Regarding Capital Management
Press Office Feature : RE:CM Global Feeder Fund outperforms peers in 2011 by not following the herd
Company: Regarding Capital Management
Author: Cara Louw
Email: editor@itinews.co.za
Posted: 15 Feb 2012
Article from itinews
The RE:CM Global Feeder Fund was the top performing equity fund across all unit trust funds available to the South African retail investor in 2011.
The fund was also the 2nd best performer amongst all South Africa unit trusts for the year. Notably, the RE:CM Global Feeder fund was also the only fund in the top 5 that is not a global bond fund.
A flight to safety saw global bonds outperforming global equities during 2011 with the JP Morgan Global Bond Index (unhedged in USD) returning 7.7% for the year versus the MSCI World Index, a global equity benchmark, which returned -4.8% for the same period.
The RE:CM Global Feeder Fund, a rand-based global equity fund, returned 28.1% for 2011, 12 percentage points ahead of the MSCI World Index in rands.
Piet Viljoen, Executive Chairman at RE:CM, says that this was achieved by avoiding emerging markets and other fads, which many investors favoured over the same period.
Viljoen says that the team focused on including strong cash generators in the fund, through powerful brands such as Johnson & Johnson, Microsoft, BP, Vodafone and Berkshire Hathaway.
Viljoen explains that the RE:CM Global Feeder Fund is a Rand denominated fund with an underlying investment in the RE:CM Global Fund, a global equity fund with specific focus on generating long-term real capital growth at below average risk levels.
The RE:CM Global Fund has returned 5% per annum (in US dollars) since inception in May 2006, comfortably growing the capital in real terms.
Over the same period the MSCI World Index, including dividends, has returned only 0.5% per annum.
The Global Fund was one of only two global equity funds, out of all the FSB approved global funds in South Africa, to provide a positive return for the period dominated by the global credit crisis.
"Investing in the RE:CM Global Feeder Fund provides an opportunity for investors who have used up their offshore allowance or prefer to invest in rands, but who still wish to benefit from offshore exposure via the RE:CM Global Fund.
"The Fund has consistently proved its mettle in tough conditions," says Viljoen.
"These satisfactory returns are achieved through avoiding most fads and fashions. A year ago, many investors thought emerging markets were the place to be, due to their strong growth prospects and the developed world's debt problems."
"It's now one year later and emerging markets have underperformed even the European markets, while the US market has delivered good returns. In addition, the US dollar has been one of the strongest currencies globally, despite the USA being downgraded by S&P."
"Fortunately, the Fund was positioned primarily in US stocks and the US dollar. We however didn't foresee this outcome."
"All we did was to invest where prices and, by implication, expectations, were low. Historically, we have found that low expectations lead to good investment results."
"As a result of the new purchases and additions, the Fund's exposure to Europe has almost doubled to just over 10% and we continue to find very attractively priced securities in that geographic area."
"As always, it takes turmoil to produce bargains, and Europe is enjoying its fair share of turmoil. One of our biggest purchases by value was Coca-Cola Hellenic - the largest independent Coke bottler by revenue globally."
"It services a range of developed and emerging markets, and happens to be listed in Greece. In short, it's a global powerhouse available on a free cash flow yield of 10%."
He says that a net result of RE:CM's actions over the past six months has been an increase in exposure to European, UK and Japanese assets, and a reduction in exposure to US assets.
"This has not happened due to a macroeconomic view or forecast; it is simply due to price/value relationships. The undervalued assets happened to be domiciled in the developed markets."
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