Caption: Ruan Marais, Theodore Oosthuizen and Arné Botha from Salvo Investment Managers collect the Raging Bull Award from Personal Finance editor Dieketseng Maleke (second from right). Picture: Ayanda Ndamane, Independent Newspapers.
Personal Finance spoke to fund managers Arné Botha and Ruan Marais.
Salvo Prime Dynamic Flexible Fund won: • Raging Bull Award: Best South African Multi-Asset Flexible Fund on a Risk-Adjusted Basis over five years to December 31, 2023.
Salvo Investment Managers is a discretionary fund manager based in Bloemfontein whose core functions include managing unit trust funds and private client portfolios, and advisory and intermediary services. The firm manages three retail domestic funds in association with Prime Collective Investment Schemes Management Company: the Salvo Prime Dynamic Flexible Fund, the Salvo Prime Income Fund and the Salvo Prime Absolute Retail Hedge Fund. It also runs an offshore fund denominated in US dollars.
The Salvo Prime Dynamic Flexible Fund, launched in 2017, has the flexibility under Asisa’s South African multi-asset flexible category mandate to invest in any asset class in any proportions, with the proviso that not more than 45% is invested offshore. Its benchmark is the FTSE/JSE Capped Shareholder Weighted All Share Total Return Index (Swix).
According to the fund fact sheet, it returned an annualised 12.16%, net of fees, over five years to the end of December 2023, more than three percentage points above the benchmark of 8.97% and at lower downside risk than peer funds in the category.
Personal Finance spoke to fund managers Arné Botha and Ruan Marais.
PF: Please state the fund objective and your investment strategy in achieving that objective.
AB & RM: The fund uses a dynamic risk allocation process to allocate capital to opportunities we deem as attractive. The objective of the fund is to outperform local equities over the long term by using a multi-asset and multi-manager approach. We believe that equities offer a long-term risk premium compared to other assets, but that it is not always necessary to be fully invested in equities in order to outperform. The fund is primarily used by investors as a building block that aims to achieve capital growth in excess of local growth assets (equities and property) but at a lower risk (standard deviation and drawdowns). We believe the fund is unique in its approach due to the dynamic/tactical positioning between opportunities.
PF: Your portfolio is invested both in other flexible funds and directly in bonds and shares. How do you go about asset selection?
AB & RM: There are many layers to the process but, in essence, we make use of a tactical asset allocation process to identify periods in the business cycle when it makes sense to increase or decrease beta exposure (exposure to higher-volatility assets). Unit trust funds and exchange-traded funds are also used to gain exposure to specific geographies, asset classes or investment philosophies. We outsource 75% of security selection to specialist managers with the remaining 25% allocated to specific tactical opportunities.
PF: Over one-, three- and five-year periods you have consistently outperformed your benchmark. To what do you attribute your fund’s excellent performance?
AB & RM: Active management from our underlying managers as well as active allocation management between managers and opportunities have greatly contributed to the fund’s performance in recent years. The last five years have been particularly exciting from an allocation perspective due the volatility in global markets. Being active has allowed us to exploit short-term opportunities that more static strategies have missed.
PF: How are you positioning the fund for the next year or two, considering the various geopolitical and economic risks we face?
AB & RM: Geopolitical outcomes are very difficult to predict, and our positioning won’t reflect what we expect from such outcomes. However, we do consider the long-term impact from political, fiscal and monetary policies that are implemented as a result of such events. Regarding economic risks, we look at what markets are pricing in and whether this is adequate given our expectations of the underlying economic environment. Ultimately, we look to put any emotion aside and try to determine the attractiveness of assets based on relative risk premiums and long-term expectations of growth, value and quality.