Hi everyone, this is Uncle Kevin. Today I would like to encourage you to start investing today.
Have you developed a savings habit? Are you saving money every month? Do you know that by consistently investing money every month, you are going to reap the rewards in the long term? Investing is not a short-term game like a 100 metre sprint, but rather a long-term game like a 42km marathon. I would like to use two real-life client examples to demonstrate how you will reap rewards in the long run. Zane is now 43 years old. 10 years ago when he was 33, he had a financial planning meeting with me. He wanted to invest for his child's education. At that time I advised him to take up a Discovery Invest Endowment Plan, R1,000 per month, with the contribution increasing at CPI inflation rate every year. He started the investment on the 1st of April 2011. He has continued with the investment plan without fail. In year 10, his monthly contribution was R1,639. Now 10 years later, at the beginning of April 2021, the investment plan value, after deducting income tax, is R 223,691. The internal rate of return, IRR is 8.39%. Now internal rate of return is the net return received by the investor, net of fees, charges and taxes. So over the 10-year period, Zane has received on average 8.39% return per annum. Which is a good return. The second client, Ken is now 49 years ago. 10 years ago when he was 39, he also had a financial planning meeting with me about the same time, and he wanted to invest for long-term. At that time I advised him to take up a Discovery Invest Endowment Plan, R1,000 per month, with the contribution increasing at CPI inflation rate every year. In year 10, his monthly contribution was R1,639. Now 10 years later, at the beginning of April 2021, the investment plan value, after deducting income tax, is R202,116. The internal rate of return, IRR is 7.13%. There are 3 points I would like to focus on:
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We have partnered with Fedgroup in offering their financial solutions for many years. A recent update shows that Fedgroup Participation Bond continues to attract investors interest in the volatile and uncertain markets. Its fund size has grown from R1.9 billion to R3.9 billion. It is a five-year term investment. The current fixed interest rate is 7.6%. The Growth Option, which compounds interest income, offers a very attractive 9.21% effective rate. This investment is suitable for investors and pensioners looking for steady income and a fixed return. Please contact 083-633-4671 or service@daberistic.com, if you are interested in this investment. outh Africa has a relatively small equities market with a handful of dominant shares, spread across a few sectors, which are available to invest in. This presents a significant risk for investors: a highly concentrated portfolio. When compared to global markets, the Johannesburg Stock Exchange (JSE) is relatively small, comprising less than 1% of the total global investing universe. It is also highly concentrated, with the top 10 shares on the FTSE/JSE All Share Index (ALSI) making up between 50% and 60% of the index. In contrast, the top 10 shares in one of the world’s major indices, the S&P 500, make up just over 20% of the index. Most of the ALSI’s concentration comes from one share: technology giant Naspers, which makes up 20% of the index. Naspers’ dominance in recent years has increased concentration risk for investors, making portfolios overly sensitive to the factors that drive its value. In general, most investors are happy to contend with the exposure, as long as they are still generating positive returns. But what happens when the proverbial goose stops laying the golden eggs; when the dominant share(s) in your portfolio begins to perform poorly? How you can mitigate your concentration risk As famously stated by American economist Harry Markowitz, who received a Nobel Memorial Prize in Economic Sciences: “Diversification is the only free lunch in finance.” The best way to reduce your concentration risk, without losing out on the potential to earn good returns, is to make sure that you are invested in a combination of assets that have little correlation to one another – essentially, having a diversified portfolio where you generate returns from a wider spread of assets, industries and markets with an acceptable level of risk. To construct a diversified portfolio, one has to consider correlation and volatility. Correlation measures the strength of the relationship between the returns of two assets. A positive correlation indicates a strong positive relationship, i.e. the two assets tend to have higher and lower returns at the same time – this is indicative of an undiversified portfolio. A negative correlation implies the opposite, i.e. returns of the two assets move in opposite directions at any given time. A correlation of zero implies that no relationship (positive or negative) exists between the returns of the two assets. By adding assets with zero, or negative correlation, a portfolio becomes more diversified. You should also look at the overall volatility of your investment to gauge how well your portfolio is diversified. Intuitively, a portfolio consisting of correlated assets should show a larger deviation in its overall returns (i.e. high volatility), while a portfolio that has uncorrelated or negatively correlated assets should show