the nedgroup investments core range - allan gray · • primary listing in london and ~80% of sab...

1

Allan Gray Fund Provider Workshop

Jannie Leach

Head of Core Investments

The Nedgroup Investments Core Range

2

Passive investment landscape has changed

3

Continuous growth in global market share

4

Increased use of rules-based balanced funds in SA

5

Created to provide investors with a solution that is:

• Designed with a clear goal in mind (Inflation + 3 or 5% pa)

• Optimally implemented by Best of BreedTM partner, Taquanta

• Low fees (0.25% pa) and total investment costs (0.41% - 0.49% pa)

• Complementary to actively managed balanced funds (Core-ActiveTM)

Have achieved scale (Over R10 bn in AUM)

Eighth year of existence

The Core Range

6

Comment on Dimensional Fund Advisors, the pioneer in alternative indexation:

"Yet survey the number of competitors’ products that are currently available and use the same

foundational research: It will quickly become clear that it is the implementation of such insight

into the investment process, not the research itself, that is essential. This implementation is a

matter of culture, and culture is always in the hands of people."

Julie Segal (Institutional Investor Magazine)

Core Range – Dispelling the myth around low cost investing

7

The South African Core Range

8

The Nedgroup Investments Core Global Fund

9

Effective tool to lower over all costs in client portfolios

TIC data from Allan Gray Investment platform lists, January 2017

Transaction costs: Core Guarded 0.05%, Core Diversified 0.12% and Core Global 0.02%.

0.41% 0.49% 0.46%

1.39% 1.37%1.21%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Core Guarded Core Diversified Core Global (USD)

Tota

l In

vest

me

nt

Ch

arge

s (T

IC)

Median peer (AG)

1010

Nedgroup Investments Core Diversified Fund

1 September 2009 to 31 December 2016

Annualised

ReturnVolatility

Sharpe

RatioTIC

Nedgroup Investments Core Diversified Fund 12.5% 7.0% 0.97 0.49%*

Median of the ten largest balanced funds 12.3% 7.0% 0.93 1.37%*

Median of SA Multi-Asset High Equity Cat. 10.8% 6.9% 0.81 -

Peer group ranking (55 funds in total) 11 23 11 1

* TICs of the funds on the Allan Gray Platform List

1111

Nedgroup Investments Core Guarded Fund

1 February 2010 to 31 December 2016

Annualised

ReturnVolatility

Sharpe

RatioTIC

Nedgroup Investments Core Guarded Fund 10.7% 4.1% 1.23 0.41%*

Median of the ten largest conservative funds 9.1% 3.8% 0.91 1.39%*

Median of SA Multi-Asset Low Equity Cat. 9.0% 3.7% 0.87 -

Peer group ranking (65 funds in total) 6 19 9 1

* TICs of the funds on the Allan Gray Platform List

1212

Asset class returns – 1 September 2009 to 31 December 2016

Asset Class Annualised return Annualised Volatility

Local equities 14.4% 11.0%

Local listed property 17.8% 12.7%

Local bonds 8.4% 7.2%

Local Inflation-linked bonds 8.7% 5.3%

Local cash 5.7% 0.2%

Global equities 16.9% 12.6%

Global listed property 19.0% 12.9%

Global bonds 9.9% 12.9%

Global Inflation-linked bonds 11.3% 12.8%

Global cash 5.8% 13.1%

Nedgroup Investments Core Diversified Fund 12.5% 7.0%

1313

Asset class returns – 1 September 2009 to 31 December 2016

Asset Class Annualised return Annualised Volatility











Nedgroup Investments Core Diversified Fund 12.5% 7.0%

1414

Benefits of diversification

Source: BlackRock

The analysis date is 29-JAN-2016, the base currency ZAR and the risk model is BlackRock’s Fundamental Equity Risk Model (BFRE World

Equity). We are using 6 years of monthly observations with a 36-month half-life. For ex-ante risk we are using a Confidence Interval of 84%

(numbers used will only be exceeded 16% of the time during any one year period, which represents 1 standard deviation from the mean).

