On the local front

In the South African unit trust business there are hundreds of fund managers, says Theo van der Lingen, fund manager at PSG Fund Management.

I would like to touch on one of the models that we use when choosing a manager for a multi-managed fund.

We believe in a dynamic multi-manager process without predisposition towards any manager, style or investing theme.

Our philosophy is to consistently and without bias incorporate quantifiable methods to find the very best underlying managers within our multi-managed solutions.

Bottom-up fund manager selection through quantitative screening and qualitative analysis dominates the process and account for approximately 80 percent of the decision making.

Top-down analysis is also incorporated quarterly by means of tactical shifts amongst the various asset classes according to expected market conditions.

The outcome of these processes feeds into the portfolio construction process where five multi-managed portfolios with different risk profiles are created.

We are currently remodeling the qualitative side. That is where we determine the quality of all the fund managers of unit trusts.

The process entails gathering 75 key variables relating to the philosophy, process, economic and market views of the fund manager and institution he/she works for.

Each variable gets a score out of ten. To score some of the key variables up to 10 relating subsections have been created. The quality of the manager is eventually quantified and ranked according to the total of all these scores.

This process continues over time as fund managers are revisited and the relevant information is updated in the model.