STANLIB Multi-Manager Diversified Equity Fund – simplifying the fund structure

June 2020

by Albert Louw

Albert Louw

The STANLIB Multi-Manager Diversified Equity Fund is a diversified equity fund of funds. Its investment objective is to provide long-term capital growth through investment in local and global equity markets. It aims to outperform CPI plus 7% p.a. over rolling 7-year periods, with a low probability of capital loss over the long-term. As inflation is not a market variable, the preferred measure of relative performance – and the Fund’s benchmark – is the ASISA General Equity Category average.

Over the long term the Fund has outperformed its benchmark comprehensively, as shown in the table that follows.

Ongoing portfolio management

As part of our ongoing portfolio management process we regularly review the underlying managers in the Fund and evaluate the overall construction framework. This ensures the Fund is well placed to maintain or improve performance going forward. This process does not always result in changes but did result in a change recently.

This communication highlights the changes made to the Fund and the basis for these changes. The revised portfolio construct is highlighted in the table that follows.

Basis for the change

The primary basis for the change was to simplify the Fund’s structure and concentrate its exposure to STANLIB Multi-Manager’s house view domestic and global equity funds, namely the STANLIB Multi-Manager SA Equity Fund and the STANLIB Multi-Manager Global Equity Fund.

Our holdings-based analysis revealed that many of the primary characteristics of the Allan Gray SA Equity Fund, the Nedgroup Entrepreneur Fund and the STANLIB Multi-Manager Property Fund – namely large cap value, small cap and property – could be achieved through the STANLIB Multi-Manager SA Equity Fund.

The portfolio managers of the STANLIB Multi-Manager SA Equity and STANLIB Multi-Manager Global Equity funds have access to a range of quality managers from our Buy List. This list is a result of our manager research process, that takes managers through rigorous quantitative and qualitative analyses. The portfolio managers can shape their funds to get exposure to a range of managers from the Buy List and can hire or fire when they feel a superior alternative comes along. This is part of our ongoing portfolio management process that ensures we continue to give our clients exposure to quality managers.

Current CISCA regulations restrict fund of funds to a minimum of two underlying funds with a maximum exposure of 75% to any one fund. Global exposure (excluding Africa) is currently restricted to 30%. Therefore, to ensure the Diversified Equity Fund is not in breach of these requirements, we added a small exposure to a low-cost passive equity block, the 1nvest ALSI 40 Fund. This provides the additional flexibility in the management of the Fund that we require to take views around the direction of local and global equity, as well as helping to reduce the Total Expense Ratio of the Fund.

Underlying manager line-up

We believe that the revised structure of the Fund gives investors exposure to quality managers both locally and globally. The Fund’s current manager line-up is highlighted in the table below.

Conclusion

In constructing the STANLIB Multi-Manager Diversified Equity Fund of Funds we consider multiple facets of the underlying funds and managers; and how they blend together with the ultimate objective of outperforming the peer group average. The Fund has achieved this objective over the long term.

The new fund structure is simpler and more focused and we are confident that the recent changes will help retain the Fund’s excellent performance track record. As always, we continue to research the universe of managers and funds and will apply our investment process to identify and provide investors exposure to quality managers.