Sanlam portfolios take the lead

Melville du Plessis.

Vanessa van Vuuren.

Several Sanlam portfolio managers brought home accolades for being the top performers in their fund categories after the 21st Raging Bull Awards ceremony held in Johannesburg on Wednesday, 25 January. The prestigious Raging Bull Awards ceremony recognises the top managers in the South African unit trust industry, measured on their long-term performance. Awards for asset-specific categories of funds are based mainly on straight performance, calculated by Profile Data for the three-year period to end 2016. The winners were the Sanlam Investment Management (SIM) Enhanced Yield Fund, the SIM Small Cap Fund and the SIIP India Opportunities Fund.

It was not the first time the SIM Enhanced Yield Fund was named the best SA Interest Bearing Short Term Fund. It had also received the honour of being first in its category in 2014. The fund is managed by Melville du Plessis, a Chartered Financial Analyst (CFA), and also a certified Financial Risk Manager and Chartered Alternative Investment Analyst.

Melville says the track record of the fund demonstrates its ability to outperform during increasing and decreasing interest rate cycles, as well as in favourable and unfavourable credit market environments. Its benchmark is the STeFI + 0.5%, but since its launch in May 2011 the SIM Enhanced Yield Fund has beaten the STeFI by 1.36% p.a., which is an unusually large outperformance for a fixed interest fund, limited to cash, government, corporate and inflation-linked bonds. One of the ways the fund avoided underperformance was by having either no or very limited exposure to counters such as African Bank and First Strut.

The SIM Enhanced Yield Fund is actively managed, and the enhanced yield is pursued by using a combination of interest rate and credit opportunities. Credit added roughly 45% of the outperformance and interest rate management about 55% of the outperformance during 2016, while the two components add value fairly equally over the long term. Although it’s impossible to have perfect foresight with regards to what the future holds, Melville believes that appropriate risk management and avoiding undue concentration risk is one of the most efficient ways to avoid underperformance. The highest and lowest annual returns since launch have been 10.43% and 5.51% respectively.

For the second year in a row, the SIM Small Cap Fund, managed by Vanessa van Vuuren, won the top accolade in the Best SA Equity Smaller Companies Fund category. Vanessa is a CFA charter holder and holds two honours degrees – one in Organisational Psychology and one in Financial Analysis and Portfolio Management. She credits the success of the fund to the extent of the SIM equity team’s coverage and the strong research culture embedded within the team.

Because the small-cap sector is generally under researched in the industry, Vanessa says there are ample undervalued companies – and hence exciting opportunities – in the sector. She ascribes a significant part of the outperformance of the fund to the appropriateness of the mandate, which allows her to invest in early-stage smaller companies.

The returns over the three years considered by the Raging Bull Awards were driven by the SIM Small Cap Fund’s selection of smaller companies based on the strength of their business models, their implicit growth potential and the price SIM was paying for the potential. Examples of companies that performed well over this period include Adapt-IT (50% p.a.), Advtech (41% p.a.) and Curro (22% p.a.).

All SIM’s funds are driven by one house view process, and the awards reaped by the SIM Enhanced Yield and Small Cap Funds demonstrate that SIM owns superior fixed interest and equity capabilities.

The SIIP India Opportunities Fund is an Irish-domiciled international equity fund investing predominantly in Indian Equities, or in companies mainly operating in India. It is managed by Sanlam Investment Management (Pty) Ltd.