smaller deviations in its overall returns (i.e. low volatility). In essence, if you have a well-diversified portfolio, then your investment should generate returns at lower levels of volatility over the long term. Diversify your portfolio If all this sounds very complicated, you could consider investing in a balanced fund. These are available both locally and internationally and offer a good solution to those investors who want to create a diversified portfolio without the hassle. Your chosen investment manager will carefully select a basket of uncorrelated assets from different markets, companies and industries to ensure that you generate good returns with minimal concentration risk. Local balanced funds offer South African investors some offshore diversification, but remember that Regulation 28 of the Pension Funds Act limits their foreign asset allocation to a maximum of 30% of the fund, with an additional 10% for investments in Africa outside of South Africa. This may not be enough offshore exposure for your needs – in which case you can also invest directly with offshore fund managers of your choice or through an offshore platform, such as the one Allan Gray offers. Every South African resident can use up to R11 million offshore for all foreign expenditure including travel, foreign exchange and for investing purposes. The first R1 million, called the single discretionary allowance, can be used without having to obtain permission from the South African Revenue Services (SARS) and the Reserve Bank. If you want to spend above this allowance, up to R10 million, you would need to get a tax clearance certificate from SARS. To further diversify, many investors choose to invest in more than one of the same type of fund from different managers. If you go this route, it is important to check that the underlying investments are different; otherwise, the combined weighting of the duplicate shares may increase your portfolio’s concentration. Building a diversified portfolio can be complicated and requires a solid understanding of markets and companies. But the good news is that you don’t have to go at it alone. An independent financial adviser (IFA) can help you assess the concentration risk in your portfolio and advise accordingly. It can be tempting to ignore concentration risk when the going is good, and returns are attractive. However, an undiversified portfolio can quickly become a problem if your most concentrated shares begin to perform poorly. Source: Vuyo Nogantshi , Allan Gray In the past three weeks, I have attended investment briefings by four well-known asset management companies in South Africa. The four fund managers are PSG, Allan Gray, Coronation, and Prudential. Allan Gray ranked first and PSG ranked second in the Raging Bulls Award. Prudential Prudential is the number one Larger Manager according to Morningstar, it also celebrates 25 years of asset management in South Africa this year. Coronation is a JSE listed fund manager that celebrated asset management in South Africa for 25 years last year. I will tell the reader my summary first: 1. These four fund managers have excellent long-term track record. Many of their funds are suitable for different types of investors, ranging from short-term high-yield, secure capital funds, to equity funds and multi-asset allocation funds for long-term growth. 2. No one has escaped the effect of political corruption (namely State Capture) in South Africa in the past five years, which has led to the economic downturn and the flat stock market. Fund managers have also been affected by the ongoing US-China trade war on the global economy and investment market since last year. The annualized return on equity funds over the past five years has been 5%. 3. Looking ahead, all fund managers are optimistic about the return on the South African stock market in the next three to four years, Japan and emerging markets such as China. At this stage, they also like the high yield on South African bonds, giving investors a yield of 9% to 10%. They are negative on European and American bonds, especially the negative interest rate on 10-year German bonds. Investors investing in German bonds are destined to receive less than the principal after 10 years. 4. Allan Gray and Coronation are South Africa's largest fund companies, with large amounts of assets under management and relatively conservative investment style. Prudential and PSG manage assets on a smaller scale, and they are able to be more flexible. Prudential always likes some exposure to listed property, and PSG is now favoring small and mid caps in South Africa and certain Japanese companies. ***** I have been dealing with asset management companies in South Africa for nearly 20 years. I have seen the growth and changes of the asset management industry, and experienced the ups and downs of the investment market: The Dot Com bubble in 2000, the global financial crisis in 2008, the European debt crisis, the emerging market crisis in 2014, and the US-China trade war from 2018 to the present. In South Africa we have seen the shocking firing of Minister of Finance Nene in 2015. During this period, South Africa's asset management industry flourished and there are now more than one hundred fund managers. It is very challenging in choosing the funds to invest in, as the market changes, portfolio managers change, and many funds appear and disappear in these two