This article was first published in the 1st quarter 2017 edition of Personal Finance magazine.
More than R2 trillion was invested in 1 461 unit trust funds at the end of the third quarter of 2016. By the end of the second quarter, about R496 billion – a quarter of the total – was invested in just 10 funds.
Why have a small group of funds attracted an extraordinarily large amount of money? And have they delivered good returns for their investors? We took a snapshot of their performance at the end of September 2016 and considered how these 10 super-sized funds measured up on returns over the past decade and on three different fund ratings.
In fact, they didn’t fare too badly. All the funds that have a 10-year track record have average returns over this period in the top quartile (in other words, they are in the top 25 percent) of funds in their sub-categories, as have those with a seven-year track record. Over five years, three of the funds failed to achieve top-quartile performance, but over three years, six of the 10 did not make the top quartile.
Although in relative terms the 10 biggest funds’ shorter-term performance is generally flagging, using shorter terms to judge performance relative to size is dangerous. Returns have been more muted generally over the latter part of the past 10 years. Historical real (after-inflation) returns from equities, for example, averaged 7.5 percent a year from 1929 to the end of 2015, according to figures published in Old Mutual’s MacroSolutions Long-term Perspectives 2016. However, returns from equities over the next five years, starting last year, are expected to average just 4.5 percent.
The Old Mutual publication shows that long-term real returns from equities over the five years to the end of 2015 were seven percent a year, while over 10 years they were 7.6 percent a year. Real bond and cash returns were similarly lower over five years (0.5 percent a year from bonds and 0.2 percent from cash) than they were over 10 years (0.9 percent a year from bonds and 1.2 percent from cash).
Global equities and global bonds, however, returned more after inflation over the past five years (21.5 percent from global equities and 12.7 percent from global bonds in United States dollar terms) than they did over 10 years (8.9 percent from global equities and 7.1 percent from global bonds).
MacroSolutions has constructed a Balanced Index, with a static asset allocation of 45 percent to equities, 20 percent to global equities, 20 percent to local bonds, five percent to global bonds, 7.5 percent to South African cash and 2.5 percent to gold. Using relevant indices for these allocations, the index shows an average real return, from 1929 to 2015, of 5.8 percent. But it predicts a real return of about 3.8 percent over the five years beginning in 2016. The index showed better returns (8.6 percent a year) over the past five years than over the past 10 years (7.2 percent). Over the five years to the end of 2015, inflation was 5.6 percent, while over 10 years it was six percent.
Two of the three ratings used in this survey, PlexCrown and Morningstar, are purely quantitative and based on risk-adjusted measures of past performance. The Fundhouse rating is a so-called “qualitative” rating, based on its own findings on factors it believes will affect a fund’s future performance, rather than just looking at the numbers. This makes it a forward-looking, rather than a backward-looking, rating (see “What the different ratings mean”, below).
All 10 funds ranked well on the Fundhouse rating, scoring a rating of tier one or two. All but one achieved a rating of four or five stars (out of five) from Morningstar. However, several funds achieved an average rating of three PlexCrowns (out of five), indicating poor performance over shorter terms.
Two funds stand out, having achieved the highest results on all three ratings and top-quartile performance over all periods: the biggest of all, the Allan Gray Balanced Fund, and a more cautious multi-asset fund, the Prudential Inflation Plus Fund. The Prudential fund was also the top performer in the multi-asset low-equity sub-category over five, seven and 10 years and even over 15 years to the end of September 2016.
Morningstar also has a qualitative rating, its Analysts Rating, but it does not disclose these ratings in South Africa, as they are used by the company’s discretionary investment management business. Kyle Cox, Morningstar’s investment analyst in South Africa, says Morningstar can say only that many of the funds listed below are on its buy list and are positively rated (Bronze, Silver or Gold).
Click here for a snapshot of the performance of the 10 funds featured in this article.
Multi-asset high-equity funds
Four of the 10 largest funds are South African multi-asset high-equity funds. The funds in this sub-category invest across the asset
classes of shares, bonds, listed property and cash. They can invest up to 75 percent in equities, and 25 percent can be in offshore asset classes, with a further five percent in African markets. The four funds have track records of more than 10 years and can be found among the top quartile of funds with a 10-year track record.
