Engaging fund managers in multi-manager funds

Myra Knoesen, FAnews Journalist

Instead of offering multiple products, fund managers should focus on providing simple, universal solutions that give investors a high chance of meeting the goals set in their retirement plans.

At PSG’s Annual Conference, there was a discussion focussing on issues around the multitude of funds out there, the attributes of specific single manager funds and how they add value to a multi-manager fund.

An idealistic approach

Adriaan Pask, CIO at PSG Wealth, facilitated a panel discussion with David Knee, Head of Fixed Income at Prudential Investment Managers, Charles De Kock, Senior Portfolio Manager at Coronation, Clyde Rossouw, Co-Head of Quality at Investec and Paul Bosman, Fund Manager at PSG Asset Management to sketch the purpose behind the multi-management approach.

According to Pask we need to find skilled managers that have differing ways of reaching goals and who outperform other managers, and blend them in a portfolio.

“The challenge in South Africa, in a multi-manager fund business, is that we sit with 1 100 portfolios. From one perspective, it is great to have product choice but on the other hand, if you have so many products available there are various outcomes available to suppliers and there are a lot of risks. The question remains; how do you identify the managers who are the best in the country,” he said.

Advisable investment outcomes

De Kock believes the first level of risk management involves asset allocation and commitment to those categories. And the second level of risk management is the financial instrument that is invested in.

Rossouw mentions that asset management is all about quality. “When we talk about quality we talk about investing in companies that have highly fundamental characteristics. These characteristics allow them to generate high returns on limited amounts of capital invested and because they knock up the incentive, they produce cash flow which comes back to investors. You end up with very advisable investment outcomes.”

Bosman added to this by saying, “For us a quality business is simply a company that could increase the asking price of its product by more than inflation over time, however, that also needs to be confirmed by high returns in capital.”

“There has to be a narrative that makes sense and there has to be hard evidence in terms of capital,” continued Bosman.

For Knee it is about thinking about the valuation of the underlying asset and the building blocks you are putting together to create the overall portfolio. “It is about thinking of the long-term anchors that affect the valuation of those assets. Then we look at long-term inflations in South Africa, the long-term growth potential etc. We then blend this in a strategic way to achieve the outcome. It is strategic asset allocation,” he said.

Generating good returns

Knee continued to say that, “It is about the strategy and what outcome you want for the client. Look for quality companies that are trading at reasonable valuations. In the long-term they will generate good returns.”

Advisers should choose the best investment style by eliminating complex products and providing fund transparency.

It is all about being patient and cautious and investing in the right funds at the right time.

Editor’s Thoughts:
Simple is always best. Managers should focus on providing simple solutions that give investors a high chance of meeting the goals set in their plans. Each client is different so it is important for you to know your client and make sure you have an offering that is relevant to the needs and wants of your specific client – as the saying goes….different strokes for different folks.Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.