To help support transformation in SA’s asset management sector, Sowetan Money has launched a monthly series profiling easily accessible and affordable unit trust funds managed by black asset managers. In the third of our series we find that track record, trust, investment philosophy and strategy are key building blocks for success.

Investors instinctively have confidence in an asset manager with a long, consistent track record in delivering inflation and market-beating returns.

This is why it’s good to know that while black asset managers are increasing in number, there are among them some with longer track records.

The number of black asset management companies has increased from 12 in 2009 to 48 a decade later – a 243% increase, according to 27four’s latest BEE.conomics survey of transformation in the asset management industry. 

Although progress in the transformation of the industry is good news, black managers are still in the minority and those with a long track record are an even smaller subset - only 15 of the 48 are older than 10 years.

Kagiso Asset Management is one of those 15 and its consistent performance across all its funds was recognised at the most recent Raging Bull Awards when the company won the award for best black asset manager. 

Founded as a joint venture between Kagiso Group and Coronation Fund Managers in 1999, the manager is a subsidiary of Kagiso Tiso Holdings and the investment arm of Kagiso Trust and the Tiso Foundation. 

The fund is the fourth largest black asset manager in the country with R38-billion under its management by the end of 2018, according to 27Four’s survey.

While Kagiso has an equity fund, a Top-40 fund, a Shariah equity fund and a range of multi-asset or balanced funds that invest across the asset classes at varying degrees of risk, among its top performing funds is the Kagiso Stable Fund. This fund invests across the asset classes but is aimed at more conservative investors as it only invests up to 40% of the fund in equities. 

“The aim of the fund it to provide total returns that are above inflation over the medium term and maintain capital stability in order to minimise losses over any one-year period,’’ Abdulazeez Davids, a portfolio manager at Kagiso Asset Management, explains.

The fund’s benchmark is inflation plus 2% and it has comfortably outperformed this target since its inception eight years ago.

The fund has achieved a return of 8.7% a year net of fees since May 2011 to the end of April 2019, comfortably beating the average two percentage points above inflation benchmark of 5.8% a year over this period.

In the latest Morningstar report on local unit trust fund performance, over the longest period measured for the fund, which is seven years, the fund is ranked 30th out of 125 funds that also invest across all the asset classes but do not invest more than 40% in equities.

Davids says the fund’s investment philosophy and strategy is to invest in shares, bonds and other investments which Kagiso believes are mispriced in the market – they are trading at prices lower than what Kagiso believes they should be and the manager believes over time the shares will return to what it regards as the correct price, delivering a return for investors who buy in when the price is cheap. 

The Kagiso Stable Fund is available for you to invest in for a lump sum of R5,000 or a monthly investment of R500. 

Kagiso charges an annual management fee of 1.25% of your investment and if you use a financial adviser, the adviser may also charge you an ongoing fee of up to 1% a year – but this fee is negotiable between you and your adviser. An adviser can also charge an initial once-off fee of 3% of your investment. 

Although the fund has a strong bias towards equities which is seen as the asset class with the highest expected long-term returns, it does invest in a wide variety of domestic and international classes including listed property, conventional bonds and inflation-linked bonds. 

At the end of April this year, just over 30% of the fund’s assets were invested in equities, 13.5% in hedged equities (where derivatives are used to protect from losses) and 22.9% kept in cash. The balance was spread in property, preference shares and bonds. 

Featuring as top equity holdings were the shares of Adcorp, Old Mutual, Metair, Clover Northam Platinum, Royal Bafokeng Platinum and AECI. 

Being a smaller manager, Kagiso favours small to midcap shares that some larger managers may struggle to hold as unit trust managers are prohibited from taking too large a stake in any one company. 

Davids says he encourages any potential investor to seek financial advice as any part of the financial decision process to ensure you understand all costs, risks and the expected future returns when you invest.