decades. However, patient investors investing in good funds of reputable fund managers will have been rewarded over the long term. Let compound interest be your good friend and work for you. 1. PSG Asset Management The PSG Asset Management's investment philosophy is 3M – Moat, Management and Margin of Safety. Moat is a company's competitive advantage, that acts as high barrier to entry, such as technology, systems, talent, and markets. Management refers to the track record of the company's management and how they allocate the company's funds. Margin of safety refers to whether the stock price is lower than the assessed intrinsic value of the company, this provides investors with downside protection against the risk of over-estimated intrinsic value. PSG has a 20-year history, was previously run by successful manager Jan Mouton and then handed over to Chief Investment Officer Greg Hopkins, who has 18 years of experience. Shaun le Roux has been with the company 18 years, managing PSG Equity Fund and PSG Flexible Fund. However, it has lost two senior portfolio managers in the past three years, the performance of new managers Justin Floor and Dirk Jooste remains to be seen. PSG's philosophy is to find investment opportunities in areas that everyone hates, and to avoid everyone's favourite stocks. This is value investing. Therefore, PSG currently does not invest in technology companies or defensive stocks, but favours South African small and mid caps. Below are the latest PSG investment update videos: How we think about and manage risk Is SA Inc even investible? Opportunities in local markets Opportunities in global markets 2. Allan Gray Allan Gray has a 45-year history in South Africa and its sister company Orbis has a 29-year history of managing global assets in Bermuda. Both companies share the same founder, Allan Gray, and have the same value investment philosophy. Like PSG, it is also a contrarian investor, looking for investment opportunities in areas that people don't like. However, because of the large scale of assets under management, Allen Gray must invest in large blue chip companies. Allan Gray's strengths are equity research and asset allocation. Its weakness is its long-term dislike for real estate, which currently works in its favour, but it missed the long-term listed property boom before 2018. Allan Gray's portfolio managers are pretty stable, with an average of more than a decade of experience at Allan Gray, giving investors invested in their funds certainty and peace of mind. Allan Gray pointed out that the total assets under management of the South African fund industry in the past three years were virtually flat, indicating that the South African stock market has been dull in the past five years and that the general public under economic and tax strains has no money to invest more. It is no surprise that, over the past three years, The fund category receiving the most new money flows is money market and income funds. Because of the lacklustre returns from the South African stock market in the past five years, investors have turned to income funds for high yields. Indeed, the chart below confirms the equity return has been below the cash return over the last five years. But the stock markets do work in cycles. If history repeats itself, the return of the SA stock market in the next three to four years will far exceed the bank deposit interest rate. The chart above shows that during the past 17 years, between 2002-03 and 2012-13, the five-year JSE total return was lower than the deposit rate. It is also the case from the second half of last year. However, after the stock market rebounded, the return for the next three to four years was better than the bank deposit. According to Allan Gray's data analysis, cash deposits only has a 13% chance of outperforming the stock market in the next four years. In other words, the stock market has an 87% chance of outperforming cash deposits in the next four years. The odds are now in investors' favour to hold and enter the stock market, not to exit. Allan Gray's foreign investment is handled by its sister company Orbis. Orbis has long-standing admirable performance, but it has fallen 20% in the last one and a half years, making it a bottom performer last year, and slightly behind its sector average in the past five years. This is due to its contrarian investment style, sometimes allowing it to greatly exceed the market, and sometimes falling far behind. I remember that in 2012-13, Allan Gray also had a period of under-performance, but it laid the foundation for its subsequent performance in 2014-2016. In the past year, Orbis has more stocks losing money than stocks that make money. What has happened? According to its analysis, the top five detractors of performance are as follows: Orbis spent some time explaining the largest detractor XPO. XPO is a US logistics and transportation company that aims to help companies enter the e-commerce sector and compete with Amazon. It is committed to the vertical integration within the logistics industry, offering small and medium-sized enterprises one-stop service. It acquired a truck fleet company Conway four years ago. In the second half of last year, the profit announcement disappointed, then short-sellers attacked the company with damaging reports. Its stock price subsequently fell 30%. Orbis met with the management and thought that the founder Bradley