Insights, Updates and News

2015 Year in review

By Nic Andrew, Head of Nedgroup Investments

Dear Valued Investor

2015 has been a tumultuous year for South African investors, culminating in the bizarre and irresponsible replacement of our Finance Minister, Nhlanhla Nene. While the end result of the appointment of Pravin Gordhan is a welcome relief after a few days of madness, much damage has been done and it will take significant time and effort to win back our reputation, especially in the eyes of foreign investors.

Investing is never easy and against the backdrop of this political uncertainty, sluggish economic growth, the end of quantitative easing in the US (and resultant interest rate increases) and generally inflated asset prices we are under no illusion that things will be any easier in the foreseeable future.

We see our primary role as helping you achieve your goals. A key way we do this is by researching and selecting independent Best of breed™ managers who we believe have a sustainable edge in their area of expertise. We have been diligently applying and refining this Best of breed™ investment philosophy since 2003.

Accordingly, excellent long-term performance is at the centre of what we strive to achieve. We judge ourselves and our managers over a full investment cycle and encourage you to do the same. In the world of short-termism and instant gratification, we believe an ability to take a longer term view is one of investing’s few sustainable competitive advantages.

We were therefore delighted that in the most recent PlexCrown survey (as at 30 September 2015) we were the top-ranked manager in two categories; both South African unit trust funds, and FSB- approved offshore funds. These rankings measure the risk adjusted performance of the entire range over three and five years, with an emphasis on the longer period and on funds with a larger amount of assets.  It is therefore a reasonable proxy of our investors’ experience. It is also very pleasing to see the consistency of this performance. This is the sixth year in a row that we have been placed in the top three.

Seven of our 22 funds received five stars (top 10% of their category) and a further eight funds achieved four stars (next 22.5% of funds in their category).  These awards are something we are very proud of but are acutely aware that it is history and that we need to remain focused and diligent to continue to deliver into the future.

Against this overall positive backdrop, one of our major disappointments over the past few years has been the performance of the Nedgroup Investments Managed Fund. During November we made the difficult decision to appoint a new manager; Truffle Asset Management. Truffle exhibits many of the qualities that Nedgroup Investments look for in a manager. They have a stable team of investment professionals with a vast depth of experience and an excellent long-term track record in managing balanced funds.

 

We have also made a few other enhancements to the range. In April we appointed The Killen Group, based in Philadelphia, to manage the Nedgroup Investments Global Cautious Fund whose objective is to outperform US dollar cash while protecting capital over the medium term.

Our local multi-asset low cost solutions; Nedgroup Investments Core Guarded and Nedgroup Investments Core Diversified Funds continue to perform well and to attract significant assets. To enhance this range, we have recently appointed BlackRock Investment Management (UK) to manage a low-cost global multi-asset fund; the Nedgroup Investments Core Global Fund. In our view, these funds are the largest, best value and most sensibly constructed ‘passive’ funds in the industry.

Last year, National Treasury introduced various Retirement Reforms, aimed at encouraging savings and helping people retire comfortably. This included the introduction of a tax-free savings vehicle that allows individuals to contribute up to R30 000 per annum into a unit trust and benefit from not paying any tax. We are very supportive of this initiative and have made it really easy and accessible to all clients to access our range at no extra cost.

During the year, we have invested significantly in improving your experience and hopefully making it easier for you to do business with us. We recently launched our refreshed website, which renders well on all devices making it easier to navigate. Then, for those of you registered on our secure site (for those who are not, we recommend you do as it is very quick and easy to do by going to www.nedgroupinvestments.com), you can now add to your investment, switch between unit trust portfolios and redeem securely and easily in a matter of minutes.

We also launched a new look and feel investment statement, which is interactive when received digitally, however also available in print. We believe that it will make it much easier to understand the key elements of your investment however a guide is available to help you read it, should you need it.

Thank you for all the positive feedback on these new initiatives. We are also very appreciative of all feedback on where we can improve our service and offering, and encourage you to let us know.

And finally many thanks for your tremendous support. We have continued to attract significant flows and grow market share. We really do appreciate this and are conscious of the enormous responsibility we have. We will continue to make every effort to repay the trust you have bestowed upon us.

All the best for 2016 and happy long-term investing!

Nic

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