15

Impact on the asset allocation and benchmarks

SAB Miller delisting

16

SAB Miller delisting impacts equity universe

Equity benchmark considerations

• Primary listing in London and ~80% of SAB earnings are non-SA

• Portfolio weightings

• Core Diversified – 1.9%

• Core Guarded – 0.8%

Asset allocation considerations

• SA Listed property - equity universe excludes all listed property shares (J867)

• Global Equity - ‘Rand hedge’ weighting of SA equity market

SAB Miller delisting – structural considerations

17

Asset Allocation considerations for including Listed property as an asset class

• Ability to generate an inflation hedged income stream

J253 – SA Listed Property Index

• No longer SA only

• Increase in development companies that do not pay out income

J867 – SA REIT Index

• Companies must be ‘true’ REITs (>=75% income distribution)

• Impact - increase in Intu

• 0.1% to 0.7% in Core Guarded/ 0.3% to 0.7% in Core Diversified

Listed property universe – Change from J253 to J867

1818

Global exposure - rand hedge shares vs offshore global equities

Nedgroup Investments Core Diversified Fund – Impact of swapping 2.5% SA for offshore equities (Before and after)

Source: BlackRock

The analysis date is 29-JAN-2016, the base currency ZAR and the risk model is BlackRock’s Fundamental Equity Risk Model (BFRE

World Equity). We are using 6 years of monthly observations with a 36-month half-life. For ex-ante risk we are using a Confidence Interval

of 84% (numbers used will only be exceeded 16% of the time during any one year period, which represents 1 standard deviation from the

mean).

1919

Core Diversified change in strategic asset allocation (mid-point)

Asset Class Core Diversified New Core Diversified











Limits

Total equities* 67.5% 67.5%

Total offshore 22.5% 24.5%

* Excluding listed property

20

The Nedgroup Investments Core portfolios were created to provide investors with a

solution that is:

• Designed with a clear goal in mind

• Low overall expenses

• Fits into your investment strategy (multi-asset)

• Scale to drive down costs and improve efficiency (TE)

• Optimally implemented by a portfolio manager with scale and experience

Conclusion

21

Thank you

22

DisclaimerNedgroup Collective Investments (RF) Proprietary Limited administers the Nedgroup Investments unit trust portfolios and is authorised to do so as a manager in terms of the Collective Investment Schemes Control Act. Collective Investment Schemes

(unit trusts) are generally medium to long-term investments. The value of participatory interests (units) or the investment may go down as well as up and past performance is not necessarily a guide to future performance. Nedgroup Investments does not

guarantee the performance of your investment and the investor will carry the investment and market risk, which includes the possibility of losing capital. Collective Investment Schemes are traded at ruling prices and can engage in borrowing and scrip

lending. A schedule of fees and charges and maximum commissions is available on request from Nedgroup Investments. Certain Nedgroup Investments unit trust portfolios apply a performance fee. For the Nedgroup Investments Flexible Income Fund

and Nedgroup Investments Stable Fund, it is calculated daily as a percentage (the sharing rate) of total positive performance, with the high watermark principle applying. For the Nedgroup Investments Bravata World Wide Flexible Fund it is calculated

monthly as a percentage (the sharing rate) of outperformance relative to the fund’s benchmark, with the high watermark principle applying. All performance fees are capped per portfolio over a rolling 12-month period. Certain Nedgroup Investments unit

trust portfolios include international assets, whereby a change in the exchange rates may cause the value of those investments to rise and fall. The Nedgroup Investments money market portfolios aims to maintain a constant price (e.g. R1.00) per unit. A

money market portfolio is not a bank deposit. The total return to the investor is made up of interest received and any gain or loss made on any particular instrument and that in most cases the return will merely have the effect of increasing or decreasing

the daily yield, but in an extreme case it can have the effect of reducing the capital value of the portfolio. The yield is calculated using an annualised seven day rolling average as at the relevant dates provided for in the fund fact sheet. Excessive

withdrawals from the portfolio may place the portfolio under liquidity pressures and that in such circumstances a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed. A fund of funds is a portfolio that

invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for the fund of funds. A feeder fund is a portfolio that invests in a single portfolio of a collective investment scheme, which levy

its own charges, which could result in a higher fee structure for the feeder fund.

Please note that Nedgroup Collective Investments (RF) Proprietary Limited is not authorised to and does not provide financial advice. This presentation is of a general nature and intended for information purposes only. It is not intended to address the

circumstances of any investor and cannot be relied on as legal, tax or financial advice, either express or implied. Whilst we have taken all reasonable steps to ensure that the information in this document is accurate and current on an ongoing basis,

Nedgroup Investments shall accept no responsibility or liability for any inaccuracies, errors or omissions relating to the information and topics covered in this presentation. Nedgroup Collective Investments (RF) Proprietary Limited is a member of the

Association for Savings & Investment SA (ASISA).

the nedgroup investments core range - allan gray · • primary listing in london and ~80% of sab...

Documents