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Broadening the diversification spectrum

13 March 2019 Andriette Theron, Head of Manager Research at PPS Investments

As an investor, you may be seeking additional opportunities for diversification within your portfolio to benefit during different market environments. We recently augmented our range with three new single-manager funds by partnering with three of South Africa’s most reputable asset managers to offer exclusive access to the PPS Partnership Fund Range, namely:


• PPS Defensive Fund, which is managed by Sasfin Asset Managers’ Errol Shear.
• PPS Stable Growth Fund, which is managed by Tantalum Capital’s Rob Oellermann and Melanie Stockigt.
• PPS Managed Fund, which is managed by 36ONE Asset Management’s Cy Jacobs and Evan Walker.

By investing in our new range, you gain access to top quality managers in mandates typically not yet available in the retail market. These funds are suitable for retirement investments and comply with the Regulation 28 (under the Pension Fund Act) that sets out limits that retirement funds may invest in particular assets and asset classes.

Partnering with reputable asset managers
Through our multi-manager investment process, we have access to asset managers ranging from large institutions to smaller owner-managed houses with expertise and experience across the different asset classes. In a bid to find asset managers to partner with for this range we focussed our attention on boutique asset managers with well-established, proven investment philosophies and processes coupled with solid, long-term track records. For this reason, the portfolio managers of the PPS Partnership Funds are all well-known and seasoned professionals in the investment industry. With more than two decades of asset management experience, each of these managers have a wealth of experience and importantly have navigated various market cycles and events that shook the market, such as the 2008/9 financial crisis, Nenegate and the collapse of prominent SA businesses.

These managers were identified through our rigorous manager research process, which encompasses both a qualitative and quantitative assessment. The quantitative analysis involved analysing past performance of the manager within the environment in which such performance was achieved.

Understanding the environment is crucial, given that different investment styles are better suited to take advantage of market opportunities at different times in the cycle. The qualitative assessment is more subjective. This involves robust engagements with managers to test the outcomes from the quantitative analysis. This includes unpacking various aspects of their business, the investment strategy, and the macro-economic environment to ascertain how performance could be impacted going forward.

Following the detailed assessment of the managers’ capabilities, these managers were specifically selected to manage the portfolio within the PPS Partnership Fund range most suited to their unique investment approach.

A risk-conscious approach to investing for the PPS Defensive Fund
We selected Sasfin Asset Managers to manage the PPS Defensive Fund, which aims to outperform the ASISA SA multi-asset low category average over a rolling three-year period. Key in achieving this objective is the manager’s risk-conscious approach to investing and a focus on capital preservation. Shear has managed to deliver a positive return over every rolling 12-month period since the inception of him managing multi-asset low-equity strategies (including the global financial crisis in 2008/9).

This is a well-diversified fund that is managed around a strategic asset allocation as an initial step to risk mitigation while high-quality, low volatility securities are preferred within each asset class.

A real-return mindset for the PPS Stable Growth Fund
For the PPS Stable Growth Fund that targets a return in excess of the ASISA multi-asset medium category average over a rolling five-year period, we partnered with Tantalum Capital. This manager has successfully managed multi-asset high-equity mandates for our funds for some time. Given their real return mindset, individual securities are assessed and included in the portfolio based on its potential for real capital growth over the medium to long term. Tantalum is one of the few boutique asset managers in South Africa with both specialist equity and fixed income capabilities. The PPS Stable Growth Fund is therefore well placed to deliver moderate returns while preserving capital over the medium to long term in order to meet its investment objective over time.

PPS Managed Fund is more aggressively managed than the traditional balanced fund
For the PPS Managed Fund, we partnered with 36ONE Asset Management. The fund’s primary objective is to achieve capital growth of at least CPI +5% per annum over a rolling six-year period. It is intended to be more aggressively managed than the traditional balanced funds within the ASISA multi-asset high-equity space. 36ONE Asset Management, known for managing equity-centric mandates, is expected to run the fund with a relatively high allocation to growth assets with the balance of the portfolio invested in cash and cash-like instruments. Key to the manager’s investment approach is its strong stock-picking ability by successfully combining in-depth bottom-up company research with top-down macro analysis. This high conviction manager is willing to take advantage of opportunities presented by changing market environments in a very short period of time.

Opportunity for added diversification backed by skilled professionals
While the PPS Partnership Fund Range was recently launched, it is managed by experienced, skilled professionals backed by their respective specialist teams. The range offers an opportunity for added diversification to your portfolio by gaining access to top quality managers in mandates typically not available in the market.

 

 

 

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