NAV on 2020/02/27
|NAV on 2020/02/26
|52 week high on 2019/05/06
|52 week low on 2020/02/26
|Total Expense Ratio on 2019/09/30
|Total Expense Ratio (performance fee) on 2019/09/30
Sanlam Collective Investments
South African--Multi Asset--Flexible
CPI + 5%
No email address listed.
No website listed.
Sandy le Roux
Baobab SCI Flexible Fund - Dec 19
2019 was a mixed year for the Fund as we continued to build the portfolio. Returns have only been marginally positive which is disappointing, but we have been actively deploying cash into what we think are very attractive opportunities for patient investors. A year ago the fund had nearly 30% in local cash and this has declined to 18% as we have gradually deployed more cash into the domestic market. Much of this has been invested in domestic small and mid-cap companies where valuations have become extremely compelling. While most investors do not have the flexibility to take advantage of this, we have used our size advantage to build positions in what we deem to be solid companies, run by very capable management teams, at extremely attractive prices.
We are also finding opportunity in cyclical areas that have been in multi-year declines, but where we think supply and demand imbalances will become a tailwind in the years ahead. Two examples are uranium and shipping where we have exposure to Cameco and Grindrod Shipping. Given the poor returns in the industry, constrained supply should support higher prices in the future. Both companies have quality assets and sound management that have managed the downturn reasonably well and should produce solid cash flows when the cycle improves.
Old Mutual has been in the news for all the wrong reasons this year. While we do not think Old Mutual is an outstanding business, we do think it is an above average business that is difficult to replicate and will survive and prosper beyond the current boardroom issues. While we are concerned about the management issues, we remain of the view that Old Mutual will be a better run and more focused business in the future and that the current share price provides a compelling entry point.
Hosken Consolidated Investments or HCI is now our largest position which reflects our conviction in the investment thesis. HCI is an empowered investment company under John Copelyn’s stewardship that has a long history of sound capital allocation and strong shareholder returns. The very large discount to NAV provides a strong underpin, but we think there is also significant hidden optionality within the HCI portfolio that may be realised in the next few years, most notably their stakes in Impact Oil and Gas and Platinum Group Metals. HCI owns 30% of Platinum Group Metals which is a part owner of a significant, palladium rich reserve in the Waterberg. Impala Platinum is a partner in the project which has enormous potential value given the very strong palladium market. With the HCI share price as depressed as it is we gain exposure to assets like these for free, providing a very favourable and asymmetrical investment set up.
As we continue to build positions and increase the equity weighting it means returns may be more volatile and lumpy in the short-term. Given that our holdings trade at such large discounts to their intrinsic value I am increasingly excited about the long-term prospects for the Fund.
The portfolio will adopt a flexible approach and the asset class exposure will be varied depending on opportunities in the market. The portfolio will invest in a range of asset classes including equities, bonds, money market instruments, listed property as well as international equities and fixed interest investments. Each instrument will be selected on a bottom-up basis and based on its individual risk/reward status, and ability to deliver on the long term objective of the fund.
The investment manager will also be allowed to invest in listed and unlisted financial instruments (derivatives) as allowed by the Act from time to time in order to achieve its investment objective.
The Manager shall be permitted to invest on behalf of the portfolio in offshore investments as legislation permits.
Apart from the above, the portfolio may also invest in participatory interests of portfolios of collective investment schemes registered in the Republic of South Africa or of participatory interests in collective investment schemes or other similar schemes operated in territories with a regulatory environment which is to the satisfaction of the Manager and the Trustee of a sufficient standard to provide for investor protection which is at least equivalent to that in South Africa.
For the purpose of this portfolio, the Manager shall reserve the right to close the portfolio to new investors on a date determined by the Manager. This will be done in order to be able to manage the portfolio in accordance with its mandate. The Manager may, once a portfolio has been closed, open that portfolio again to new investors on a date determined by the Manager.
The Trustee shall ensure that the investment policy set out in the preceding clauses are adhered to; provided that nothing contained in this clause shall preclude the Manager from varying the proportions of securities in terms of changing economic factors or market conditions or from retaining cash in the portfolio and/or placing cash on deposits.