and its future earnings.
There are many long-term valuation-based managers in South Africa, but Zilimbola says the robust and consistent application of Mazi Capital’s intensive bottom-up research process sets it apart.
A bottom-up manager considers each company on its fundamentals, rather than choosing companies because they are in a particular sector or industry.
Mazi seeks out companies that have a sustainable business model, quality management team and board of directors, a strong balance sheet and clarity on how they will generate cash, Zilimbola says.
In addition, the companies need to be defensive ones that will not fare badly during a market downturn, and they need to be reasonably priced relative to their fundamental value.
Zilimbola says the fund’s good performance over the past three years is a result of its exposure to the industrial sector, in particular, the healthcare and packaging sectors.
Among its top 10 holdings at the end of last year, the Equity Fund had seven percent of its portfolio in mass media company Naspers, six percent in financial services group Old Mutual, 5.8 percent in cellular network operator MTN, 5.1 percent in energy and chemical company Sasol, 4.8 percent in brewing and beverage company SABMiller, four percent in luxury goods holding company Richemont, 3.4 percent in mining and petroleum company BHP Billiton, 3.3 percent each in private hospital operators Lifecare Health and Netcare, and 2.9 percent in miner Anglo American.
Mazi Capital expects the South African economy to improve from its dismal performance in 2013, but the boutique manager will continue to be cautious in its application of its bottom-up investment approach, Zilimbola says.
The Equity Fund is Mazi Capital’s first of two unit trust funds, as it has recently launched a property fund.
The total expense ratio of the Mazi Capital Met Equity Fund at the end of November was 1.09 percent.