House View Portfolio Proposal

Transcription

1 House View Portfolio Proposal August

2 Content Topic Page Your Private Client Partner 3 Your Portfolio Managers 3 Efficient House View Portfolio 4 Efficient House View Portfolio Performance 5 Efficient House View Portfolio Statistics 6 Company Descriptions : Top Holdings 7 Why Invest With Efficient Private Clients 12 Summary 12 The goal is not to have the longest train, but to arrive at the station using the least fuel. Tom Murphy 2

3 Your Private Client Partner FOCUS ON QUALITY Our focussed investment approach is based on a Quality philosophy. Quality investing is centred around investing in high quality businesses at attractive valuations. Efficient Select defines quality in terms of four critical aspects of an underlying company, namely: market position, business model, management and corporate governance as well as financial strength. Our quality approach seeks to identify companies with outstanding quality characteristics; companies we believe, over time, to deliver on our investors expectations. We construct portfolios based on this methodology and practise discipline when it comes to selecting the right entry and exit valuations. This has enabled us to consistently generate alpha (excess return above the benchmark). OUR TEAM The Efficient Select team comprises of eleven investment professionals with diverse qualifications, extensive experience and sound knowledge of the investment industry. We combine entrepreneurial spirit and intuition within the disciplined framework of our investment process in the management of our clients portfolios. Our boutique environment and team culture encourages growth and innovation within the maxims of honesty, integrity and respect. OUR SUPPORT Having made an investment decision does not automatically translate into returns, execution is equally important and essential in our company. With the proper systems in place to implement and monitor investments, manage risks and oversee compliance, our investment team can solely focus on delivering the performance that our clients expect. Your Portfolio Managers Robert Enslin, Head of Private Clients, Portfolio Manager BCom Honours, CFA Robert has been with Efficient Select since 2008 and has been the co-portfolio manager of Efficient Select s Specialist Funds since Besides his Portfolio Management role, Robert was also actively involved in equity research and making asset allocation decisions across Efficient Select s funds. Robert holds a BComm Honours degree in Financial Analysis from the University of Stellenbosch and is also a CFA charter holder. Dawie Roodt, Chief Economist His career in economic and political analysis spans over 20 years and includes nine years as an economist at the South African Reserve Bank as well as being the economic editor of a financial publication. Dawie holds a Masters degree in Economics (Cum laude). Ryan McCaughey, Assistant Portfolio Manager BCom Honours, Ryan has been with Efficient Select since 2011 and has been part of the investment research team. Ryan has been actively involved in the management of the House View process, the asset allocation decisions across the Efficient Select s funds and actively involved in equity research. Ryan recently joined the Private Clients team as an assistant portfolio manager. Ryan holds a BComm Honours degree in Financial Analysis from the University of Stellenbosch. 3

4 Efficient House View Portfolio Portfolio Objective Efficient House View Portfolio is an actively managed direct equity share portfolio suitable for high net worth individuals. The portfolio aims to significantly outperform the FTSE/JSE All Share Index over a 3 to 5 year period, by investing in a concentrated portfolio constructed from Efficient s best investment view. The portfolio will typically hold no more than 25 high quality equities at any point in time. The emphasis is on active stock selection and bottom-up fundamental research. The objective of the Efficient House View portfolio is to provide investors with capital growth over the medium- to long-term, by targeting returns in excess of the FTSE/JSE All Share Index over the stated investment horizon. At Efficient Select we manage portfolios in accordance with our Quality Investment Philosophy and Process. Our investment philosophy is based on the following key principles: We seek to invest in high quality business at attractive valuations. We believe our in-depth proprietary research process will identify superior long term investment opportunities We invest for the long term. We look to hold an investment for at least three to five years unless the investment case changes significantly. Portfolio Composition Top 5 Holdings Weighting in Portfolio Naspers Ltd 7.00% Aspen Pharmacare Holdings Limited 5.00% Life Healthcare Group Holdings Limited 5.00% MTN Group Limited 5.00% SABMiller plc 5.00% Source: Morningstar, 31 August

5 Efficient House View Portfolio Performance Recommended Portfolio Source: Morningstar, 31 August 2015 Annualised Performance 6 Months 1 Year 2 Years 3 Years Since Inception 1 July 2011 (Cumulative) HOUSE VIEW PORTFOLIO FTSE/JSE ALL SHARE INDEX ALPHA Houseview Std Dev ¹ Benchmark Std Dev Information Ratio² Source: Morningstar, 31 August