1. Allan Gray Balanced Fund
Despite being the unit trust super-heavyweight, with the most assets under management of any South African unit trust fund, the Allan Gray Balanced Fund scored well on all three ratings and was ranked third out of 39 funds in its sub-category on its 10-year performance, according to ProfileData. On average, it has out-performed its benchmark (the average of all other funds in its sub-category) consistently since its inception 17 years ago.
Allan Gray’s investment philosophy is to buy shares at a discount to their intrinsic value. It buys shares that are shunned by the stock market because of their unexciting or poor short-term prospects, but that are relatively attractively priced on a long-term view.
Decisions on how much to allocate to each asset class are made on the basis of the value that the manager finds in each asset class, starting with equities. If there are not enough shares offering value, more of the fund is allocated to alternative asset classes, or Allay Gray may partially hedge the fund’s stock-market exposure. Foreign investments are mostly in funds managed by Allan Gray’s offshore partner company, Orbis Investment Management.
Ryk de Klerk, a director of PlexCrown Fund Ratings, says the fund under-performed the average of its peer group from 2011 to mid-2015, owing to its relatively high exposure to British American Tobacco (BAT), its exposure to Sasol, which was affected by the collapse in the oil price in 2014, and its indirect holdings in Russia’s Sberbank. However, the fund’s fortunes have changed dramatically since then, he says. The fund was significantly overweight compared to its peer group in SABMiller, which benefited from the Anheuser-Busch takeover, and its exposure to BAT received a major boost from the collapse of the rand in the fourth quarter of 2015.
The core of the fund is highly focused, with its top 10 local shares comprising about 27 percent of the fund’s total value and more than 60 percent of its local equity exposure, while its top five shares (BAT, Sasol, Standard Bank, Naspers and Old Mutual) make up more than 20 percent of the total value of the fund. The fund’s net exposure to equities is currently about 60 percent. Its exposure to real estate is negligible and to local bonds 12 percent. Allan Gray’s proficiency in the management of fixed-interest investments is likely to add value to the fund, De Klerk says.
Allan Gray regards BAT as a high-quality company and is likely to maintain an overweight position in the share compared to its peer group. Its performance relative to its peers is likely to be influenced by the relative performance of the share, De Klerk says.
2. Coronation Balanced Plus Fund
The Coronation Balanced Plus Fund was rated tier one by Fundhouse and got four out of five stars from Morningstar, but scored a middling three PlexCrowns for its performance over the past five years. It was ranked second out of 39 funds in its sub-category on its 10-year performance and out-performed its benchmark, a composite of indices representing the various asset classes. The fund has a strong bias towards equities and growth assets such as real estate, which make up 81 percent of the fund. The manager seeks out what it regards as attractively valued shares that are expected to achieve strong returns over periods of five years and longer.
De Klerk says MTN was one of the fund’s largest holdings and was a major contributor to the fund’s out-performance from 2010 to mid-2013. The fund’s exposure to MTN was more than halved in 2014 before MTN’s share price fell by nearly 40 percent last year. Since mid-2013, the fund has continued to outperform its peers on average, despite several setbacks that created increased volatility.
Coronation held SABMiller, but it was not among its top holdings, when the share rose 40 percent on news of the takeover bid by Anheuser-Busch in August last year. This resulted in Coronation losing out to larger holders such as Allan Gray, De Klerk says.
Naspers has been a core holding in recent years and added significant value. This holding is now 5.9 percent of the fund, and any significant under-performance of the share may lead to under-performance of the fund relative to its peers, he says.
One of the fund’s core holdings (5.7 percent) is Coronation’s Global Emerging Markets Fund. This fund under-performed developed-market equities from the third quarter of 2014 to the first quarter of 2016, but has made up some ground since then.
The fund’s bond holding benefits from Coronation being one of the top bond managers, but its shorter-term returns on its listed property assets are vulnerable to rising interest rates, De Klerk says.
The fund’s asset allocation will be a strength if there is further improvement in the global economy and especially emerging markets, including South Africa, De Klerk says.
3. Foord Balanced Fund
The Foord Balanced Fund received the second-highest rating from Morningstar, a tier-two rating from Fundhouse and three PlexCrowns. The fund targets a return of inflation plus five percentage points over rolling five-year periods and has achieved this target consistently, except for one period of under-performance in 2011. Paul Cluer, Foord’s managing director, says the fund has not returned less than inflation over any rolling five-year period.
