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By Anthony Hall
The quote that is often attributed to Benjamin Disraeli – “Lies, damn lies and statistics” – is a warning that statistics can often be used to mislead. Corion Capital is therefore always wary of reading too much into the short-term performance of fund managers. 12-month performance should definitely be classified as such. Despite this, it is also important to recognize that although it is short-term in nature, there have been some stand-out performances from fund managers in 2021.
Another reason to celebrate 12-month performance is that fund managers have specific styles which prove to be cyclical in nature. When their style is out of favour and performance suffers, they often take a lot of criticism. Therefore, when the cycle turns, it is equally important to give the managers that have stayed the course their dues. In this light, Corion Capital is pleased to focus on the following managers that are “top of their class” in 2021 in their respective ASISA categories.
SA General Equity
- Investec Wealth & Investment BCI Dynamic Equity Fund – 60.2%
The Investec Wealth & Investment BCI Dynamic Equity Fund is managed by Barry Shamley. Although the fund’s benchmark is the FTSE/JSE Capped SWIX All Share, its size and investment philosophy mean that it has the ability and willingness to invest differently to its benchmark. Whilst the fund can invest across the full spectrum of the market, it is expected that the fund will have significant exposure to the small and mid-cap space (or as they label them, emerging companies). This often under-researched segment of the market has battled over the years but came good in 2021 driven by corporate activity and the market finally realizing that there was exceptional value to be had in these shares. What makes the fund’s performance even more impressive over the last 12 months is the manner in which it has outperformed its peers who focus on this segment of the market as measured by the ASISA SA Equity Mid/Small Cap category.
SA Multi Asset High Equity
- Aylett Balanced Prescient Fund – 39.5%
Managed by Walter Aylett and Dagon Sachs, the Aylett Balanced Prescient Fund is a traditional bottom-up research driven fund that strives to “buy good asset that have some pricing power … and to make sure one does not overpay for them.” The fund benefitted in 2021 from its stock picking ability in both local and offshore shares (international sectors like energy).
Their decision to stay invested in attractive South African stocks post the ‘Covid collapse’ was more than vindicated by subsequent performance – and in certain cases such as with Royal Bafokeng Platinum, the onset of the Covid-19 pandemic provided them with significant opportunity to add to stocks that they already owned at bargain-basement prices. In addition, unlike most of their peers, their decision not to hold Naspers and Prosus over the last year has proven to be correct on a relative basis.
What currently does stand-out when comparing this fund to most of the other funds in the ASISA category is the large cash holding in the fund – a case of dry-powder for opportunities that may present themselves in the near future.
SA Multi Asset Low Equity
- Counterpoint SCI Stable P&G Fund – 28,7%
The Counterpoint SCI Stable P&G Fund took full advantage of the performance in risk assets during 2021 with its high allocation to equity and listed property versus its peers. The fund is allowed to have a maximum exposure of 65% to such assets (40% to equity and 25% to listed property) and has been close to this limit at times during 2021.
For a Low Equity Fund, running this high an allocation to risk assets is somewhat uncommon but when you get it right, as they did, it works spectacularly. The fund is managed by Ian Anderson & Richard Henwood – both have extensive experience in the listed property space and hence a potential reason for the larger than peer allocation to such.
It will however be unfair to only highlight their asset allocation for their great year. Counterpoint as a house had a very good stock picking year driven by an overweight in small companies. Specifically, investments in Thungela, Grindrod Shipping, Aveng and Lewis (local furniture retail).
SA Multi Asset Flexible
- Flagship IP Flexible Value Fund – 54.1%
Niall Brown, who manages the Flagship IP Flexible Value Fund, has always been known as a contrarian value investor. Niall pays little regard to the index when considering stock selection and concentrates on identifying stock specific or thematic areas of undervaluation. This led to a substantial weighting in neglected small caps that were trading at distressed valuations, e.g. Nampak, Lewis Group, Novus and York Timbers. These four counters have all trebled or even quadrupled from their 2020 lows.
A secondary theme which started playing out in the second half and benefited the fund’s performance in 2021, was that of buying into good quality investment holding companies trading at abnormally wide discounts e.g. Zeder, African Rainbow Capital and Brait.
Worldwide Flexible Equity
- Blue Quadrant Worldwide Flex Prescient Fund – 129%
It is amazing what a difference a year can make. After a disappointing 2020, the Blue Quadrant Worldwide Flexible Prescient Fund has been making waves in 2021 for all the right reasons. The fund is managed by Leandro Gastaldi who employs a deep value concentrated macro-thematic approach and one of his big bets, energy stocks, has driven the performance of the fund to new heights.
The fund is still relatively small and due to this, is able to be very actively managed. Blue Quadrant have little regard for how their peers are positioned and seems to have less concern about sector risk or the resultant volatility. Over the last three years, their fund has consumed a staggering two and half times the risk (as measured by standard deviation) when compared to its benchmark. However, when you take a lot of risk and then get your positioning spot on it leads to amazing outcomes. With a return of 129% for 2021 (approximately 3 times the second-best fund in the category), this fund certainly was the standout fund of the year.
Global Equity
- ABSA Global Core Equity Feeder Fund – 35.8%
The ABSA Global Core Equity Feeder Fund is a domestic feeder fund that invests in the Schroder International Selection Fund QEP Global Core Fund. Although the Schroder ISF QEP Global Core has strong risk controls which limit the index tracking risk (benchmark is the MSCI World), the fund still does take some active tilts based on value and quality factors which benefited the fund’s performance in 2021 as value finally outperformed other equity factors such as growth.
What was very interesting to note when analysing the fund was that unlike the winners of the other categories mentioned above, this fund had no excessive bets in terms of sectors or regions relative to its benchmark. On this basis, perhaps the other stand out fund of 2021?
