Discovery Global Value Equity Feeder Fund outperforms its asset class and all other unit trust funds

The strong performance by US banks in the last year bode well for investors in the Discovery Global Value Equity Feeder Fund, who saw returns of 31.86% over the year to 30 September 2017 and 17.1% annualised over three years to end September 2017.

These returns placed the fund as the highest performing fund in the entire collective investment scheme industry over the past year, and fourth highest performing fund in the entire collective investment scheme industry over a three-year period.

Source: Profile Data

Still open to new investors, this feeder fund invests in the Luxembourg-domiciled Investec GSF Global Value Equity Fund. The fund benchmark is the MSCI All Country World Index in rands and the fund managers are Alessandro Dicorrado and Steve Woolley. The strategy of this fund is to follow a “contrarian value” investment approach and identifies stocks that are out of favour in the market but have sound fundamentals that predict future growth. The research team selects high quality stocks, which must meet certain minimum criteria before the manager will invest in them.

US banks and Australian gas company power returns

Dicorrado attributes part of the fund’s outperformance to an overweight allocation in US banks, such as Bank of America and Citigroup. He notes that US financials soared towards the end of 2016, on the back of banks receiving support in 2017 after they passed the US Federal Reserve’s stress tests, and the hawkish interest rate approach from key developed market central banks.

The Discovery Global Value Equity Feeder Fund also had exposure to certain companies which performed excellently. For example, WorleyParsons, an Australian oil & gas engineering company added to returns, reaping the benefits of a strong rally in oil prices. The Anglo-Irish builders’ merchants business, Grafton Group also contributed to the strong returns. The company’s strong market position in Ireland is now benefiting from an economic recovery and its Selco business in the UK is growing strongly.

A simple way to invest offshore

As a rand-denominated investment, this fund provides an easy and simple way to diversify a portfolio with offshore exposure. Although there is no exposure to South African assets, investors will enjoy the rand value of any investment returns and foreign currency gains. One of the biggest advantages of a rand-denominated investment is that there is no need to convert rands into foreign currency as the investor is effectively using the unit trust’s offshore allowance instead of their own. There is also no limit on the amount that may be invested through a rand-denominated offshore fund since individual investors do not require any tax clearance for these investments.