The fund’s exposure to foreign markets is predominantly via the Foord International Fund (a conservative multi-asset fund) and the Foord Global Equity Fund Luxembourg (a portfolio of global shares and cash). Fundhouse director Ian Jones says his company rates Foord highly and its funds are all rated tier one or two. Foord’s core strengths, Jones says, are global asset allocation and a consistent investment approach.
But Fundhouse also looks at succession plans for individuals in the business, Jones says, and it is concerned that the founder of the firm, Dave Foord, is still very central to the business, but is not as actively involved as before in the South African investments. He believes the team in South Africa remains strong, but Fundhouse would like to see how it performs without the firm’s founder over a full market cycle.
De Klerk says after out-performing from 2011 to 2013, the Foord Balanced Fund has performed in line with the average of its peer group. The fund’s current exposure to equities is about 53 percent, compared with 66 percent at the end of 2014, which is a clear indication that the fund’s managers are preparing for the worst, especially for the South African economy. The fund therefore risks under-performing its peers if there is an improvement in the South African political environment. If there is further improvement in the global economy, resulting in improvements in emerging-market economies – and, by default, the South African economy, with a stabilisation of the country’s sovereign debt ratings – the fund could under-perform, De Klerk says.
4. Investec Opportunity Fund
The Investec Opportunity Fund was rated tier one by Fundhouse and received four stars from Morningstar, but it achieved only three PlexCrowns for its performance over the past five years. The fund, managed by Investec veteran Clyde Rossouw, was not far behind the top performer in the sub-category over 10 years and has out-performed its benchmark since its inception 19 years ago. But more recent performance has resulted in it failing to make the first quartile.
The fund’s fact sheet says it seeks capital growth and positive returns by investing in equities, cash and bonds in an active and aggressive style. The manager seeks out quality shares that will deliver consistent performance through the business cycle.
De Klerk says the fund under-performed its peer group average from 2013 to mid-2015, mainly due to being significantly underweight in the local financial sector and overweight in BAT and Richemont. The under-performance was further exacerbated by the slump in commodity prices and crude oil. The slump in the rand in 2015 paid off handsomely as fortunes reversed with the sell-off in financials and the surge in the rand prices of offshore assets.
The fund’s exposure to foreign assets and to local businesses with offshore earnings was about 31 percent in September 2016. Its exposure to equities was about 55 percent, compared with 64 percent at the end of 2015. With listed property, exposure to growth assets was about 60 percent. The fund is highly focused, with nine shares making up about 82 percent of total local equity holdings. Exposure to the local bond market had increased from 16 percent to 18 percent at the end of last year, while exposure to listed property was less than five percent, De Klerk says. It is conservatively positioned, except for its focus on offshore earnings.
Continued underweight positions in the local financial sector and overweight positions in BAT and Richemont mean the fund, like the Foord Balanced Fund, is at risk of under-performing if there is a further improvement in the global economy, and therefore in emerging-market economies, including the South African economy. The risks are somewhat mitigated by the fund’s local bond holdings.
Multi-asset low-equity funds
These funds are designed to deliver inflation-beating returns, but with a less bumpy ride than the multi-asset high-equity funds, thanks to investment in equities being limited to 40 percent. Four of the 10 biggest funds are in this sub-category and three of these have a 10-year track record. All of them are suitable for retirement fund investments.
5. Allan Gray Stable Fund
The Allan Gray Stable Fund received the top Fundhouse rating, an above-average Morningstar rating and four PlexCrowns. Over 10 years, the fund was ranked fourth in the multi-asset low-equity sector and its average annual return was 1.5 percentage points below the sub-category leader, the Prudential Inflation Plus Fund. The fund has comfortably out-performed its benchmark of cash plus two percentage points since its inception in July 2000.
Like its Balanced Fund, the Stable Fund invests in offshore markets through Allan Gray’s offshore partner company, Orbis.
6. Coronation Balanced Defensive Fund
The Coronation Balanced Defensive Fund achieved the top Fundhouse and the second-best Morningstar rating, and an above-average four PlexCrowns. It does not have a 10-year track record, but its seven-year annual average return of 11.22 percent is just over one percentage point below the return of the sub-category leader, the Prudential Inflation Plus Fund (12.31 percent a year over seven years).