6 Efficient House View Portfolio Statistics Risk - 1 Year House View Fund FTSE/JSE All Share TR ZAR Sector Min Median Max Stdev Tracking error Information Ratio 6.12% 4.25% % 4.13% 1.04% % 4.06% % 8.76% 2.73 Source: Morningstar, 31 August 2015 Notes: 1. Standard Deviation - How widely the returns varied over a certain period of time. E.g. When a fund has a high standard deviation, the predicted range of performance is wide, implying greater volatility. 2. Information Ratio (IR) - A ratio of portfolio returns above the returns of a benchmark (usually an index) to the volatility of those returns. The IR measures a portfolio manager's ability to generate excess returns relative to a benchmark, but also attempts to identify the consistency of the investor. This ratio will identify if a manager has beaten the benchmark by a lot in a few months or a little every month. The higher the IR the more consistent a manager is and consistency is an ideal trait. Source: Morningstar, 31 August

7 Company Descriptions: Top Holdings Recommended Portfolio Anglo American Anglo American, with its subsidiaries, joint ventures and associates, is a global leader in the mining and natural resources sectors. It has significant and focused interests in gold, platinum, diamonds, coal, base and ferrous metals, industrial minerals and paper & packaging & ferrous metals, as well as financial and technical strength. Anglo America is currently cheaper from a valuation perspective than its peers. Historically looking it is also trading at a discount to its Net Asset Value. With a strong management team and world economic growth improving, Anglo American is in a good position to benefit from the recovery in growing demand for resources. Aspen Pharmacare Holdings Limited Aspen Pharmacare Holdings Limited is a global supplier of branded and generic pharmaceuticals and of consumer and nutritional products in selected territories. British American Tobacco British American Tobacco South Africa produces and manufactures tobacco products. The company also manufactures cigarettes and cigars. Its brands include Peter Stuyvesant, Dunhill, Rothmans, Lucky Strike, Benson & Hedges, and Court Leigh Gold Bands. The company was founded in 1904 and is headquartered in Stellenbosch, South Africa. BHP Billiton The group occupies significant positions in major commodity businesses, including aluminium, energy coal and metallurgical coal, copper, manganese, iron ore, uranium, nickel, silver and titanium minerals, and has substantial interests in oil, gas, liquefied natural gas and diamonds. The group has a high quality portfolio of assets that spans a wide range of commodities and countries. It also boasts a strong balance sheet and good cash generation that allows it add to add additional assets to its portfolio when prices are depressed. The group is, however, vulnerable to a number of external variables like commodity prices and exchange rates, which has a significant effect on group profitability, but is not under control of management. This leads to significantly higher forecasting risk. The increased capacity utilisation and broad based growth in the United States, Germany and France bode well for future growth. This growth should be further aided by the approval of new projects. BRAIT Brait is a listed investment company that invests capital in privately held businesses by making longterm investments of significant influence. Brait s capital is mainly raised through its public shareholder base. The company recently restructured from an Alternative investment manager to an Investment Company. The Group also has interests in the management companies that oversee traditional private equity funds and has the largest stake in PEPKOR, which own PEP retails stores and a stake in Premier Foods. The PEPKOR stake makes out 63% of Brait s total assets under management. Through this stake in PEPKOR we get access to the lower end consumers across Africa, which we believe will grow 7

8 Company Descriptions: Top Holdings Recommended Portfolio DBX US Tracker Fund The MSCI USA Index reflects the performance of the United States of America equity markets. The Index contains about 600 constituent securities representing companies with a total market capitalisation of approximately US$14 trillion. The MSCI USA Index is recognised as a barometer of the United States of America economy and as the holder of db x-trackers MSCI USA Index ETF; an investor will essentially track the United States of America equity markets. DB X-Trackers DJ Euro STOXX 50 The EURO STOXX 50 Index is a Blue-chip index in Europe. The Index has become one of the leading stock exchange barometers for Europe and the euro-zone and includes 50 market sector leading euro-zone companies. The Index has a base value of 1000 as at 31 December Famous Brands Limited Famous Brands Limited is a food and beverage company. The Company offers franchising of trademarks, manufacture and supply of product to these franchisees and the retail trade. Famous Brands provides its services with a wide range of meat, sauces, bakery, ice cream, and fruit juice products. First Rand FirstRand provides a comprehensive range of products and services to the South African market and niche products in certain African and international markets. The Group is differentiated by its portfolio branding approach and there are a number of leading financial services franchises within the Group, such as Rand Merchant Bank (RMB), First National Bank (FNB) and WestBank. FirstRand is a premier financial services provider with a strong, diversified portfolio of businesses that remains poised for long term growth. The gradual economic recovery and cost management should continue to support the group's results in the short term. Impala Platinum Impala Platinum Holdings Limited (Implats) is in the business of mining, refining and marketing of platinum group metals (PGMs), as well as nickel, copper and cobalt. Impala Refining Services (IRS) uses Impala s excess smelting and refining capacity to process the concentrate and matte produced by the various mine-to-market group operations as well as material purchased from third party companies. Toll-refining is also undertaken on behalf of other companies. Implats is one of the largest auto catalyst recyclers in the world. The group's earnings will remain dependent on the sustainability of an economic recovery. Mining flexibility remains a key issue which will continue to place reliance on mining activities at older shafts, resulting in reduced efficiencies and necessitating an on-going high level of remnant mining. The illegal strike that took place subsequent to the interim period will also negatively impact short term production. Nevertheless, the developments at Impala Rustenburg and the expansion at Zimplats sets well for a stable and long-lasting production platform going forward. 8

