Fleeing the Flock

*This content is brought to you by Corion Capital 

By Garreth Montano

Garreth Montano

Investors are becoming savvier. They are aware of costs and importantly they are aware of performance, especially in relation to passive indices.

For decades, TV commercials have drummed into our heads the concept of “investing for the long term”, and while walking down the corridors of every airport, we have subliminally been indoctrinated that “trust” will make us a lot of money. Nobody is denying the relevance of these two concepts, but they are not enough to provide a fund that is not only distinctive but also capable of outperforming the market.

In the age of ubiquitous data, especially in financial markets, it is becoming more apparent that many savings solutions behave in a strikingly similar way, despite marketing campaigns telling an entirely different story.

Corion has coined the term “flock stocks”, with reference to the concentration or commonality of the same shares dominating large equity funds and share portfolios. To illustrate the extent of the commonality, we obtained the top 10 holdings of four large equity funds and show below in the diagram the extent to which “flock stocks” are common – i.e., a stock in at least three of the four funds.

The overlap of these positions is stark, and unfortunately common place in the industry. (We discussed the potential reasons for this proliferation in our previous article on flock stocks).

Corion believes investors are looking for equity funds with more distinction. Funds that capitalise on great South African investment minds. Funds that are truly active.

Corion Prime Concentrated Equity is a fund of approximately twenty-five shares, reflecting high conviction views across small, medium and large capitalisation shares.

Corion has identified what we believe are among the best stock pickers in South Africa. These managers provide their best three to five investment ideas. In so doing, the fund provides diversification and is not dependent on one manager or management style.

While harnessing the skill of our selected managers’ high conviction calls, Corion builds resilience into the fund with an additional seven to ten shares, that balances risk but retains the focus of the fund.

This fund (Collective Investment Scheme) is one-of-a-kind. Whilst noting that past performance is no indication of future performance, we take pride in how it has performed relative to its benchmark and to its peers since the fund’s inception. With current market volatility and nimble managers, we believe that prospects continue to be promising.

At Corion, we think it is time to flee the flock and provide investors with the opportunity for truly active management. A fund that is different from the herd. The Corion Prime Concentrated Equity provides that distinction.

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