The Reg 28 fund that has almost no exposure to South Africa

The High Street High Equity Prescient Fund – and it’s been a top performer over the past year.
Ross Beckley’s strategy has been to allocate almost entirely away from the local economy. Image: Supplied

Over the past 12 months, the average return from South African multi-asset high equity funds has been 2.7%, according to figures from Morningstar. Over that same period, the High Street High Equity Prescient Fund has gained 25.4%.

Source: Morningstar

While this fund is a multi-asset strategy, it is clear from even a cursory glance at its asset allocation that fund manager Ross Beckley is doing something unusual.

The portfolio has almost no bond exposure, at just 0.1% of assets. It also carries a high weighting to property, with 17.5% invested in this sector.


The reason for this is that Beckley’s target is to allocate in such a way that the fund maintains an 80% to 100% rand hedge bias. The intention is to offer a Regulation 28-compliant vehicle into which South African investors can invest in rands, but is minimally exposed to the local environment.

“We don’t oscillate between deciding whether to be bearish or bullish on South Africa,” says Beckley. “We leave that up to the investor.

“Currently, the fund will only invest in rand hedge instruments or, at a bare minimum, counters with a material offshore component. Currently, Mix Telematics is the holding with the lowest offshore component of approximately 40%.

“A rand hedge bias of 80% to 100% is the existing target,” says Beckley. “However, this is subject to change should retirement regulation be amended, or it becomes infeasible because our investment universe shrinks to a level where it becomes imprudent to simply focus here. Our mandate allows us to change tack should either of these scenarios unfold.”


He estimates that the rand hedge component of the fund is around 90% of the portfolio at the moment.

The first part of achieving that is through making full use of the fund’s 30% offshore allocation allowance.

“Typically, that 30% offshore allocation will predominantly be in equity,” says Beckley. “We look for exposure to companies and sectors that we don’t have in our local market.”

This includes investments in mega-cap growth stocks like Microsoft and Alibaba, but also more nuanced positions in companies like Lockheed Martin.

Listed locally, focused internationally

For the 70% that has to be invested in South Africa, High Street looks for companies that are either dual-listed on the JSE or make a large proportion of their revenues from international operations. This includes prominent large cap stocks like Naspers, Prosus, AB InBev and Mondi, but also allocations to small caps like Mix Telematics and Master Drilling.

“We are not a small cap fund, but we are small enough to play in that area,” says Beckley.

As a multi-asset strategy, the fund does consider the importance of yield. However, Beckley is not currently prepared to invest in local government bonds. He could do so and stay within the fund’s objective of maintaining an 80% to 100% rand hedge bias, but he believes that the risks are too high.

“We could hold South African government bonds if we wanted to,” he says. “But we would have to see a major shift in the underlying environment before we ventured there.”


As a proxy, he therefore prefers to invest in British American Tobacco, which is currently trading on a dividend yield of 8.1% according to Bloomberg.

The fund also takes advantage of the relatively high number of locally-listed property counters that have assets offshore. Three of the top 10 holdings in the portfolio are real estate stocks – MAS Real Estate, Sirius Real Estate, and RDI Reit.

“We have to have a relatively high weighting to property, because our equity universe is so limited and for the yield,” says Beckley.


This highlights a key challenge that he faces in managing this portfolio. If the intention is to only invest in companies with high exposure to offshore earnings, the opportunity set on the JSE is extremely limited.

“Our investible universe is about 10 to 12 names in South Africa, plus the property stocks,” says Beckley. “At the moment, given the strategy of the fund, it is very unlikely that we are we going to be holders of local banks or local retailers. That eliminates a significant part of the JSE.

“But we are utilising all of the asset classes available to us. We are currently increasing our exposure to gold, and we do have a position in platinum.”

The fund has 9.4% of its portfolio in the New Gold ETF (exchange-traded fund), and 2.9% in the New Gold Platinum ETF.

Patrick Cairns is South Africa Editor at Citywire, which provides insight and information for professional investors globally.

This article was first published on Citywire South Africa here, and republished with permission.


Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.


Very interesting.

Just had a look yesterday at the difference in the Ishares S&P 500 and the Ishares S&P 500 Growth ETF’s. The first was around 9% for the year and the second around 25%.

I like their take on property as well.

Good article. Thanks.

What other Regulation 28 Funds have almost no exposure to South Africa?

Thought provoking article!

