Equity Fund – Manager change: Salient Quants

Keeps you updated with news and changes within STANLIB Multi-Manager.

In constructing the STANLIB Multi-Manager Equity Fund (the Fund), we consider multiple facets of each underlying manager, including the deep value to momentum continuum. The positioning of managers along this continuum is taken into consideration, with an understanding that managers may shift along the continuum depending on how they view market opportunities. We expect managers that are sticky on either end of this continuum, likely to have a higher tracking error. To this end, we held a small allocation (5%) to either end of this continuum through the Salient Value and Salient Momentum portfolios since 2011. Our rationale was accessing these alpha opportunities by using “cost-effective” smart-beta strategies.

The Salient Momentum portfolio performed well up until 2015, in line with the liquidity-driven markets and where rand hedges continued to deliver good returns as the rand weakened. As expected, this portfolio underperformed the overall market, as the value-cycle came into favour, characterised by cyclical commodities running hard in 2016. We were disappointed, however, that the Salient Value portfolio caught very little of the value bounce.

Selected to upweight the other managers in the Fund

During the course of 2016, we became increasingly concerned about the performance of smart-beta during the increased volatility. Accordingly, we tactically reduced Salient’s manager allocation to 5.8% across both mandates, compared to the strategic allocation of 10% (5% to each mandate) and subsequently decided to terminate their mandate. Given the smaller allocation, we chose to change our strategic manager allocation by upweighting the smaller allocations to other mandates within the portfolio, rather than introducing a new manager to replace Salient.

We also found that the weights of the value or relative value-oriented managers in the portfolio had increased as they outperformed. We therefore used the opportunity to correctly size the managers within the portfolio. Given the large moves across the portfolio, we employed a transition manager to assist with the move of assets across the managers. The move was completed by the end of March 2017.

The following diagram illustrates the changes to the Strategic Manager Allocation (SMA).

 

New Strategic Manager Allocation
Coronation
17.5%
 Prudential
22.5%
 Passive
10%
 Foord
17.5%
 Visio
17.5%
 Truffle
15%

Old Strategic Manager Allocation
Salient Value 10% Coronation
17.5%
 Prudential
22.5%
 Passive
10%
 Foord
15%
 Visio
15%
 Truffle
10%
 Salient Value 10%
 
Deep Value Continuum Momentum
Portfolio positioning

The 10 largest holdings in the Fund are shown below. While Naspers continues to be the largest position in the Fund, it remains underweight relative to the index. From a sector perspective, the Fund remains overweight relative to basic materials and underweight relative to financials and telecoms.

 

STANLIB Multi-Manager has taken care to ensure that all information provided herein is true and accurate. STANLIB Multi-Manager will therefore not be held responsible for any inaccuracies in the information contain herein. STANLIB Multi-Manager shall not be responsible and disclaims all loss, liability or expense of any nature whatsoever which may be attributable (directly, indirectly or consequentially) to the use of the information provided.

STANLIB Multi-Manager Limited is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (Licence No. 26/10/763).