Wednesday, January 26

The convictions of one of the fund managers with more years of experience in SA

The Ninety One Managed fund was launched just over 27 years ago and has been managed by Gail Daniel for most of that time.

She was in charge when the fund was launched in 1994, then moved to a different portfolio around the turn of the millennium. He returned to office in 2003 and has managed the fund ever since.

This makes her one of the oldest portfolio managers in the country in a single fund, alongside her fellow Citywire A-rated John Biccard at the Ninety One Value fund, Clyde Rossouw at the Ninety One Opportunity fund, and Daniel Sacks at the rated AAA from Citywire in the Ninety One Commodity fund.

The long-term returns that she and her team have generated for investors have been extraordinary.

The Ninety One Managed fund was launched just over 27 years ago, and Gail Daniel. Image: supplied

According to Morningstar, there are only 16 South African multi-asset high-end funds that have a 20-year track record, and the Ninety One Managed fund is in the top quartile during that period. It has returned an annualized return of 13.4% over the two decades to the end of November.

In particular, it is comfortably the best performer among this group of long-standing balanced portfolios over 10 years and five years. Throughout the decade, it has obtained a return of 11.7% per year and 9.7% per year for the last five years.

This is a rare level of persistence that also reflects Daniel’s consistent approach to managing the portfolio.

‘My DNA is in action’

“This is a balanced fund, but I’ve always focused on stock selection,” Daniel said. Citywire South Africa. “My DNA is in equities, unlike other balanced managers whose DNA is in bonds.

“And I’m pretty clear on what I’m looking for when taking concentrated equity positions: positive earnings reviews; some valuation argument; I like it if the stock is not owned; and I like that management is unloved because the market tends to switch between liking and hating management, and that’s often a function of economic headwinds or headwinds more than anything else. ”

Daniel is also committed to investing in larger companies.

“I don’t play small caps because I’m wrong, and when I do I want an exit door. I don’t want to have to pretend I’m right just because I can’t sell the stock. ”

There is also a clear focus on the international component of the fund.

“I will always manage the fund’s international exposure as much as possible because there are many ways to express an idea in offshore markets. They are bigger and the liquidity is much better. I also run that offshore part myself with the help of analysts. ”

She believes this is an important differentiator.

“For many managers, the offshore part of their local balanced fund is a portfolio that is managed primarily to be sold abroad or it is an offshore fund that is placed in the local fund, whereas I manage the offshore part of the fund with very little shares – 10 to 12 shares. A global equity fund could be 100 or more.

“I can take big bets on stocks that can have a significant impact because they have a significant weight in the overall portfolio. There is no point in sitting in a position that will only be 0.5% in the final portfolio. ”

Return conductors

This also means that Daniel can use the offshore allocation to supplement the fund’s local positions, rather than simply as a generic exposure.

“For example, we can run a lot of technology in the offshore assignment because a South African investor doesn’t have a lot of exposure to the technology. Medical care is also much easier to play abroad, which I have done through some vaccine stocks. Even within emerging markets, you can find these kinds of opportunities. I don’t have much in the background, but I have done well with Russian banks because their mortgage market is growing much faster than ours and they have raised interest rates faster, which widens margins. ”

This overseas allocation has been an important factor for the fund historically, and Daniel believes it will continue to be that way for at least the medium term.

“I don’t think there is a great structural case for local equities. They have underperformed for a considerable period of time. They had a massive rebound from last year, but that has petered out in recent months. I think the drivers are waning. If policy tightens in the US, liquidity tightens a bit, that will blow the wind out of the sails for emerging markets. ”

He added that very few local companies in the local market have exceeded their cost of capital over the past decade, and the environment is likely to remain challenging.

“Do I think the cost of capital is going to go down? No. Local rates will go up with US rates. There is no reason for the risk premium to be reduced. And do I think the growth rate is going to increase in the next five years? No. We only managed to grow at 2% when China grew at 8%. Now China seems to have dropped a level and that will affect us too.

“Regardless of how I do it, I cannot come up with a reasonable growth scenario for South Africa.”

Patrick Cairns is a South African editor at Citywire, providing knowledge and information for professional investors around the world.

This article was first published in Citywire South Africa hereand republished with permission.

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