Stanlib may reduce its range of collective investment schemes further, after completing a process last month that saw 15 funds being merged with eight funds, says Anthony Katakuzinos, the chief operating officer of Stanlib’s retail business.

He says that, over the next 12 months, Stanlib will examine its fund range to ascertain which funds should be closed. Stanlib believes it needs a focused range of funds that cater to investors’ requirements. 

The recently completed amalgamation process was motivated by the recognition that investment trends have changed over the past five years, Katakuzinos says. In the late 1990s and early 2000s, there had been a demand for funds that focused on specific investment styles and market sectors. However, this is no longer the case, and investors prefer funds with a general mandate, where the style and sector decisions are left to the discretion of fund managers, Katakuzinos says.

He says the funds that have been closed were no longer as popular with investors as they had been, and they were not growing. Merging them with other funds will create more efficiency and reduce the total expense ratios of the funds with which they were merged.

The amalgamation process, which was finalised on March 23, has resulted in the following changes to Stanlib’s suite of South African equity funds:

• The Capital Growth Fund (a general equity fund), Resources Fund, Financials Fund and Industrial Fund have been merged with the SA Equity Fund, while the Value Fund (also a general equity fund) has merged with the Equity Fund. Both the SA Equity Fund and the Equity Fund are general equity funds and are benchmarked against the FTSE/JSE Shareholder Weighted All Share Index, but they have different investment strategies.

• The Shari’ah Equity Fund (general equity) has been merged with the Multi-Manager Shari’ah Equity Balanced Fund of Funds, a multi-asset high-equity fund. Stanlib says the management of a sharia fund requires the appointment of a sharia investment board, and that it is more efficient to participate in the sharia offering through a multi-managed fund.

The following changes have been made to Stanlib’s domestic multi-asset funds:

• The Aggressive Fund of Funds (a flexible fund) has been merged with the high-equity Balanced Fund. Stanlib says that both funds invest in similar instruments and have the same objectives, as well as the same risk exposure. The only key difference is the frequencies of the income distributions. 

• The Moderate Fund of Funds, Inflation Plus 3% Fund (both medium-equity funds), Moderately Aggressive Fund of Funds (high equity) and Balanced Trustees Fund of Funds (low equity) have been merged with the Absolute Plus Fund, a medium-equity fund. Stanlib says these funds invest in similar instruments and have the same objective. The four funds have been closed to remove duplication and simplify the offering.

• In the low-equity sub-category, the Moderately Conservative Fund of Funds and the Conservative Fund of Funds have been merged with the Balanced Cautious Fund. Stanlib says these funds have similar investment objectives and risk profiles. 

Stanlib’s Institutional Property Fund has been merged with the Property Income Fund, a real estate general fund available to retail investors. Stanlib says both funds invest in similar instruments and have similar objectives, as well as the same risk exposure. The merger will remove duplication and promote efficiency.

The Euro Currency Fund of Funds, a regional interest-bearing short-term fund, has been merged with the US Dollar Currency Fund of Funds. Stanlib says most investors prefer to invest in the United States dollar. It will offer the full range of funds for global currencies only via foreign-currency-denominated funds.

The accompanying tables show performance to the end of December last year (according to ProfileData) of the funds that have been closed ITable 1), and performance to the end of March this year of the funds into which the closed funds were merged (Table 2).

Separate teams

Despite the recent mergers, there are a number of Stanlib funds in some unit trust sub-categories. In the multi-asset high-equity sub-category, for example, there are six Stanlib funds. This is because Stanlib offers single-manager actively managed funds, a suite of multi-managed funds and index-tracking funds. 

Katakuzinos says these three types of fund are run by separate teams and are designed to meet different investment needs. 

Stanlib intends to add to its range of passive funds, because it sees this as a growth area, he says.

Ryk de Klerk, an investment analyst and co-founder of the PlexCrown Fund Ratings, says it makes sense for an asset 
manager to offer investors fewer funds with clearly defined investment objectives and mandates. This also benefits the manager, because having too many funds creates the risk that less-popular funds will be “neglected”.

De Klerk says the reduction in the number of funds will not automatically result in Stanlib improving its position in the PlexCrown Fund Ratings. Asset managers with a large range of funds, such as Coronation and Nedgroup Investments, have done well in the ratings. 

The PlexCrown methodology is such that the number of qualifying funds is not the key issue in how a manager performs overall in the ratings, De Klerk says.