10 years of investment performance with distinction

The classic spaghetti western, The good, the bad and the ugly, set the scene for the recent Nedbank Private Wealth investment roadshow. The phrase has come to refer to upsides, downsides and the parts that could or should have been done better. “We thought this was an interesting framework for reflecting on the past 10 years of investing,” said Mike Wilmot, Head of Investments at Nedbank Private Wealth.

Wilmot was reflecting on market and investment developments over the past decade, highlighting Nedbank Private Wealth’s investment approach that led to both equity and asset allocation performance with distinction. This coincides with Private Wealth's celebrating four market-leading performance successes over 10 years at end April 2014, including two leaders in the big-name Property and Balanced or SA multi-asset medium equity fund categories.

“While 10 years of investment success is a great outcome to celebrate, in the world of investing process trumps outcome in the long run,” commented Wilmot. “We believe that our investment professionals and our private client process demonstrate this success.”

Wilmot said: “Starting with the good, all asset classes delivered positive growth over 10 years, with risk assets, namely property and equity, shooting the lights out. Our house view as expressed in our equity unit trust, the Nedgroup Investment Private Wealth Core Equity Fund, delivered material outperformance, beating over 100 funds in its category to become the number one SA general equity unit trust over one year at end May 2013 and number one over three years at end March 2014. This Private Wealth Fund delivered top decile performance over one, three, five and seven years, and top quartile performance over one, three, five, seven and ten years at end April 2014.”

Examples of Nedbank Private Wealth’s stock-picking success include blue chips such as SAB, Naspers, British American Tobacco and Richemont – all core holdings in Nedbank Private Wealth’s client portfolios – and investment in a few phenomenal growth counters such as Aspen, Mr Price and Grindrod.

“We manage our equity portfolio on principles of low turnover, long-term holdings in quality companies, (where quality refers to capable management teams), strong balance sheets, clear earnings visibility and a bias towards progressive dividend payouts,” said Wilmot. “We view dividends as a key contributor to investment returns and a defensive underpin to our portfolios.”

Wilmot further explained that asset allocation – investing capital across cash, bonds, preference shares, property and equity – is critical to long-term investment success. “A key outcome of our asset allocation process was to find a high and growing income stream to meet our clients` objectives, resulting in an overweight property position, a contrarian position much of the time.” Wilmot continued: “This approach has met our clients’ income requirements and added to outperformance from an asset allocation perspective.”

It is this combined stock-picking and asset allocation success that resulted in Nedbank Private Wealth's achieving number one rankings in four categories over 10 years at the end of April 2014, the additional two being for its Small and Mid-cap Equity Fund and its Defensive Fund of Funds.

“Bad outcomes that we noted in the 10-year period included the relative decline of the mining sector and how picking the flavour of the day led to poor outcomes over the period, illustrated by comparing the relative performance of the Findi with resources over the 10 years,” said Wilmot.

“Ugly outcomes or things that we can do better in South Africa definitely reside in the areas of unemployment and inequality – two hard, structural nuts that we are yet to crack. While we cannot control the currency or gold price, a stock price or the market, we can control our investment process and adapt it where necessary. This is key to long-term investment success.”