29 Jan 2010
Happy returns, for some
By Financial Mail, Stephen Cranston
Sasol is the most widely held share in SA pension funds. According to Alexander Forbes Asset Consultants, it is held as a top-10 share in 16 of 18 portfolios looked at in the consultant's SA Balanced Manager Watch. It makes up 5,38% of the average pension portfolio yet it is a share that has underperformed the market substantially, gaining just 12% over the past year.
The next most widely held, in 15 of the 18 portfolios, are BHP Billiton and Standard Bank. Standard Bank has long been a favourite of the top asset managers as it has strong management with the best returns in the banking sector. It accounts for 6,03% of average portfolios, 1,9% more than its Alsi weighting.
None of the other banks comes close: FirstRand is in the top 10 in six portfolios, Absa in three and Nedbank in just one.
Asset managers kept their inherent bias against mining shares intact, with the BHP Billiton holding at 6,1%, less than half its Alsi weighting. Anglo American is in the same boat with managers holding 5,1%, also less than half Anglo's Alsi weighting. Among the industrial shares, only SABMiller is significantly underrepresented, at 5,4% compared with 6,9% in the Alsi.
SABMiller's strongest supporter is Allan Gray, with SABMiller accounting for almost 15% of the equity portfolio in its global balanced fund. It also has support from Investec (6,1% of the equities held in its balanced fund) and from Coronation (4,8%).
The Investment Solutions Spectrum portfolio invests equally in the 11 managers in the Alexander Forbes Large Manager Watch. It shows that MTN has the highest weighting, at 6,3%, Standard Bank is next at 5,3%, Sasol is comfortably the most popular resources counter at 5,1%, Anglo American 4,3%, and SABMiller and BHP Billiton both at 4,2%. The rest of the top 10 is made up of Naspers (3%), FirstRand and Richemont (2,6%) and British American Tobacco (2,5%).
The most over-owned share two years ago was Remgro, in which managers have a 5,5% allocation compared with 2,2% in the Alsi. Since the unbundling of its BAT shares it now appears in just four top-10 lists. It now makes up just 1,1% of the Alsi but is still held with high conviction, making up an average of 4,6% of the holdings in these funds. Allan Gray and Oasis are among Remgro's strong supporters.
Trevor Abromowitz, head of Forbes Asset Consulting, notes that the holding in domestic equities in the average balanced fund has declined steadily from 72% in 2005 to 67% at the end of 2009.
This covers a wide spectrum with the most conservative in domestic equities being Re:CM at 54% and Allan Gray at 56%. Stanlib, RMBAM, Oasis and Foord are the most aggressive with more than 68% of equities held being in domestic companies.
The main structural move has been into listed property, up from 1,5% to 3,7%, while the exposures to bonds has changed significantly.
Abromowitz says portfolio managers upped their bond exposure from a low of 8,5% at the end of 2008 to 14% a year later. "Part of this is investment into inflation-linked bonds, but it also shows there is a widespread belief that it is going to be a much better year for conventional bonds," he says.
The exposure to international assets in fully discretionary portfolios has increased to 17% but this shift has knocked returns. While the average domestic balanced portfolio has produced a 17,6% annual return over five years and 23,7% in 2009, balanced funds with global portfolios gave 16% over five years and 20,5% in 2009.
As often happens, the rankings of the top portfolio managers were quite different from the year before (see table, right), according to the Global Manager Watch. Allan Gray, the default manager for most consultants, was second last out of 22, beating only Oasis, which started life as a breakaway from Allan Gray.
In contrast Metropolitan, which has been a disappointment since it topped the rankings 10 years ago, came in fifth. Abromowitz says it is far too early for him to recommend Metropolitan to clients. "I cannot say with any conviction that this performance is sustainable," he says.
The clear winners were Investec and Coronation, which now also have strong medium-term performances and are now on most consultants' buy lists.
And there has been a strong turnaround at Sanlam Investment Management with a solid 21% return. It remains second last, however, to a hapless Stanlib over three years.
Alexander Forbes also measures asset class performance to help pension funds which prefer to give specialist single asset class mandates to portfolio managers rather than balanced mandates.
There are three categories in the Equity Manager Watch survey:
- Enhanced index, for funds which want to stay as close to the benchmark as possible;
- Benchmark-cognisant for those who want only a limited tracking error against the benchmark; and
- The non benchmark-cognisant, which are given free rein.
Low-profile Kagiso Asset Management has a top fund in both the enhanced index and benchmark-cognisant categories. Investec Active Quants had a strong year, outperforming the index by 6,5%. This was a better return than all the non benchmark-cognisant funds except Coronation Aggressive Equity.
Of course, the greater freedom in the nonbenchmark-cognisant category also means greater freedom to fail. Stanlib Small Cap was no less than 28,8% below benchmark, Oasis Specialist Domestic was 7,2% below and Allan Gray underperformed by 6,4%