Investors looking for a local equity fund offering diversified access to shares on the JSE and to support black business in South Africa will find a top-class offering from boutique manager Mazi Capital.  

Founded in 2006, its name - which means cow in Nguni - drives Mazi capital’s investment philosophy to produce rich capital growth. “Mazi grows and produces offspring - in investment terms this implies growth in capital. It produces milk on a regular basis, which implies dividends. The Mazi can be sold at the end, realising a capital gain,” Malungelo Zilimbola, founder of Mazi Capital, says.

Mazi’s local equity fund, the Mazi Prime Equity Fund, only invests in shares on the local equity or share market – the Johannesburg Stock Exchange – making it subject to the ups and downs or volatility of the stock market.

Its benchmark, which it aims to outperform, is the FTSE/JSE Shareholder Weighted Index – the index that tracks the performance of all the shares on the JSE in the same proportion as they make up the capital invested in the JSE.

To outperform the index, the management team known for their stock picking skills, carefully researches the companies in which the fund will invest. They look for the shares of companies that are trading below the price at which the manager thinks the business should be valued and which should over the long term return to fair value – known as a long term valuation approach to select investments.

“We invest in companies with sustainable business models that are led and managed by competent, honest management teams. The companies should generate cash and have a strong balance sheet to withstand turbulent times,” Asanda Notshe, a fund manager at Mazi Capital, says.

You can invest in Mazi’s Prime Equity Fund with a lump sum of R5,000 or make monthly contribution of R500.

The fund now has just over R1-billion invested in it.

As with all unit trust funds you can withdraw your money at any time, but because the value of your investment can go up or down in line with the shares in which it invests, it is best suited for investments that you are able to leave invested for about five years to ensure you will earn a positive return overall despite any short-term ups or downs.

Notshe says if you want exposure to listed equities you need to be an investor who has little regard for volatility or short- to medium-term losses in your investment. You must have some tolerance for the investment risk to enjoy longer-term capital growth, she says.

“We say remain invested for at least five years as this volatility and the short-term hits become less significant over the long term,” Notshe says.

The fund managers also considers environmental, social and governance factors when investing in companies. They look for companies that behave responsibly in light of global warming, transformation, inequality and diversity, and which have good corporate governance.

Currently, the Mazi Prime Equity Fund is heavily invested in shares in the financial and consumer services sectors of the JSE, followed by resources, industrials, consumer goods and healthcare. It also holds some offshore and domestic cash investments.

From time to time, the portfolio may also invest in some unlisted derivatives to protect its investments.

The Prime Equity Fund’s largest holdings are currently in Naspers, Firstrand, Standard Bank Group, Anglo American, Sasol, Old Mutual, Bidvest, Investec, Exxaro Resources and BHP Group.

“We perform a thorough analysis and due diligence before we invest in any share and the number of shares we would hold in the fund ranges from 20 to 40 shares across the different sectors of the JSE,” Notshe says.

The fund had a tough year last year as global political risks and local economic challenges affected the markets. It showed a loss of 12.5% for the year, but it has made up some of this loss in the first four months of the year and its one-year return to the end of April is now just minus 1.76%.

Its average return over the past seven years remains a healthy 11.05% a year.

According to Notshe, the maximum fall from a high to a low – the draw-down – the fund has suffered was 16% and this occurred during the global financial crisis of 2008. The fund’s draw-down was however less severe than the 23% decline the JSE All Share Index suffered.

The JSE subsequently recovered 32% in 2009, “which is why we encourage our investors not to panic and withdraw their investment during volatile markets”, Notshe says.