NAV on 2021/03/01
|NAV on 2021/02/26
|52 week high on 2021/03/01
|52 week low on 2020/03/23
|Total Expense Ratio on 2020/12/31
|Total Expense Ratio (performance fee) on 2020/12/31
Discovery Life Collective Investments (Pty) Ltd.
South African--Multi Asset--Medium Equity
Peer group average
Chris is the co-head of SA Equity & Multi Asset within the 4Factor team at Ninety One. He is the lead portfolio manager for our SA multi-asset strategies. He joined the firm in 2005 having left Futuregrowth Asset Management, where he served as head of equities and portfolio manager from 2001. When he first joined RMB Asset Management (RMBAM) in 1993, he spent nine years as an analyst, portfolio manager and ultimately, director. During this time, he managed a number of portfolios including balanced portfolios for many retirement funds, as well as the RMB General Equity Unit Trust. Still with RMBAM, he relocated to Cape Town in 2000 to take responsibility for the Public Investment Corporation equity portfolio outsourced by Futuregrowth, before formally joining Futuregrowth in 2001. Following the completion his articles, he joined JD Anderson stockbrokers as a banks/insurance analyst in 1990. Chris graduated from the University of Cape Town with a Bachelor of Commerce degree and holds a Bachelor of Computations (Certificate in Theory of Accounting) degree (with Honours) from the University of South Africa. Chris is a Chartered Accountant (SA) and is also a CFA Charterholder.
Hannes Van Den Berg
Hannes is the co-head of SA Equity & Multi-Asset within the 4Factor team at Ninety One. His focus is on the General Equity and Balanced strategies and equity hedge funds. Prior to joining the firm, Hannes was a portfolio manager at Fairtree Capital. He was also an analyst and head of the equities trading desk. Before that, he held various positions within the Sanlam Group, including being a founding member of MiWay Insurance and member of the Group Corporate Finance team. Hannes completed his articles at PricewaterhouseCoopers. Hannes holds a Bachelor of Accounting Honours as well Bachelor of Accounting Masters degree from Stellenbosch University. Hannes is a Chartered Accountant and CFA Charterholder.
Discovery Absolute Return comment - Mar 11
Discovery Absolute Return Fund March 2011
Portfolio review It is surprisingly easy to maintain a bearish view of the world, especially when there is no shortage of events to reinforce that view. The first quarter of 2011 was dominated by: social unrest and regime changes in North Africa and war in the Middle East; spiking oil prices; an earthquake in Japan, followed by a devastating tsunami and a nuclear scare; increasing inflation globally; and rising interest rates in China.
As a result, the local market was jittery, but equities still managed to gain 1.1% over the quarter. Volatility provides a slighter better picture of market conditions. The South African Volatility Index started the year on 21.7%, spiked to 27.3% during March, and then ended the quarter at 22.5%. Investors are clearly nervous, especially considering that the JSE cannot be considered cheap on either a historic or prospective basis.
Given the increased risk, one would expect us to be more bearish about the prospects for equity markets. We view the events in Japan and the Middle East as short-term shocks with longer term ramifications that have potentially been mispriced by the market. After all, equity markets ended in positive territory after a risk-filled first quarter!
At just below 40% exposure to equity markets, we believe that our positioning was already conservative, so we left this relatively unchanged. Ultimately, the portfolio ended the quarter in line with equity market returns on a gross of fees basis.
Over the quarter, the winners in the portfolio were Assore, Old Mutual and Sasol. The losers were Impala Platinum, the JSE Ltd, and Pick n Pay Holdings. Overall, the actively managed equity component of the portfolio was significantly ahead of the market.
Portfolio activity Activity was muted over the quarter. Protection in the portfolio was adjusted slightly to ensure its continuing effectiveness.
We raised our exposure to MTN and Old Mutual as a result of their undeserved underperformance relative to the index. Both stocks have significantly outperformed the market since this increased weighting. At the end of the quarter, we cut our exposure to RMB Holdings and replaced it with exposure to FirstRand. RMB Holdings is an investment vehicle effectively only holding FirstRand and was trading at a 6% premium to net asset value. We also managed to secure exposure to an African Bank bond, yielding JIBAR plus 4%, or in excess of a 5% real return. Finally, our derivative exposure to Discovery matured, locking in profits for our investors.
Portfolio positioning While the crisis in Japan and the loss of human life is devastating, the speed with which the Bank of Japan and the G7 nations have responded to the crisis may be positive for equity markets in the short term. The excess liquidity provided is effectively a third round of quantitative easing (QE). 0%
Combined with the fact that the US Federal Reserve (Fed) has only employed about half of its QE2, we may see further upward pressure in equity markets in the short term. We expect that the Fed will keep interest rates at close to zero for longer. Offsetting this positive momentum is a relatively bearish outlook for the US consumer. Over the quarter, US house prices turned down, while the savings rate continued to increase. Unemployment appeared to be a positive story, with the rate falling almost 1% to 8.8%, but the percentage of the population employed is relatively unchanged. On the home front, we are concerned about the impact of the expected rate increases. The SA consumer is still highly indebted, and will be squeezed further if oil continues to rise. Since disaster struck Japan, oil has become a greater concern for us. The Japanese crisis, in our opinion, has increased the risks to energy security. With China considering delaying further roll-out of its nuclear strategy, and Germany planning to mothball a number of older nuclear facilities, the pressures on fossil fuels will rise.
We continue to monitor these risks, but we have not made significant changes to the portfolio. The contagious nature of the protests/uprisings was unforeseen and we believe that their resolution is equally unpredictable. Our concern is that the number of issues that could derail the world economic recovery is increasing, and, as a result, investors are becoming increasingly jittery. Attempting to predict fluctuating sentiment is a sure way to destroy value; therefore, we will continue to keep turnover low and focus on the protection within the portfolio. In the short term, investors may experience higher volatility month to month than what they have experienced in the past. However, investors can be safe in the knowledge that their investment remains protected on a one-year basis.
Investment Strategy The fund aims to provide steady income and capital growth from an actively managed portfolio diversified by major asset classes, at a lower level of volatility than the typical equity or balanced fund. The fund will do this by investing in a balanced manner, with equity exposure moderated in order to reduce the risk of capital loss during unfavorable market conditions. The fund is compliant with Regulation 28 of the Pension Funds Act. Fund Objectives The fund's main objectives are: - provide a steady income and capital growth. - reduce the risk of capital loss during unfavorable market conditions. - maintaining a low to moderate risk profile.