Very astute asset manager who obviously has done his homework and saw his way through whilst being hamstrung by Reg. 28. He is to be commended for this. Speaking of which, Reg. 28 continues to operate on life support courtesy of (costing) the S. A. investor. This by being forced to do so by a government that wouldn’t know what an investment is if it jumped up and bit them in their seating area. It is an absolute waste and does not conform to a free market economy. If government thinks they have a problem with retirees now, give it another five years or so when the masses cannot afford to retire because of being saddled with Reg. 28 for the past 13 years or so. 10 of those last years were dismal to say the least. Or is Reg. 28 just another way of “expropriation by RSA imprisonment/capture bill”? If Reg. 28 was truly done for the benefit of the South African investor then surely we would have something to show for it by now?

I predict that over the next three to five years local industrials are going to well, from a low base.

”I have never been an intellectual, but I have the look”

Woody Allen (1935-)

I have also been enthralled by the notion that it is ”possible” to peer into the future and by the looks of it – so did Ross Beckley with his strategy to allocate almost entirely away from the local economy with the Reg 28 fund.

To what extent can we anticipate what lies ahead – inbred in all of us is the capacity to weigh probabilities – long before modern economic policymakers formalized such decision making in mathematical terms.

The theory of efficient markets cannot explain stock-market crashes. The markets have not been reacting rationally for decades now and I think lots of investors rushed to disengage from commitments, causing stock markets to crash. The lessons of stock-market investing apply to the forecasting of whole economies.

I think in sunny SA, the regulators failed to ensure that rapid-fire, risk-laden dealings were financed by wealthy professional offshore funds, and not by the general public. Their efforts to monitor and influence failed – public-sector surveillance is no longer up to the task.
I just love the Reg 28 Fund approach: ” Beckley’s target is to allocate in such a way that the fund maintains an 80% to 100% Rand hedge bias. The intention is to offer a Regulation 28-compliant vehicle into which South African investors can invest in rands, but is minimally exposed to the local environment. We don’t oscillate between deciding whether to be bearish or bullish on South Africa. We leave that up to the investor”

Been looking for something like this for a while. @Prescient / High Street how does one invest? It doesn’t seem to show up as a fund option on Prescient or High Street’s website.

You can use the form on the Contact Us page on the High Street website. Alternatively you can call us on 011 325 4006 for more information.

Well done to them. Its refreshing to see companies coming-up with solutions instead of the usual complaining we have become accustomed to. Next step someone must put together an ETF that replicates that strategy.

Its a pity they are only available on the Momentum platform due to size of fund limits. I ran away from Momentum due to bad service. Charles @ Easy Equites can you consider this in your RA?

Refreshing article from Patrick C & commendable from the fund management at High Street.

Was getting excited, thinking “I’d better instruct my fin.advisor/broker to switch some of my underlying funds in my RA’s”…and then noted “Obs” mentioned it’s only available on the Momentum platform (…wonder which product range? Investo?)

Then it would mean a Section 14 type transfer.

But before I get too excited, this impressive fund is STILL subject to Reg 28. So, irrespective the underlying assets, if the Govt later dictate say a 20% must be into Govt Bonds….THEY ALSO would have to comply & rebalance their portfolio….where they’d have 80% left (of the cake) to invest where they want to invest.

Will thus affect ALL Reg 28 funds.

Best to be invested outside Reg 28, if you can. Direct offshore even better. But granted yes, many of us are stuck in R28 Funds…so this one could be the pick of the bunch (‘beste van slegte saak’)

Unfortunately it’s only on the Momentum Wealth platform, as well as the Momentum FundsAtWork platform for corporates. We share your sentiment with regards to Reg 28, and advocate for direct offshore investment whenever possible. However, this fund is the best solution we could find for our clients’ compulsory retirement savings.

Despite my Reg28 comment, this admittedly remains an impressive fund. Absolute MAX offshore exposure in various ways.

Section 14, here we come!

Great initiative

However, with the 3 years lockup proposal still solidly on the table, I will be touching any RA with a barge pole. I might still maxed out contributions to my work pension as I’ll still have access via resignation but if there’s a wiff of government changing this, resignation it will be and my early retirement just a little earlier than planned

Apologies, will NOT be touching

@BergSeun 😉

…the proposed 3 year waiting period only applies to people (mostly prior-55 age) that has emigrated & still has they Ret funds in SA.

If you remain in SA & retire here, the good news is it won’t apply to you (as a SA tax resident).

And think about it…..remaining in SA, will allow you to be “closer” to your retirement fund assets….hence you & I will have a BETTER VIEW to see how the governent will burn our pension funds to the ground (like “standing closer to a bonfire”). While waiting our pensions going up in smoke, we’ll enjoy our last beers & while sobbing together.

End of comments.




Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.

Follow us:

Search Articles:
Click a Company: