
Nedgroup Investments has appointed a new manager for the formerly popular Rainmaker Fund following a prolonged period of lackluster performance.
Managing around R6.5 billion in assets, the fund has consistently underperformed against its benchmark (the average in the Asisa Equity: General category) over the last one, three, five, seven, and ten years. Additionally, this benchmark itself has been trailing the FTSE/JSE Capped Shareholder Weighted All Share Index and the All Share Combined Index (prior to the Swix index) for nearly a decade.
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Abax Investments (formerly Polaris Capital), a boutique asset manager founded in 2003, has been at the helm of the Rainmaker Fund for Nedgroup Investments since its launch in 2000. The investment team at Abax has been responsible for managing the fund since its inception. Moreover, Abax also oversees the Flexible Income Fund, Opportunity Fund, and Entrepreneur Fund for the bank’s investment division.
Monitoring the manager ‘closely’
Nedgroup Investments indicated in its 2021 annual report that “in 2020, we adjusted the mandate of the Nedgroup Investments Rainmaker Fund to allow the manager to invest up to 30% of its portfolio in offshore equities.”
“The fund achieved a return of 23.6% in 2021. Nevertheless, its long-term results (3.8% annualized over five years) have been disappointing, leading us to continue our close scrutiny of the manager.”
Read: SA reforms spur money manager Abax to boost exposure [Jul 2024]
With changes announced by the National Treasury, the maximum offshore allocation was raised to 45%. In 2023, it was reported that the “fund had a respectable year (9% in 2023), yet its longer-term performance remains underwhelming (4.6% annualized over five years). We will continue to closely monitor the manager.”
In comes Ninety One …
On December 11, Nedgroup Investments revealed its decision to replace Abax as the manager of the Rainmaker Fund with the “Ninety One quality team.”
Nedgroup Investments’ head, Nic Andrew, stated that this decision follows an in-depth review and aligns with their Best of Breed philosophy to ensure the best possible outcomes for clients.
Listen/read: Ninety One remains positive despite concerning outflow volumes [Nov 2024]
Nedgroup asserts that “in 2020, the mandate was modified to incorporate global equities, and in 2022, the SARB [South African Reserve Bank] increased the prudential offshore limits to 45%, permitting almost half of the portfolio to be allocated to global equities. In light of this, Nedgroup Investments assessed the requirements for managing such an equity mandate.”
Andrew commented: “Given the mandate adjustment to include nearly 50% global equities and the fund’s performance, we determined it was in the best interest of investors for Nedgroup Investments to seek better options that align with the fund’s objectives.”
Read: Have investors been ditching SA’s biggest asset managers? [May 2023]
After a thorough evaluation using Nedgroup Investments’s stringent Best of Breed criteria, the Ninety One Quality Team was selected to assume management of the flagship fund for Nedgroup Investments, pending regulatory approval.
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“We believe the Ninety One Quality team is exceptionally qualified to manage this mandate due to their strong capabilities and successful track record in both South African and global equities. They exemplify the qualities we seek in our partner managers, and we trust that their expertise will yield superior results for our clients.”
Exclusive access point
The Rainmaker Fund will serve as the exclusive gateway to the Ninety One Quality capabilities within a South African General Equity Fund.
Thabo Khojane, MD of Ninety One South Africa, stated: “We are honored to be selected by Nedgroup Investments as a Best of Breed manager for the Rainmaker Fund and look forward to a fruitful partnership.”
Clyde Rossouw, head of the Ninety One Quality Team, added: “Our team is eager to provide investors in the Rainmaker Fund with our extensive knowledge in managing both South African and global equities.
“We are fully committed to achieving the fund’s goal of delivering long-term returns.”
As of the end of November, the Rainmaker Fund’s top 10 holdings included FirstRand (5.3%), Naspers (4.9%), Anglo American plc (4.3%), Pepkor Holdings (4.2%), British American Tobacco plc (3.5%), Sanlam (3%), Visa Inc (2.9%), Microsoft Corp (2.9%), Amazon (2.9%), and Bidvest (2.9%). Foreign equities constituted 41.7%, with an additional 1.4% in offshore cash.
Abax remains a key partner
Andrew highlighted that Abax Investments continues to be an important ally for Nedgroup Investments.
“Abax Investments will continue to manage the Nedgroup Investments Opportunity Fund, the Nedgroup Investments Flexible Income Fund, and the Nedgroup Investments Entrepreneur Fund. All of these funds have delivered excellent returns, and we are confident they will sustain this performance going forward.”
Over the past year, the Rainmaker Fund has seen net outflows of R71 million in Q3, R85 million in Q2, and R72 million in Q1, according to Asisa data.
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