Jacobs and his management team were still very good, and the market was wrong in punishing the stock, so it increased its investment in XPO. Abbvie is a US pharmaceutical company, and Orbis is convinced of the future of the US healthcare industry, so it has added another pharmaceutical company, Celgene. After reviewing the investment case for Netease, it has increased its holding, now it is the largest position in the fund, with a weighting of 9.1%. PG&E is an electricity and gas company in California, USA, it sold out at a loss. It also sold out Symantec, an internet security company, at a loss. For the Chinese market, Orbis is optimistic about the future of tech companies, mainly holding shares in NetEase, Tencent and Autohome. Orbis has a long-term track record, I suggest investors buy on current dips. 3. Coronation Asset Management Coronation is 26 years old in South Africa and is South Africa's largest listed fund manager. I was invited to participate in the annual Face to Face event in Cape Town, as due diligence, and listened to its economist and 8 portfolio manager briefings throughout the day, from Top 20 Fund, Balanced Plus Fund, Strategic Income Fund. Capital Plus, Balanced Defensive, Property, Global and Emerging Markets, The day ended with a Q&A session with Chief Investment Officer Karl Leinberger. Coronation employs 300 people, one-third of whom are investment analysts and fund managers, a strong investment management team in South Africa. It follows a valuation driven investment process and invests in undervalued companies or assets. The difference between Allan Gray and Coronation is that Coronation is more likely to invest in riskier industries in the stock market. In recent years, it has invested in mining stocks, which initially caused the its equity funds to fall, then helped investors make money when share prices recovered and rose. Coronation also likes real estate, and for a long time there has always been an exposure to listed property in South Africa and abroad. However, Coronation has also stepped on many of the so-called landmine stocks in recent years, such as Steinhoff and MTN, so the returns from its equity exposed funds have been market average for the past five years. The Coronation investment management team is stable and reputable. They have been incorporating ESG (environmental, social, governance, environmental, social and corporate governance) principles in evaluating investment opportunities for many years. On the whole, their standouts are income-based funds, where risk management is robust, and opportunities are captured for clients to enhance yield. the other area is global Emerging Markets. Many analysts visit the CEOs of listed companies around the world, they really work hard to find investment opportunities for clients. Other funds are expected to have similar returns relative to other larger managers in the long term. 4. Prudential Prudential Prudential Investment Management celebrates 25 years in South Africa. Similar to Coronation, the valuation investment method is also used, but because it belongs to Prudential, a global financial services group headquartered in the UK, it tends to have a more macro, top-down approach, to assess the relative value of each country and asset class, thereby overweight the undervalued assets and underweight the overvalued assets. It does not take big bets, but rather a large number of small bets. It uses a team-based investment management model. Its investment performance is more market neutral, unlike Coronation, which sometimes experiences large ups and downs due to its conviction calls. Although the investment management team is not large, it is also very stable. Chief investment officer David Knee has more than 20 years of investment experience, mainly fixed income assets, worked in the UK and moved to South Africa in 2008. Head of Equity Johny Lambridis is an actuary and has many years of investment management experience. Prudential's macro data analysis has three points that caught my attention: First, China and India accounted for about 50% of global GDP before 1820. The G7 industrial countries rose rapidly during the industrial revolution of the 19th century, and reached the peak of 49% of global GDP in 1940. The rise of China and India over the past 40 years is just a return to its former status. It now accounts for 30%, which is equivalent to 32% of G7 countries. 2. The global population continues to grow, but the growth rate is slowing. The global population is expected to reach 11 billion in 2100. The population continues to be aging, which has a huge impact on social welfare, government borrowing, caring for the elderly, and political landscape. 3. The rise of China is closely related to the liberalisation of world trade. The left axis of the chart below shows the world trade as a percentage of GDP, and the right axis is the growth rate of China's economy. World trade has increased from 25% in the 1960s to nearly 60% in 2008, but since then it has plateaued. The ongoing US-China trade war is threatening world trade, which in turn will slow down China's economic growth. Prudential's leading funds are Equity Fund, Balanced Fund, Inflation Plus Fund, and Enhanced SA Property Tracker Fund. These funds have outperformed the average fund in their respective sectors over the long term. However, Inflation Plus Fund has fallen behind in the past three years.