9 Company Descriptions: Top Holdings Life Healthcare Life Healthcare is a leading private hospital operator in South Africa and primarily serves the market for privately insured individuals, representing approximately eight million people. LHC has two divisions: Hospital division: The hospital division provides services primarily to the private medically insured. Healthcare services division: Includes the provision of acute and long term chronic hospitalisation services to state patients through Life Esidimeni, as well as the provision of primary and occupational healthcare services to employer groups in commerce, industry, parastatals, mining and correctional services, through Life Occupational Health. With its presence in emerging markets, Life Healthcare is well positioned for future growth within the Private Health sector which is defensive of nature, with basically no debt and high margins the company is favoured among its peers and also provide a nice dividend return to its investors. MTN Group The MTN Group Limited (MTN Group) is a multinational telecommunications group offering cellular network access and business solutions. It has mobile licences across 21 countries in Africa and the Middle East. MTN is a quality company and offers healthy cash generation, high margins, above average ROE and a strong balance sheet. The low levels of mobile penetration across markets in which the group operates should support continued subscriber growth, which combined with increased focus on data and service related revenue should negate the effects of increasing competition and high regulatory burden. Naspers Limited Naspers Ltd. provides television platform, print media, internet services, technology products and book publishing. It operates through three segments: Pay-Television, Internet and Print. The Pay-Television segment offers digital content management and protection systems to customers globally to protect, manage and monetise all digital media on any platform. The Internet segment includes ecommerce, communication, social networks, entertainment and mobile value-added services. The Print segment publishes magazines, newspapers and books. This segment also includes printing and distribution. Naspers was founded on May 12, 1915 and is headquartered in Cape Town, South Africa. Growthpoint Properties Limited Growthpoint Properties Limited (Growthpoint) is a real estate investment trust (REIT). The Company s primary business is long-term investment in rental-generating properties which are maintained and upgraded or refurbished as necessary. Its property portfolio comprised 436 owned and managed properties in the South African industrial, office and retail sectors. In addition, Growthpoint has a 50% shareholding in properties owned by V&A Waterfront Holdings (Pty) Ltd in Cape Town and holds a majority stake of 64% in Growthpoint Properties Australia, which owns 51 properties. Its retail portfolio consists of shopping centres, retail warehouse, speciality centres and vacant land (including house). Its office portfolio consists of offices, offices, office parks office/warehouse, mixed use: office and retail, hospital and vacant land. The industrial portfolio consists of Warehousing, industrial Parks, Retail Warehouses, Motor-Related Outlets, Mini Units and Vacant Land. Oceana Oceana Group Ltd. is engaged in the fishing and allied services sector. The company is involved in the catching, processing, and procurement of marine species, which include pilchard, sardine anchovy, redeye herring, lobster, horse mackerel, squid, tuna, hake, and other deep-sea species. Its products are sold through international and local marketing channels. The company operates through the following divisions: Lucky Star, Blue Continent, Oceana Lobster, Calamari Fishing, Lamberts Bay Foods and CCS Logistics. Oceana Group was founded in 1918 and is headquartered in Cape Town, South Africa. 9