Managed by investment veteran Charles de Kock and Duane Cable, the fund has out-performed its benchmark since inception. The fund’s fact sheet notes that it has not lost money over any 12-month period and has achieved reasonable investment growth in the long run. The fund also has a low maximum drawdown of just minus 2.6 percent.
The fund invests offshore through Coronation’s Global Capital Plus Fund, Global Oppor-tunities Equity Fund and Global Emerging Markets Fund.
7. Nedgroup Investments Stable Fund
This fund achieved only tier two on Fund-house’s ranking, but it achieved four stars in both Morningstar’s and PlexCrown’s ratings.
The management of the fund is outsourced to Foord Asset Management, and Fundhouse has the same concerns about this fund as it does about the Foord Balanced Fund, which explains the low rating.
The fund does not have a 10-year history, but its seven-year annual average return, 11.23 percent a year, was just over one percentage point below that of the sub-category leader, the Prudential Inflation Plus Fund (12.31 percent). The fund has failed to out-perform its benchmark of inflation plus four percentage points since inception, but by only a small margin, and its benchmark is higher than that of its peers.
At the end of September, the fund had just 14.3 percent in local equities and 18.5 percent in foreign equities. More than 36 percent of the fund was in money-market and cash instruments.
8. Prudential Inflation Plus Fund
This fund received top ratings from Fundhouse, Morningstar and PlexCrown and was the top-performing fund for all periods between five and 15 years. The fund’s primary objective is to out-perform inflation by five percent (before fees) over a rolling three-year period. The secondary objective is to minimise the risk of capital loss over any rolling 12-month period. The fund has comfortably beaten its benchmark on average performance since inception.
Part of the fund’s out-performance last year came from being overweight in local bonds since the Nenegate sell-off. While bonds were the best-performing asset class in 2016, the fund is paring down its overweight position. The fund starts with a strategic allocation to the different asset classes, which it tweaks in line with its views on the market. For example, over the year to the end of September, Prudential went overweight on listed property after the Nenegate sell-off, moved slightly underweight as listed property rallied earlier in the year, before finally moving to a slightly overweight position again as prices fell and the outlook improved. At 21.7 percent at the end of September, its local equity expo-sure was neither over- nor underweight relative to that allocation.
Multi-asset medium-equity funds
Only one fund in this sub-category makes it into the 10 super-sized funds. Multi-asset medium-equity funds can invest up to 60 percent of the portfolio in equities.
9. Coronation Capital Plus Fund
The Coronation Capital Plus Fund was rated tier one by Fundhouse, but achieved only an average rating from Morningstar and three PlexCrowns. Over 10 years, it was the third-best performer in its category, with a return of just less than a percentage point lower than the top performer in the sub-category. Over the 10 years to the end of September, the fund failed to achieve its inflation-plus-four-percent benchmark.
The fund’s fact sheet says it is specifically managed to suit investors, such as pensioners in the first half of retirement, who want to draw an income over an extended period of time. Like the Coronation Balanced Plus Fund, the fund benefited from a large pre-2015 exposure to MTN and significant exposure to Naspers. Its substantial exposure to emerging markets via the Coronation Global Emerging Markets Fund meant that it under-performed developed-market equities from the third quarter of 2015 to the first quarter of 2016, and the absence of SABMiller among its top holdings in 2015 caused it to lose out when the share price rallied on the takeover bid, De Klerk says.
Like the Balanced Plus Fund, this fund, with 28 percent in local bonds and 10 percent in local listed property, is vulnerable to rising long-term interest rates. Exposure to equities and property amounts to about 54 percent currently, so the fund will do well if there is further improvement in the global economy and particularly in the economies of emerging markets, including South Africa.
Only one equity fund makes it into the top 10 by size, and it has many smaller funds competing on performance: more than 150 funds are registered in this sub-category. Equity funds have to hold at least 80 percent of the fund in equities at all times with up to 25 percent offshore. You should expect these funds to be fairly volatile, which means you need to plan to invest for at least five years to be reasonably confident of a positive return.
10. Allan Gray Equity Fund
The Allan Gray Equity Fund scored a top rating from Fundhouse and second-best ratings from Morningstar and PlexCrown.
Despite being the biggest fund in the South African equity sub-category, the fund has achieved top-quartile performance over 10 years. It is also ranked fourth in the sub-category over 15 years and on its shorter term performance over three years it is within the top 10 funds.