Summary The US-China trade war that began more than a year ago has been hurting the economy and trade of the two largest economies of the world, while also disrupting and re-shuffling the global supply chain. In addition, the United States hiked interest rates four times last year, increasing the rate to 2.25%, attracting funds back to the United States, first hitting emerging markets, and then hitting the US stock market. The US stock market had the second worst rate of return in December in the past 100 years (-7.8%). The South African asset management companies that I rate highly agree that the South African stock market and global emerging markets are at or near historical lows, and many good investment opportunities are found at this stage. We recommended long-term investors to continue to have exposure to growth (stock) assets, which could provide a 60% return over the next three years. *** Global The US-China trade war has been more than a year since the US declared it last year. President Trump of the United States believes that China was competing unfairly. The US trade deficit with China is huge and continues to expand. China infringes on intellectual property rights, as well as providing subsidies to public and private companies. Sanctions include imposing 10% tariffs on imported products from China, lawsuits and measures against ZTE, Huawei and other Chinese telecommunications companies, and containing Chinese companies in the 5G sector. From the recent statistics on Chinese economic growth and import and export volume, China’s exports in February fell by 20.7% from the previous year to US$135 billion, the largest decline since February 2016, indicating that the US-China trade war is having a significant negative impact on China. China's stock market fell 25% in 2018, but since the start of 2019, China's stock market has risen by 25% due to the recovery of global investor confidence and the Chinese government's monetary easing. In 2018, the US stock market was steadily rising, until it experienced a sharp 7.8% drop in December and a 6.1% decline over the year, the first annual negative rate of return since the 2008 global financial crisis. However, it has risen 11.48% since the beginning of this year. South Africa After Cyril Ramaphosa was sworn in as new president at the beginning of last year, there were high expectations from all sectors, which was termed Ramaphoria. However, the US-China trade war, the emerging market currency crisis, the ANC party’s two-faction fighting have caused the high spirits to evaporate quickly. The successive commissions of inquiry have opened up the lid on the rampant corruption and briberies during the Zuma era, so now we know that the National Treasury was hollowed out, and the infrastructure is crumbling. Eskom frequently broadcasts news of mismanagement, energy crisis and implements load shedding, which darkens investor confidence. South Africa’s economic growth rate last year is only 0.8%, and this year is not going to be any better due to the Eskom factor. South Africa's stock market fell 8.5% in 2018, the first annual negative rate of return since the 2008 global financial crisis. If former President Zuma sees the stock market return history, he will brag that, during his presidency, the stock market has risen every year and has never fallen! This is a bit ironic. South Africa's stock market has risen 6.3% since the beginning of this year. The four South African fund managers I rank most highly, based on my long-term observation, analysis and evaluation, agree that 2018 was a tough year for all investors: they lost money no matter where they put their money (except bank deposits and bonds). PSG pointed out that 2018 was a year of trying to avoid landmines: In 2018, the following well-known listed companies have brought huge losses to investors. The South African stock market is now near the bottom of the five troughs experienced over the past 40 years. Coincidentally, Coronation also has the same analysis: However, they also agreed that 2019 is a year of turnaround. The PSG research report pointed out that the annualized rate of return for the three years after the past five lows was as high as 24.3%, that is, the cumulative rate of return for three years was 92%. Even using the lowest annualized return rate of 16.4%, the investor's 3-year cumulative return would reached nearly 60%. This is the so-called reversion to the mean. Even if the South African economy does not do much, by going from the bottom of a market cycle to the average of a market cycle, with a little boost of investor confidence, the investors could receive this kind of return. PSG Asset Management is currently positive on the following asset classes (marked by green): South African domestically focused stocks, government bonds, overseas stocks and cash. Even though 2018 was a disappointing year for investment returns, we recommend investors not to give up on the stock market; continue to hold stock positions in the medium and long term, with exposure to South Africa and offshore markets. Allocate positions in shares, bonds and cash. During this trying time, I chose this pearl of wisdom from Warren Buffett to remind myself and investors:
