Nedgroup Investments has selected a new manager for the previously well-regarded Rainmaker Fund following a prolonged period of disappointing results.
The fund, which oversees around R6.5 billion in assets, has not met its benchmark (the average within the Asisa Equity: General category) over the last one, three, five, seven, and ten years. It is worth noting that this benchmark has also underperformed relative to the FTSE/JSE Capped Shareholder Weighted All Share Index and the All Share Combined (before the Swix index) for nearly a decade.
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Abax Investments (formerly known as Polaris Capital), a boutique asset manager established in 2003, has managed the Rainmaker Fund for Nedgroup Investments since its launch in 2000. The investment team at Abax has been responsible for the fund’s management from the very start. Furthermore, Abax is in charge of the Flexible Income Fund, Opportunity Fund, and Entrepreneur Fund for the bank’s investment division.
Keeping a close eye on the manager
In its 2021 annual report, Nedgroup Investments mentioned that “in 2020, we also revised the mandate of the Nedgroup Investments Rainmaker Fund to allow the manager to invest up to 30% of its assets in offshore equities.”
“The fund achieved a return of 23.6% in 2021. Nonetheless, its longer-term performance (3.8% per annum over five years) remains disappointing, leading us to maintain close oversight of the manager.”
Read: SA reforms spur money manager Abax to boost exposure [Jul 2024]
With changes initiated by National Treasury, the maximum offshore allocation has increased to 45%. In 2023, it was reported that the “fund had a decent year (9% for 2023), but the longer-term results still fall short (4.6% per annum over five years). We will maintain our close monitoring of the manager.”
Ninety One takes the reins
On December 11, Nedgroup Investments announced its intention to replace Abax with the “Ninety One quality team” as the manager of the Rainmaker Fund.
Nic Andrew, head of Nedgroup Investments, remarked that this decision followed an extensive review and aligns with their Best of Breed philosophy to ensure the best outcomes for their clients.
Listen/read: Ninety One remains positive despite concerning outflow volumes [Nov 2024]
Nedgroup explained that “in 2020, the mandate was modified to include global equities, and in 2022, the SARB [South African Reserve Bank] lifted the prudential offshore limits to 45%, allowing nearly half of the fund to be invested in global equities. Given this, Nedgroup Investments assessed the needs for managing such an equity mandate.”
Andrew stated: “Due to the mandate modification allowing almost 50% in global equities and the fund’s performance, we determined it was in the best interest of our investors to seek better alternatives that align with the fund’s goals.”
Read: Have investors been ditching SA’s biggest asset managers? [May 2023]
After a thorough evaluation based on Nedgroup Investments’s stringent Best of Breed criteria, the Ninety One Quality Team was selected to take over the management of the flagship fund, pending regulatory approval.
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“We are confident that the Ninety One Quality team is well-equipped to manage this mandate given their strong capabilities and proven track record in both South African and global equities. They exemplify the qualities we seek in our partner managers, and we believe their expertise will lead to improved outcomes for our clients.”
Exclusive access point
The Rainmaker Fund will act as the exclusive access point to the Ninety One Quality expertise within a South African General Equity Fund.
Thabo Khojane, MD of Ninety One South Africa, commented: “We are privileged to be selected by Nedgroup Investments as a Best of Breed manager for the Rainmaker Fund and eagerly anticipate a long-term partnership.”
Clyde Rossouw, head of the Ninety One Quality Team, added: “Our team is enthusiastic about providing investors in the Rainmaker Fund with our extensive experience in managing both South African and global equities.
“We are totally committed to achieving the fund’s goal of delivering long-term returns.”
As of the end of November, the Rainmaker Fund’s top 10 holdings consisted of FirstRand (5.3%), Naspers (4.9%), Anglo American plc (4.3%), Pepkor Holdings (4.2%), British American Tobacco plc (3.5%), Sanlam (3%), Visa Inc (2.9%), Microsoft Corp (2.9%), Amazon (2.9%), and Bidvest (2.9%). Foreign equities made up 41.7%, with an additional 1.4% in offshore cash.
Abax remains an important partner
Andrew stressed that Abax Investments continues to play a vital role for Nedgroup Investments.
“Abax Investments will continue to manage the Nedgroup Investments Opportunity Fund, the Nedgroup Investments Flexible Income Fund, and the Nedgroup Investments Entrepreneur Fund. All these funds have produced exceptional returns, and we are confident they will keep up this positive trend.”
Over the past year, the Rainmaker Fund recorded net outflows of R71 million in Q3, R85 million in Q2, and R72 million in Q1, based on Asisa data.
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