Investec Global Strategic Managed Fund

Philip Saunders, Head of Strategy of Investec Asset Management, manages Investec Global Strategic Managed Fund. ....

YT Kum, CFA 26.04.2007
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Philip Saunders, Head of Strategy of Investec Asset Management, manages Investec Global Strategic Managed Fund. Saunders is assisted by Max King. The Fund's benchmark is composed of 60% MSCI World Index and 40% Citigroup WGBI, but the Fund's asset allocation can deviate from the benchmark. With equity portion kept approx. 65% of the entire portfolio, the Fund aggressively positions its fixed income assets. Adding that the Fund is relatively benchmark free geographically and sectorwise, the Fund management can bring its bottom-up stock selection approach into full power.

With holding approx. 200 securities, the Fund's portfolio is relatively diversified compared to its peers. The total number of holdings ha

s been increased gradually from 130 early last year to 200 recently as more investment opportunities have been found, according to Saunders. In addition to investing directly on equities and fixed income securities, the Fund also invests in funds including MLIIF World Mining and Martin Currie China, a Qualified Foreign Institutional Investors (QFII) A-share fund. This strategy should help the Fund more diversified and assist its research team to focus on exploring new investment opportunities.

On the fixed income front, the Fund has increased the modified duration and moved its cash portion (cut from 19% in March 2006 to 5% in February this year) to bonds (added from 16% in March 2006 to 31% in February this year), showing its aggressive stance towards a near-term rate cut. Management prefers equities to fixed income in short-run, and hence the weighting of the fixed income within portfolio will be decreased further for re-positioning and profit-taking.

The Fund management clings to their four-factor approach for portfolio building. The Fund management would score each stock in their investment universe, according to “strategy” (the extent to which a company has been able to generate wealth for shareholders), “valuation” (the gap between fair value and the current share price), “dynamics” (a measure of the improvement of current operating performance), and “technicals” (identification of share price trends that can be exploited). Other than fundamentals consideration, the Fund would take some technical indicators, like bull/bear ratio, as barometers to the market sentiment and this strategy can help the fund to execute their contrarian strategy. Saunders said that the successful equity positioning at the market slump around May 2006 could be partially attributed to their four-factor approach.

Despite of the choppy 1Q07 and sub-prime loan crisis, the Fund still has a buoyant view to the global economic outlook. Geographically, the Fund prefers Japan equities; sectorwise, the Fund is positive towards tech (especially software development related stocks) and healthcare sector (especially bio-tech stocks)

The Fund posted a 16.72% and 8.35% calendar returns in 2006 and 2005 respectively, which were well-above the category average, proving its strong capability to keep its outperformance through volatile market.

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About Author

YT Kum, CFA  YT Kum is a consultant for Morningstar, contributing to manager selection and asset allocation activities in Asia, and is responsible for providing investment thought leadership on topics relevent to investors in Asia.  

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