Where would fund managers invest R5m today?


Moneyweb canvassed top money managers and market commentators on where they would invest R5 million today.

In this hypothetical situation, there were two possible time horizons: a three-year view (to 2025) and an eight-year one (to 2030). The investment could be split across both time horizons or only in one.

The only other proviso is that the amount could be invested in (listed) shares or exchange-traded funds (ETFs), funds, or other asset classes.

We requested that the investment professionals be somewhat specific, and not simply focus on thematic options.

This is the first of two articles based on the responses received. Two managers selected funds, while others offered picks of a number of specific stocks. These, along with their thinking, will be published in the second part of this series.

Piet Viljoen – executive director and portfolio manager, Counterpoint Asset Management

“Today, many assets outside of the US are cheap. Low interest rates have inflated the value of ‘capital light’ businesses with stable or growing income streams. The rest have been left behind. The really cheap markets are those that are politically unstable and reliant on resource extraction,” says Viljoen.

“The JSE is one of those. Insiders are taking companies private at a record pace, proving its cheapness. Small companies are ignored and offer huge potential. For example, last year Aveng and Steinhoff were up over 400%, PPC by 350% and Merafe by 300%. Many other shares also increased substantially.

“The Counterpoint SA Value Fund is small enough to take advantage of these undervalued small companies. It also owns cheap high quality large companies like Absa, Sasol, Exxaro, and Glencore.


“On a longer-term view, no one knows what the world will look like. As a reminder, in 2015 Microsoft was regarded by pundits as an also-ran. Since then, it has been a 10-bagger.

“For longer term investing, a fund that owns different assets, without trying to forecast the future, makes sense. A roughly equal mix of cash, bonds, equities, and commodities – mainly denominated in hard currency – provides both protection and growth. Such a fund is the Counterpoint Worldwide Flexible Fund.

“I manage both these funds, and most of my liquid investments are invested there.

“Not to be too complicated, but I would start at a split of 80/20 (in favour of the local fund). Then I would move 20% from the SA Value Fund to the Worldwide Flexible Fund every year, so that in four years’ time everything is offshore. Of course, this is with my personal risk appetite. If you have less appetite, I would allocate proportionality more to the Worldwide Flexible Fund.”

Jean Pierre Verster – founder and CEO, Protea Capital Management

“The moment I get asked about periods of three years or longer, it immediately takes me to equities. Over these kinds of time horizons, one can stomach volatility.

“Three versus eight years is much of a muchness. I would probably put the whole amount into an equity fund.

“When one looks at which funds or equities did the best in the past, over shorter periods the answer is almost always if you picked the ‘right’ theme, you performed above average. If you picked the ‘wrong’ theme, you likely underperformed,” says Verster.

“So my approach would be not to pick themes – I want to be flexible. I want to be able to change themes. This provides even further flexibility than an equity fund with quite a wide mandate.

“In terms of geographic diversity – the fund has got to have the flexibility to decide where the best opportunities are. These could be in South Africa or in offshore equities.

Read: Lessons from four top SA hedge fund managers

“I want further flexibility too. I want to not only buy shares, but also be able to sell shares.

“This is especially important offshore, where equity markets are – broadly – expensive.

“In the last three months, for example, the big tech companies have been resilient but smaller tech stocks have fallen sharply. What you don’t see in the indices is that there is a lot of dispersion in underlying share prices .

“Given valuations, my preference would be being able to buy and to short (depending on the opportunity), rather than being forced to buy in now for the next three to eight years.

“The fund I’m suggesting is one I manage: the Protea Worldwide Flexible hedge fund.

“I’m not going to give my money to someone else to manage.”

Listen to this MoneywebNOW podcast with Simon Brown:

Read More: Where would fund managers invest R5m today?

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