Caption: Philipp Wörz from PSG Asset Management receives the Raging Bull Award from Personal Finance editor Dieketseng Maleke. Picture: Ayanda Ndamane, Independent Newspapers.
Personal Finance interviewed the fund’s managers, Greg Hopkins, Philipp Wörz and Justin Floor, on how the fund operates and their views of the global equity market.
PSG Global Equity Feeder Fund won: • Raging Bull Award: Best (SA-Domiciled) Global Equity General Fund for Straight Performance over Three Years to December 31, 2023
The PSG Global Equity Feeder Fund is a rand-denominated fund that invests solely into the PSG Global Equity Sub-Fund, a sub-fund of PSG Global Funds, denominated in US dollars. The underlying sub-fund invests mainly in global listed securities and aims to outperform its benchmark, but at lower risk. The fund nonetheless sits at the top end of the risk-reward spectrum, and investors should be comfortable with fluctuations in global equity markets and currency exchange risk. It is suitable for investors who want exposure to global equities without expatriating rands and who have a long-term investment horizon of seven years and longer
The fund’s benchmark is the MSCI Daily Total Return Net World Index (US dollars) after conversion to rands. Over three years the fund has delivered far better annualised performance than its benchmark: 23.33% versus 15.40%.
Personal Finance interviewed the fund’s managers, Greg Hopkins, Philipp Wörz and Justin Floor, on how the fund operates and their views of the global equity market.
PF: Can you outline your investment process, referring to stock selection and regional allocation?
GH, PW & JF: We select stocks using our 3M investment process through which we evaluate both quality (the evidence of a competitive advantage that serves as a Moat and the strength of Management) and price (Margin of Safety). Essentially, this process aims to uncover an inherent quality that the market is missing, or at the very least, underappreciating. The fund invests into the best risk-adjusted opportunities across geographies.
PF: The year 2023 was a good one for the global equity market, with the MSCI World Index returning almost 24% in US dollars, while 2022 was awful. How have you navigated the market over the last three years?
GH, PW & JF: At PSG Asset Management, we remain focused on achieving the fund’s long-term objectives, despite the short-term ups and downs of the market. Global returns in 2023 were dominated by a handful of stocks, mainly the Magnificent 7 (Apple, Amazon, Alphabet, Microsoft, Meta Platforms, Nvidia, and Tesla), which contributed to about half of the index’ return. With market returns this narrow and our focus on investing at a margin of safety, it came as no surprise that last year was a challenging one for the fund from a performance perspective. While 2022 was an awful year for global equity returns, losing 18%, our fund outperformed the market by 25% in 2022 and delivered positive returns for our investors. As a result, the fund’s three-year returns were well ahead of the market. We believe this focus on longer-term outcomes is appropriate, given the time horizon of this fund.
PF: Which counters stood out for you in 2023?
GH, PW & JF: A diverse range of sectors and geographies contributed to performance in 2023. The fund’s top contributors to performance were US pension provider Jackson Financial (+58%), UK defense contractor Babcock International (+48%), Canadian gold royalty company Wheaton Precious Metals (+28%), offshore oil and gas driller Noble Corporation (+30%) and the Canadian uranium producer Cameco Corporation (+90%). The percentages represent total returns in US dollars.
PF: How are you positioning the fund going forward, and what is your outlook for global equities over the next year or two?
GH, PW & JF: While the global equity market has been marking record highs, largely driven by a compelling artificial intelligence (AI) narrative and strong earnings growth in the technology sector, we are positioning the fund into attractive areas that the market is currently neglecting. These opportunities tend to be outside the popular indices and largely outside the United States, and trading at a significant valuation discount to the overall market, which supports our positive view on fund returns going forward.