Diversified approach ensures stable, long-term returns

To support transformation in SA’s asset management sector, Sowetan Money continues its monthly series on easily accessible and affordable unit trust funds managed by black asset managers. The seventh part of our series focuses on independent wholly black-owned multi-manager, 27four Investment Managers.

The multi-manager invests across different asset classes, fund managers and investment strategies providing a more stable long-term investment return.

“Our philosophy is based on the premise of not putting all your eggs in one basket. Investing in a single manager fund exposes you, the investor to risks associated with a single investment house,” explains Marietjie Oosthuizen, certified senior financial planner at 27four. 

Oosthuizen says the fund manager’s aim is to optimally blend these different managers with different styles to get the ideal mix with a diversified style exposure and then to maintain this optimal combination as the markets change, either by increasing or decreasing allocations between different managers. 

27four’s Balanced Prescient Fund of Funds is a moderate risk multi-managed, multi-asset class portfolio. It gives you diversification across asset classes and fund managers by investing in a combination of equity, listed property and fixed income funds both locally and internationally. 

Established in 2008, and with a current fund size close to R900 million, the fund has about 35% invested in local equities and 22% in global equities. This means you will be exposed to local and global market volatility with the fund value moving when markets move. 

The fund is classified as a medium-equity sub-category of the multi-asset funds, which means it can invest between 40% and 65% in equities. 

27four has selected to invest the equity portion of the Balanced Prescient Fund of Funds in two funds managed by smaller boutique managers, the Bateleur Equity Prescient Fund and Denker SCI SA Equity Fund. It has also invested a portion of the equity allocation in the more well-established Coronation SA Equity Fund.

The global equity allocation has been invested in the Investec Global Franchise Fund, the Franklin Global Real Estate Fund and a US dollar call account. 

The manager chooses the underlying funds based on the strategy adopted.  

The fund is suitable for investors with a medium-term investment horizon of between three to five years and you can invest in it for a minimum monthly contribution of R500 or a lump sum of R5,000.  

The total investment charge is currently 1.53% of your investment a year. This is in line with fund fees like that of Sanlam’s Global Financial Fund and Investec Equity which range from 1.24% and 2.46%.

The objective of the fund is to generate moderate capital growth and income, and since the portfolio is diversified across various asset classes it holds more equity exposure than low risk portfolios but less than high risk portfolios.

Therefore, the fund won’t give you as high returns as pure equity funds when markets are running but returns should still give you good long-term growth, giving you a smoother ride than if you invest purely in equities.

The fund has consistently outperformed its benchmark after three years of remaining invested. Over the past 10 years to the end of October it has recorded the highest average annual return of 10.42% a year compared with 8.33% a year average return achieved by all the SA multi-asset, medium-equity funds over the past decade.

Oosthuizen warns that the fund does have some periods of capital losses over the shorter term. Losses have been relatively low and since its launch the fund’s worst losses over a year have been -2.83%. 

The fund may be right for you and your retirement investments if your retirement fund or retirement annuity offers underlying choices, and if you’re seeking managers that will guide you through your investment. 

“Navigating the financial markets and managing the associated risk has become complex. For this reason, delegating this responsibility to a team of dedicated expert investment professionals makes perfect sense,” Oosthuizen says.