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Top Performance from PSG Funds

14 January 2014 PSG

Morningstar has released the results of the unit trust performances to the end of December 2013 and the PSG Equity Fund was noted as the best-performing General Equity Fund in South Africa over the preceding year and five years. Newer investors in this fund should be pleased with the last year’s performance, but the patient investor – the investor who has been in the fund over the long-term – has been richly rewarded.

"It’s about the process”

One of the slogans behind Bill Clinton’s successful 1992 run for the White House was "It’s about the Economy, Stupid!”, but when it comes to investing, it is much more apt to note that investing is all about the process. Ask a PSG Asset Manager if they are focussed on "performance” and they will be quick to point out that they have no control over performance. Performance is an outcome, not an input. The input in investing is the management team’s investment process. A sound process, diligently enforced, is a key element in generating consistent superior long-term returns.

At PSG Asset Management our investment team spend all their time applying our investment process – honed over a long time working together – to the assets we take care of for our clients. They are constantly looking to identify both those investment opportunities which meet our investment criteria for inclusion, as well as those investments which should be sold and, of equal importance, those which should be avoided completely. The process of understanding the business model, quality of the management team and underpinning this with the appropriate assessment of value has resulted in the performance of our funds.

Over the past 5 years the PSG Equity Fund was the top performing General Equity Fund in South Africa (out of 84 funds), delivering an annualised return of 24.59% over the period net of fees and costs. Over the same period, the FTSE/JSE All Share Index returned an annualised 19.93% and the average general equity fund just 17.38%. Over the last 3-years the fund has also been a top performer, delivering returns well in excess of the benchmark and average fund and, over the last year, it has also delivered returns than better than any of the 115 other local General Equity Funds.

To see tables please click here.

Consistency is what investors want

The table above shows the performance of the PSG Core Funds which have at least a 5 year track record. All of these funds have delivered top-quartile returns over the last 5 years and one-year and all but one were in the top quartile over the last 3-years. These returns have been consistent in two ways. Firstly, the consistency of excellent performance across the suite of funds demonstrates that there is a single process which is being applied to the management of these funds. Secondly, the good returns which our investors have enjoyed have been consistent over time. We are frequently told by our supporters that investors shy away from "feast or famine” returns and, by sticking to the investment process and ensuring that – in particular – the margin of safety is there before we buy an asset, we have been able to consistently avoid the big misses and select solid performers.

What about the future?

We all know that past returns are no guarantee of future returns but we also know that a good process, well applied by a strong team, will tend to deliver excellent, consistent returns over the long term. Our managers have more than 140 combined years of investment experience and have, on average, been together at PSG for at least 6 years. It’s a solid team.

The funds we manage have seen very strong inflows over the past year as more and more advisors and investors are realising how well these funds have done. Despite these flows, the funds are still all small in size relative to the larger peers and this remains a key competitive advantage for our investors, as the managers are able to acquire significant holdings in a larger investable universe, giving them a wider range of investment ideas and more flexibility.

There are no guarantees for future performance, but the commitment to the consistent application of a proven process by a well-established team goes a long way to providing investors with confidence about the future.

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