The fund’s top holding at the end of September was in Sasol (7.2 percent) and it had more than six percent in each of Standard Bank, Naspers and BAT.
Simon Raubenheimer, one of the managers of the fund, says expectations for the future prospects of many of the fund’s top holdings are far more modest. The outlook does not appear rosy for all the fund’s holdings, with some facing meaningful challenges. Fortunately, a rosy outlook is not a prerequisite for a good investment – the future merely has to be a little better than what is implied by share prices today, he says.
WHAT THE DIFFERENT RATINGS MEAN
Fundhouse is an independent rating agency based in the United Kingdom and South Africa that does an in-depth due diligence on funds, with limited reliance on historical performance but a focus on the prospects of a manager continuing to perform well.
Fundhouse considers four factors when rating a fund:
• The quality of the investment team;
• The parent company that offers the fund;
• The investment process; and
• Past investment decisions or major investment calls.
When it evaluates an investment team, Fundhouse considers the team’s experience in various areas, the level of staff turnover, whether past investment decisions can be attributed to the current team, and whether the team’s decision-making is characterised by genuine debate. It looks at how patient the manager has been with under-performance, because it takes time for a fund to beat the market; whether the company has the right range of products; and whether it offers investors value for their money. Another consideration is whether portfolio managers themselves invest in the funds they offer to their clients and whether their incentives are aligned with the long-term returns that their clients receive.
The investment process is assessed for how well defined it is and whether it is well understood by the investment team and investors. Did past investment decisions display “conviction” (in other words, did the manager take a reasonable stake in the securities it invested in) and were they in line with the fund’s investment philosophy?
Fundhouse ranks funds as tier one, two or three. Tier one reflects consistency and continuity, tier two reflects minor concerns regarding the people, process or business, and tier three is allotted to funds with more serious problems. Fundhouse rates the fund, not the asset manager, so it is possible for an asset manager to have a range of funds rated at different levels.
Morningstar Star Ratings
Morningstar uses a scale of one to five stars to rate funds on their risk-adjusted returns within small, focused categories that group together funds with similar investment strategies. The star rating is based on how a fund has performed in the past, after adjustments for the risks taken by the fund and the costs compared to funds in the same category. When determining past performance, Morningstar measures volatility and how much return an investor receives for a given amount of risk.
Each fund receives individual ratings for three-, five- and 10-year periods, which are then combined into an overall rating, with the longer periods weighted more heavily. This overall rating determines the star rating the fund receives. The top 10 percent of funds receive five stars, the next 22.5 percent are given four stars, the middle 35 percent receive three stars, the next 22.5 percent are awarded two stars and the bottom 10 percent get one star.
The rating accounts for all variations in a fund’s monthly performance, with more emphasis on downward variations. It rewards consistent performance and reduces the possibility of strong short-term performance masking the inherent risk of a fund. Morningstar warns that a high rating alone is not a sufficient basis for investment decisions; instead, it should be used as a first step in evaluating the suitability of a fund.
The Morningstar Analyst ratings not quoted here are based on five factors: the people in the investment team and their experience; the manager’s investment process, how repeatable it is and whether it is applied consistently; the parent company’s ethics; the fund’s performance; and the fees on the fund.
PlexCrown Fund Ratings
Funds with a performance track record of more than five years in a sub-category with more than five funds are awarded a PlexCrown rating between one and five, with five being the highest rating.
Funds in the multi-asset sub-categories (excluding multi-asset income) are ranked over five- and three-year periods according to four different risk-adjusted measures: the Sharpe ratio is the average return earned in excess of the risk-free rate for every unit of volatility or risk; the Sortino ratio is a similar measure, but uses only the volatility that results in down-ratings; alpha is the excess return above the normal rate of return for the market; the Treynor ratio, also known as the reward-to-volatility ratio, measures returns that exceed those that might have been gained on a risk-less investment, for each unit of market risk; and omega is the percentage change in an option’s value with respect to the percentage change in the underlying price.
The funds are classed in their sub-category and awarded PlexCrowns as follows:
• Top 10 percent: five PlexCrowns;
• Next 22.5 percent: four PlexCrowns;
• Next 35 percent: three PlexCrowns;
• Next 22.5 percent: two PlexCrowns; and
• Bottom 10 percent: one PlexCrown.