10 Company Descriptions: Top Holdings Recommended Portfolio Old Mutual Old Mutual offers life assurance and related products as well as banking, short term insurance and asset management services, both locally and internationally. Old Mutual has a diverse investment portfolio with significant stakes in listed and unlisted companies. Since OLM sold its Nordic asset, the company is in a very favourable debt position, the largest risk to the business over the last couple of years. The company is also restructuring itself towards the emerging markets, with the strong demand for insurance within these economies; we believe OML is in a good position to take advantage of the fast growing markets. Richemont Richemont is a Swiss luxury goods group managed with a view to the long-term development of successful international brands. It has several of the most prestigious names in the luxury industry including Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC, Panerai and Montblanc. Richemont is a high quality company that is well placed within the luxury goods market. The group's results remain influenced by global Economic conditions and consumer confidence. With the Asian luxury market continuously growing we believe strong growth numbers will come from this region as well as the growing number of Asian tourists visiting Europe will support sales going forward. Investec Plc Investec plc, a specialist bank and asset manager, provides various financial products and services in the United Kingdom, South Africa, Australia, and internationally. It operates in three divisions: Asset Management, Wealth & Investment, and Specialist Banking. The Asset Management division offers active investment products and services to institutional and individual investors. It invests in global, emerging, and frontier markets spanning the equity, fixed income, multi-asset, and alternative asset classes. The Wealth & Investment division provides wealth management, portfolio management, private office, and stockbroking services for individuals, families, trusts, and charities. SAB Miller PLC SABMiller plc is one of the world s largest brewers. It has a brewing presence in over six continents and a portfolio of strong brands and markets that range from developed economies such as the USA to fast-growing developing markets such as China and India. The group s wide portfolio of brands includes premium international beers such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch, as well as leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller plc is also one of the largest bottlers of Coca- Cola products in the world. Sasol Sasol is an integrated energy and chemicals company which add value to coal, oil and gas reserves, using these feed stocks to produce liquid fuels, fuel components and chemicals through its unique proprietary technologies. The group mines coal in South Africa and produce gas in Mozambique and oil in Gabon. Its chemical manufacturing and marketing operations span the globe. Sasol is a high quality company with an exceptional track record. Improved demand for commodities together with supply shocks due to political unrest should continue to drive commodity prices in the period ahead. The group has also managed to contain costs and successfully deleveraged its balance sheet, giving it room for future growth. Sasol is also vulnerable to external factors like the oil price and exchange rates among others. 10

11 Recommended Portfolio Company Descriptions: Top Holdings Recommended Portfolio Sun International Limited Sun International Ltd. invests and manages its businesses in the hotels, resorts, and gaming industries. It focuses on the development, operation and management of hotels, resorts and casinos. The company operates its business through two segments: Gaming and Resorts & Hotels. It also offers events and entertainment activities and manages meetings and conferences. Sun International was founded on June 28, 1984 and is headquartered in Sandton, South Africa. Standard Bank Group Limited (SBK-ZA) Standard Bank Group Ltd. engages in the business of providing banking and financial services. It offers transactional banking, saving, borrowing, lending, investment, insurance, risk management, wealth management and advisory services. It operates through four business units: Personal & Business Banking; Corporate & Investment Banking, Liberty; and Central & Other. The Personal & Business Banking business unit provides banking and other financial services to individual customers and small- to medium-sized enterprises. The Corporate & Investment Banking business unit provides corporate and investment banking services to governments, parastatals, larger corporate, financial institutions and international counterparties. The Liberty business unit provides life insurance and investment management activities. The Central & Other business unit includes the impact of the black economic empowerment ownership initiative, group hedging activities, group capital instruments and group surplus capital and strategic acquisition costs. The company was founded in 1969 and is headquartered in Johannesburg, South Africa. Steinhoff International Holdings Limited Steinhoff International Holdings Limited is a South Africa-based integrated retailer that manufactures sources and retails furniture and household goods in Europe, Africa and Australasia. In addition, the Company owns diversified industrial businesses in southern Africa through supply chain solutions, passenger services, timber products and manufacturing operations across diverse industries. The Company s segments include retail - international operations; retail-african operations, and manufacturing, sourcing and logistics - International operations. The Company s operations are principally located in continental Europe, the Pacific Rim, southern Africa and the United Kingdom. The Company s brands include confodepot, emmezeta.hr, Bradlows, Price N Pride, Steinhoff, Barnett s, Russell s and Myer s, among others. 11

12 Conclusion Conclusion Why Invest With Efficient Private Clients Our portfolios are constructed in accordance with our Quality Investment Philosophy based on the following: We believe in investing in high quality businesses at attractive valuations. Wealth is preserved and created by following a long- term low turnover strategy. We follow an unconstrained, high conviction approach to investing which proves to generate additional returns. Transaction costs erode investment returns, based on this our low turnover strategy also provides low execution fees. Given our size we are able to optimally construct investment portfolios that consist of multiple asset classes across multiple geographies ranging from fixed income to equities. We believe that investing in quality affords us a higher probability of success and guards against capital losses. We offer personalised and specialised investment solutions and welcome personal interaction with the portfolio manager. Quarterly reporting and statements are supplemented by online access to view your portfolio. You can diversify your portfolio through a transparent and cost effective structure. Summary We would like to thank you for the opportunity to present this proposal. At Efficient Private Clients we take our role as your Private Client Portfolio Manager very seriously and our primary goal will always be to grow your wealth over the long term. We also strive to be attuned and attentive to your investment requirements while being committed to prompt, personalised and efficient service at all times. We look forward to engaging further with you in the near future. 12

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