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PSG Balanced Fund tops over 15 years

22 May 2014 Paul Bosman, PSG
Paul Bosman, PSG Balanced Fund manager.

Paul Bosman, PSG Balanced Fund manager.

The PSG Balanced Fund, PSG Asset Management fund with the longest track record, has provided its investors with a hefty return of 15.68% per year since inception in June 1999 - nearly 15 years ago. This is no less than 5.03% per year more than its benchmark of inflation plus 5%.

Considering that the FTSE/JSE All Share Index gave investors a total return of 18.28% over this period at significantly higher volatility, this demonstrates the benefits of utilising a multi-asset mandate correctly.
 
This is according to PSG Balanced Fund manager, Paul Bosman, putting the fund in focus in the latest Angles and Perspectives Report from PSG Asset Management. Over this period the fund has only had three managers providing investors with exceptional risk-adjusted returns.
 
"We are focussed on executing an investment process that has been developed and refined over many years. We know that by following a disciplined process, which is generally contrarian of nature, we can continue to achieve our objective of exceptional risk-adjusted returns over time.
 
Balanced Funds provide investors with a diverse exposure to the asset classes being equity, bond, money and property markets. As a Domestic Multi-Asset High Equity fund, the portfolio of the PSG Balanced Fund must at all times have:
• At least 75% of their assets invested domestically,
• No more than 75% of the portfolio in equities (local and offshore), and
• No more than 25% of the portfolio in listed property.
 
Funds in this sector must comply with Regulation 28 of the Pension Funds Act, which makes the PSG Balanced fund an ideal retirement vehicle. One of the most significant benefits of having a multi-asset class mandate is that the manager’s hands are never tied. This is key to risk management as it enables the manager to move out of risky asset classes to more appropriately priced opportunities.
 
The PSG Balanced Fund is ideal for investors who prefer the fund manager to make the asset allocation decisions and aim to build wealth within a moderate risk investment.
 
Having such a wide range of assets to choose from, how is this all put together? Bosman says the fund requires a significant exposure to equities, typically 55% to 75%. The focus is on valuations.
 
"When we value an asset (be it an equity, a bond or any other security) we look at its prevailing value relative to long-term trends as well as relative to other assets within the same asset class and across asset classes. Every individual investment opportunity is also valuated on merit.
 
"Ideally, we like to have large amounts of cash when the market goes down. This offers us the opportunity to buy the securities that we’ve been eyeing for a long time. This in no way means that we try to guess or predict when there will be a sell-off.
 
"The level of cash in the fund is a result of our bottom-up process. There are higher levels of cash in the fund when we can find fewer undervalued opportunities and, vice versa, the fund has lower levels of cash when there are more overvalued securities,” Bosman says.
 
Over the last quarter there has not been much change to the asset allocation of the PSG Balanced Fund. "One must remember that we are long term investors and only invest when there is a significant margin of safety. This could and should result in many quarters of very limited change to the portfolio.
 
"However, when you read big scary headlines you should not be surprised if our asset allocation may have changed significantly over that quarter.
 
"We buy when others panic,” Bosman says.
 
One of the changes in equity holdings was the introduction in the fund’s top ten of J Sainsbury Plc. Sainsbury’s is the UK’s 3rd largest food retailer with a market share of about 17%.

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