DOES SIZE COUNT?
A manager of large funds will tell you that size is not an impediment to performance, while a manager of a smaller fund will say that the big funds miss many good opportunities. Independent opinions are hard to find and there are both advantages and disadvantages to being either large or small.
It is very difficult to isolate the effect of a fund’s size on its performance, according to Morningstar. However, Kyle Cox, an investment analyst at Morningstar, says the company hasn’t seen a size-related decline in performance, or style change, in any of the 10 biggest funds. Cox says many of the managers of large funds are prepared to cap or close funds, or investment portfolios, to new investments when size encroaches on their stated investment approach.
Fund-rating agency Fundhouse says the size of local equity portfolios, in particular, does influence their performance prospects. Ian Jones, a director of Fundhouse, says large funds can out-perform the market, although it may be more difficult to do so.
Dirk van Vlaanderen, an associate portfolio manager at Kagiso Asset Management, which has R40 billion under management, says South Africa’s hugely concentrated equity market imposes onerous constraints on large managers relative to their more nimble competitors, which have far more choice, he says.
In the local equity market a very small number of large shares make up the bulk of the value of the stock market. The market capitalisation of just 10 shares makes up 52 percent of the market and 20 shares make up 67 percent of it (at the end of November 2016).
Van Vlaanderen says the market is now dominated by industrial shares compared with a much larger resource weighting 10 years ago. At the end of November 2016, the market comprised 53 percent industrials, 23 percent resources and 24 percent financials.
Low global yields have seen foreign investors seeking better returns from South Africa’s plethora of well-run, cash-generative companies with good growth prospects. This has resulted in strong share price growth, well ahead of earnings delivery – pushing up the share valuations (price relative to earnings) of these large companies to very high levels.
The same is not true for many local small- and mid-cap companies’ shares, where valuation and earnings potential are currently significantly more attractive than their large-cap peers, Van Vlaanderen says.
Van Vlaanderen says a portfolio manager’s ability to add value is influenced by the manager’s skill in taking the correct decisions, the breadth of opportunities the manager has over which to exercise this skill and, lastly, any restrictions in carrying out these ideas.
But the extreme concentration in the South African equity market can materially reduce the breadth of a large manager’s investable universe, Van Vlaanderen says. If a manager wants to take a meaningful stake of at least five percent in a share without investing more than 10 percent of the fund in the share or owning more than 25 percent of the share, the investable universe of shares becomes smaller the larger the assets under management.
For example, a portfolio manager managing R60 billion of equity assets has 42 choices of companies that can make up at least five percent of its portfolios, without owning more than 10 percent of any one company. A manager with R200 billion in equity assets will find that the comparable investable universe shrinks to just 15 shares. Owning a large percentage of a company increases the time taken to trade and there is likely to be a negative share price impact from trading large proportions of a company.
Arguing for bigger funds, Cox and Jones say many big funds are multi-asset funds, where size is less important, because these funds are able to allocate to a broader range of asset classes. Most now invest up to 25 percent in offshore markets, which also helps to broaden their investment opportunities.
The advantages that large funds have over smaller ones is that they achieve better economies of scale, which means they can bring costs down, Cox says. In addition, a manager that has a large holding in a particular share and works with company management to institute positive change in the company can reap benefits for investors.
Jones says larger managers can afford to do more in-house research, which can add significant value to investment outcomes. In addition, large managers are able to weather periods of relative under-performance without the need to change their investment philosophy or chase short-term performance for business survival.
He says Fundhouse doesn’t think it’s an either-or scenario; there is an opportunity to invest in a blend of very good large and small managers.
According to Cox, Morningstar believes investment style has been more of a defining factor in fund performance than size. The past year has seen the value style come back into favour, resulting in more valuation-focused managers performing well.
In an article titled “Allan Gray Balanced Fund: too big to deliver returns?”, published on Allan Gray’s website in 2014, Daniel van Andel, a business analyst in the Allan Gray product development team, wrote that while a smaller asset manager can quickly change the look of its portfolios, larger managers like Allan Gray are forced to adopt a longer-term approach. However, he says, such managers are still able to take quite different positions in their universe of potential investment.
There is no compelling evidence of a correlation between performance and the level of assets under management in the South African market, Van Andel says.