Raging Bull Award for the Best South African Multi-asset Equity Fund on a Risk-adjusted Basis over five years to December 31, 2018
The Sanlam Multi Managed Conservative Fund of Funds is a low-equity multi-asset fund that was launched in August 2010. Its December 2018 minimum disclosure document indicates that it holds R343 million in assets.
As a fund of funds, it invests in a carefully chosen suite of unit trust funds using “a combination of the best investment expertise within South Africa and abroad”.
Over five years to December 31, 2018 it was among the top performers, having taken the lowest investment risk, in all three multi-asset equity subcategories (high equity, medium equity and low equity), returning an average of 7.35% a year. Consumer Price Index (CPI) inflation averaged 5.44% over the period.
Personal Finance asked Paul Wilson, Chief Investment Officer at Sanlam Investments Multi-Manager, about the fund’s investment strategy and performance.
Please outline your company's investment philosophy/strategy in relation to this fund.
The fund is managed to provide clients with a very stable, consistent return profile. This is implemented through our absolute return philosophy in which the key is finding asymmetrical investments which protect well in market downturns but have the ability to capture some upside. The target of the portfolio is CPI + 2%, which also informs the risk budget we set for the fund. This ensures that the targeted minimum return clients achieve over any rolling 12-month period is three quarters of the return on cash (100% success rate over the last five years). We also target no negative returns over any quarter (98% success rate over the last five years). This risk budget assists in informing how much we can allocate to risk assets to enhance returns. However, capital preservation plays a far more critical role, so before increasing risk we need to be extremely convicted.
To what do you attribute the fund's outperformance in 2018?
The outperformance is mainly the result of the fund’s ability to protect against adverse market conditions, such as the ones we experienced in 2018. The approximately 60% exposure to flexible-income strategies through 2018 was a key component in protecting against downside events and keeping volatility low. The manager selection in the low-equity area was good - the managers are selected according to their ability to protect during market downturns.
Were there any particular stand-outs in the portfolio?
The stand-outs came mainly via smaller managers who form part of our Sanlam Select initiative. Within the Flexible Income component of the fund the top performer was Terebinth (Sanlam Select Strategic Income Fund), while Prescient also performed well. Within the low equity space, Truffle (Sanlam Select Wealth Protector Fund) was the top-performing fund in the low-equity category throughout 2018 while Matrix (Sanlam Select Defensive Balanced Fund) was also a top-quartile performer.
How are you positioning your fund for the year ahead?
The fund is currently positioned with a slight risk-on tilt relative to its history. Bottom-up valuations on many domestic asset classes, such as domestic property, bonds and equity, look more compelling than they have in a while. However, there still remains a fair amount of risk/negative sentiment from a macro perspective and as a result these positions are not large. If we feel more comfortable that certain risks are declining (such as trade wars, Brexit and the SA economic and political situation) then that allocation may increase.