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Nedgroup Investments Managed Fund drops its performance history

After the change in investment policy.

Sixteen months after Truffle took over as managers of the Nedgroup Investments Managed Fund, the unit trust is effectively being given a clean slate. The Association for Savings and Investment South Africa (Asisa) has decided that because there has been a material change in the fund’s investment policy, its historical performance should no longer be published.

The fund was previously managed by RECM, but Nedgroup Investments replaced them with Truffle in November 2015. At the time, the fund was the worst performing unit trust in the South Africa multi-asset high-equity category over one, three, five and ten years, since RECM’s deep value strategy had gone through a long period of not being rewarded by the markets.

This decision brought a complication, which was that Truffle already had its own multi-asset high-equity fund – the Truffle Balanced Fund. The agreement with Nedgroup Investments was however that it would only manage funds for Nedgroup Investments in this category.

Initially, the plan was simply to merge the two funds, but this proved problematic. Nedgroup Investments was therefore left with two funds in the same category, with the same mandate, which regulations do not allow.

Its solution was to propose a change in investment strategy for the Managed Fund. It balloted investors to get approval to restrict the fund’s investment universe to only South African assets. In other words, it would no longer be allowed to use its 25% offshore allowance.

This was approved and from November 1 2016 Truffle immediately began to align the fund to this new policy. All through this period the fund had maintained its long-term performance history.

The change in investment strategy however necessitated a review by the Asisa fund classification standing committee.

“The standing committee reviewed the application and all relevant information, including historic asset allocation for the fund,” explained senior policy adviser at Asisa, Sunette Mulder. “It was decided to approve the change in investment policy, but with a loss of performance history.

“The reasoning of the standing committee was that the investment policy of the fund is now materially different and the investor experience in the restructured fund could be expected to be fundamentally different,” she added. “As such it could be misleading to potential investors to present past performance for this fund.”

Mulder said that the actual track record of the fund played no part in this decision. It was purely made on principle.

The decision by ASISA has drawn some concern in that it has allowed Nedgroup Investments to effectively bury the extended poor long term returns the fund had produced. This didn’t just include the last few years for which RECM was the manager, but also the first year of Truffle’s management in which the fund lost a further 10.3%.

However, the head of Nedgroup Investments, Nic Andrew, stressed that it had not motivated for the performance history of the fund to be dropped. It had simply presented Asisa with the information it needed to make an assessment on the change in investment strategy.

“The Asisa guidelines say that a manager can motivate for a change in performance history when there is a change in investment strategy, but because we understand the sensitivities we didn’t want to do that,” Andrew told Moneyweb. “And the feedback we got is that the investment policy was materially different and that historical performance should no longer be published.”

He pointed out that until the guidance had been received, the fund’s track record had been maintained.

“We haven’t run away from the very disappointing performance of the fund,” Andrew said. “We have engaged a lot with clients because it has been a massive disappointment for us.”

Even though the new fund fact sheets can no longer contain the historical track record, Nedgroup Investments has kept a live link to the October 2016 fact sheet on the fund’s page on its website. This is the last fact sheet that can legally show the performance history, since it was the last month before the change in mandate took place.

“We’re very conscious of our responsibility to the existing investors,” said Andrew. “We have tried to make it very clear where they can get the history. But the reality is that for new investors the most appropriate track record is the Truffle track record, and that will be the new track record.”

Together with the change in mandate of the Managed Fund, Nedgroup Investments also received approval to rename the Truffle Balanced Fund. This is now being offered as the Nedgroup Investments Balanced Fund, and will keep its previous track record.

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Nedgroups’ Stable, Value & Rainmaker Funds also performing poorly.

And this here ladies and gentlemen is another reason the financial services sector struggles to keep the trust of its customers. Pull the other leg nedgroup and asisa! Those cosy industry relationships paying off handsomely I see…. sies!

Time for the financial industry to take a long hard look in the mirror . . .

Heads we win, tails you lose. Fund managers can write history as they want so they always look good. If a fund does well we will keep it but if not we will do what is needed to make it look.

RECM must be relieved to have their poor history wiped clean. In what other industry would you still have a business after losing money for your clients for over 10 years???

Not only do you lose money for your clients, but you yourself get very rich by taking a few percent of billions each year.

They never even offered their clients a cent in fee reduction as some sort of recompense after 10 years of dismal performance.

This is why managing your own portfolio is better in my opinion, and why passive investing is gaining momentum.

So what does the relevant regulatory body do about this?

S F A.

Hey Nick tell us how long it will take truffle to get back to the nominal peak price of about 535.00 cpu.

Hey show us the b a l l s.

You were quick and consistent in telling unit holders about holding on and that all would be ok. Or did you not Nick? Pray do tell us.

Patrick do some digging here………..maybe some dirt?

Ask Neek how much disappointment the unit holders had. For Nedbank to cry about their disappointment when they lost not a cent is enough to make one throw up.

I honestly don’t know how ou Piet still makes a living in this industry.

I can assure you Piet does not need to make a living any longer.Cycling and tweeting about rubbish while investors are crying.Their is little doubt that Nedgroup let the grass grow under their feet on this one,despite the extended period of underperformance. What does boggle the mind as to why this fund remained on the list of Nedbank Financial Planning approved fund list,when both the composition of the fund and its performance did little to warrant it.These aspects should be raised because funds continued to be invested while better performing funds were not on the list.

Corning you are 100% spot on. This is why Nedbank and dear neek could be taken to task by a relevant authority sooner rather than later.

What about it Patrick? Do you think that NB actions are ethical and above reproach? Do you think that they need business and personal sanction?

How about some investigative journalism Patrick?

Disgraceful conduct by Nedgroup – This is why you have to control for survivorship bias in any study of historic active managed returns – the official numbers are always biased upwards as a result of this.
So passive strategies will look even better if compared to the true active managed returns.

“We have engaged a lot with clients because it has been a massive disappointment for us.”

Bulldust. Nedbank has offered no remedial compensation for their shocking lack of interest in this fund despite investment professionals and investors agonised please for them to take action while RE:CM was stuffing up.

Want to know the new fund’s history?

Here it is (from the relevant website:)

“RECM is a privately owned, independent asset management company that was founded in 2003 with the primary intention of putting clients’ interests first.

At RECM we follow a disciplined, value-based philosophy that focuses on growing clients’ wealth in real terms above inflation, while protecting their capital from the risk of permanent loss.”

Note the “ABOVE INFLATION…..”

Thanks Louise.

The real isue is less with RE:CM but with Nedbank:

-What they told their clients

-What they did not do

The axe may fall on this one.

Patrick – I would be interested if you could ask the FSB why when a Fund changes mandate to ALLOW offshore investment (like many local equity Funds have done in the past few years) it can retain its track record, but when it changes its mandate to EXCLUDE offshore investment it gets stripped of its track record?

Agree with other comments that this isn’t right and paints the financial services industry (quite rightly) in a VERY poor light!

Would appreciate if you could help with some digging!

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