Now is not the time to give up; it is probably the best investment opportunity since the 2008 global financial crisis. Yesterday (Happy International Women's Day!) I was fortunate to visit Dodge & Cox in San Francisco, US. Kevin Johnson, an experienced portfolio manager at Dodge & Cox, was kind in spending over an hour with me, for me to understand more about the firm, its operations and investment outlook. Dodge & Cox is situated in the Financial District of San Francisco, occupying 4 floors in this very impressive skyscraper on 555 California Street. After the guest registration process at the lobby, I was told to take a lift to the 40th floor. When the elevator door opened, I walked onto think carpet, with the gold plated Dodge & Cox signage in front of me. I knew I was at the right place. The office has stunning views of the San Francisco Bay area. The tall building in the second picture is Transamerica Pyramid, 260m high. Kevin Johnson came and welcomed me, took me to the boardroom with stunning views of San Francisco. I decided to sit with my back facing the view/window, so I could better focus on my discussions with Kevin. Kevin Johnson is well versed in the investment markets, with 28 years of experience at the firm. I gave him a background of what Daberistic does, our wealth management services to our clients, and how Dodge & Cox funds fit into our solutions to our clients. Kevin then gave me a presentation booklet on Dodge & Cox UCITS. I am not familiar with the term UCITS, so afterwards I googled it. UCITS stands for “Undertakings for Collective Investment in Transferable Securities". In essence mutual funds, or unit trusts as known in South Africa. Dodge & Cox was founded in 1930 in San Francisco. It prides itself in having a stable and well-qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox. Ownership of Dodge & Cox is limited to active employees of the firm. Currently there are 75 shareholders and 271 total employees. It is a mature fund management business. Kevin emphasised the point that Dodge & Cox is independent, no absentee ownership, no parent company to report to, so not forced to do anything. This is a great contrast to Merrill Lynch, which is owned by Bank of America. Dodge & Cox is solely in the business of investing clients' assets. Apart from the San Francisco office, it only has one small client service office in London. So all its staff are based in the single office in San Francisco. It offers a focused range of strategies (I tend to like fund managers with a small, focused range): US equities Non-US equities Global equities: combination of the above two US Fixed Income Global Fixed Income US Balanced (combining equities and fixed income) Active vs Passive This debate continues to rage on. Kevin and Dodge & Cox are undoubtedly in the Active Managers camp. His comments? Active managers have been overly criticised for high fees, the focus on (comparing to) average active managers return is a mistake. Dodge & Cox wrote an article on the characteristics of good active managers. These include: 1. Low turnover 2. Experienced 3. High active share. Passive is really a Momentum strategy, buying more on the way up. He used the dotcom bubble as an example: in 1998 the tech sector accounted for 45% of S&P, and index trackers would continue buying more of tech companies as their weightings in the index rose. Only to see the dotcom bubble burst until 2002. What is important is to focus on performance after fees, he comments. I 100% agree with this point. Dodge & Cox is a value-driven fund manager. Value as a style has fallen out of favour with investors over last few years, as the bull market continues to rise. Dodge & Cox continues to stick to what it has done over last 88 years, without wavering. Value Defined It is always good to get under the skin of a manger to understand better what they mean. Kevin defines the firm's Value Investing as "what you thing it's going to be