Fund Name: 36One MET Equity Fund Portfolio Manager: Cy Jacobs
Fund Description
The 36One MET Equity Fund is a general equity portfolio with the primary objective of generating significant capital growth over the long term. The fund invests mainly in local listed equities and primarily follows a bottom-up stock picking approach. It also can invest in foreign equities up to its maximum statutory limit of 25%.
Background
This is a success. 36One asset management, was started in 2004 by Cy Jacobs and Steven Liptz. They have grown their assets under management to R20bn and they manage eight different funds: three unit trusts and five hedge funds. The firm has nine investment professionals and six admin staff.
Past Performance
The fund launched in September 2005 and has R1.9bn in assets. Its performance has been exceptional with an annualised return of 21.2% (6% ahead of its benchmark – JSE equities) since its inception. It is the second best performing general equity unit trust over the last three years.
Investment Style
The investment style is described primarily as bottom-up stock picking based on a detailed fundamental research process. This is overlaid by macro economics and market themes. However, the key success driver has been thematic, which they have got right. Hence, their preference for offshore/innovative/consumer companies have rewarded them well.
They are generally shorter term focused and given their relatively smaller size they are more nimble, allowing them to take advantage of shorter term opportunities. In addition, being smaller allows them to take more meaningful positions in smaller companies which in turn, broadens their investment universe.
Portfolio Positioning
| Consumer Goods (SABMiller, BAT, Steinhoff) | 28% |
| Financials (Offshore property, Firstrand, Old Mutual) | 27% |
| Consumer Services (Naspers) | 22% |
| Industrials (Remgro,Hudaco, Super Group) | 7% |
| Basic Materials | 5% |
| ETF | 2% |
| Technology | 2% |
| Telecommunications | 1% |
| Health Care | 1% |
| Cash | 5% |
Fund Manager’s market view
Over the next year they expect the equity market to be flat to slightly up. Local shares are not expensive and offer pockets of value. They expect the Rand to remain weak. The biggest macro risk is China’s economic growth, but they believe China will not materially disappoint. Their biggest bet is the resilience of the offshore consumer through Naspers, SABMiller and BAT.
Flow of funds
Over the last 12 months there’s been one large withdrawal and the money was moved into one of their other regulation 28 funds.
Is the Fund Manager invested in the fund?
90% of the Fund Manager’s investable money is invested in the firm’s funds, which all hold similar equity positions.
Investonline View
The 36One team is very ambitious and will strive hard to continue their success. Although they describe themselves as “bottom-up stock pickers”, their good performance over the last few years has largely been as a result of getting the big macro themes right. These have mainly been offshore, consumer, defensive, social media and innovation /growth sectors. This has suited their style of investing. Our concern is that as market themes change, these themes will require a different style of investing. Commodities, basic materials and value investing may be become the next drivers of the market. The question is: will this team be able to adapt to a change in investment style over the next few years, which is likely to take place.
Despite our concerns of 36One being able to adapt to a material change in market drivers, we believe this quality team will provide valuable balance to a diversified investment and therefore we would support it comprising 20% of an aggressive portfolio.