worth in the future. It can be strictly metric based, such as PE ratio. It can also be valuation relative. You would want to avoid something with very high premium built in the price, as it may not be sustainable." So Dodge & Cox sees value in a slightly different way to Warren Buffet. It uses four investment hypotheses: Above Average Growth, Compounders, Cyclical or Asset Play, Deep Value or Turnaround. Warren Buffett's style is probably more the first two hypotheses. Risk Management Over the years I have learnt to appreciate that the best fund managers are also the best risk managers. Dodge & Cox has a systematic way of analysing risks, under the six headings of Operational, Macroeconomic, Commodity, Financial, Technological and Political/Legal Risks. These are used to assess what will cause the future outcomes to disappoint. Investment process Dodge & Cox has a tried and test investment process, run by a very experienced team. I posted some very specific questions to Kevin, his comments are as follows: Schroders as a value manager We as a manager do not worry about what other fund managers do. My impression is they have an excellent reputation, has value orientation. It may have lots of funds. On the question of the use of the word Recovery in Schroders global Recovery Fund: "There can be an element of marketing. This might define value in a more narrow way." Coca-Cola "it is a good business, not a lot of growth, highly priced. We don't own any Coca-Cola stock. Maybe when its PE is 13 it becomes interesting to us." Amazon "A remarkable company, high valuation makes no sense to us. However what it does influences our thinking on other retailers. Retailers like Sears and JC Penny have been in decline for years. Macy's also struggling, not to the same extent. Walmart and Target have done better in response to the changing business environment, the online/offline mix strategy is a good one." Its AWS (Amazon Web Services) also influences our thinking on other tech companies like Microsoft." "of the FANGs, we only own Google" Dell Dell just came out with its update, showing 9% turnover growth and doubling operational losses, so I posted to Kevin. "Dell went largely private, had a series of corporate actions over last 2 1/2 years. Laptops have low margin, the profitable part is server/other services." Portfolio diversification As a wealth manager I am very sceptical of funds with 20% weighting in one stock (Naspers), as I question their risk management and diversification. "We do not have more than 5% of portfolio in one holding. In our Global Stock Fund, we probably will not exceed 3%." Its original (US) Stock Fund has an enviable track record of annualised 9.55% return over 20 years, outperforming S&P500. Over 10 years a respectable 7.71% after fees. The Global Stock Fund, which South African investors can access via Glacier Global Stock Feeder Fund, has done annualised 13.26% in USD over last 5 years. The time was just too short, if there is an opportunity I would come back again. At the end of the meeting I asked Kevin to take a photo together. He agreed as a gentleman.
Discovery Balanced Fund is a flagship fund offered by Discovery Invest. It is only available on the Discovery Invest platform. It is managed by Chris Freund of Investec Asset Management, a very experienced and successful portfolio manager. He manages investments using an earnings revision approach. Discovery Balanced Fund has attracted a lot of inflows, in fact the fastest growing balanced fund in South Africa, thanks to clients and advisors' support, benefiting from the integration and unique features of a range of Discovery Invest products. Discovery Balanced has been a consistent top-quartile performer in the high-equity balanced fund sector, with the (annualised) performances figures as follows: 10 years: 10.14% 5 years: 11.52% 3 years: 8.05% 1 year: 11.34% This fund has a high cost, with a Total Investment Charge (TIC) of 2.12%. This makes it one of the most expensive balanced funds to invest in. I question this high fund management fee, even given its good performance figures. Were it not for various integration and fee reduction structures offered by Discovery Invest for investing in a Discovery fund, this will erode net returns to investors over the long term. Discovery Balanced Fund is suitable for general long-term investment. Being Regulation 28 compliant, it is suitable for use in a retirement product. Below is the link to download Discovery Balanced Fund's fund fact sheet as at end December 2017.
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