Investec IAL Global Diversified Growth Fund

Investec IAL Global Diversified
Growth Fund
As at 30 September 2014
Fund Structure
The Investec IAL Global Diversified Growth Fund is a Rand denominated fund, which invests the Investec Global Diversified
Growth Fund, domiciled in Guernsey.
Investment objectives
The Investec Global Diversified Growth Fund aims to generate total return during any market conditions while seeking to reduce
downside risk. The performance of the Fund is produced by generating returns from different investment sources.
Key Facts
Portfolio manager: Philip Saunders
Launch date: 03 October 2003*
Who should invest?
Master Fund: Investec Global
The fund is specifically designed for investors seeking long-term capital growth whilst reducing the risk of capital loss (when
measured in USD). It’s an ideal choice for investors who do not want to make asset calls themselves, but at the same time
require diversified exposure across different global asset classes. The desire is for greater stability of returns.
Diversified Growth Fund
Domicile: Guernsey
Fund overview
The Investec Global Diversified Growth Fund is an actively managed multi-manager fund with a focus on total return. This
hybrid fund combines traditional ‘long only’ components with alternative investment holdings in order to achieve its return and
risk objectives.
Investec Global Diversified Growth Fund is built on the principle that stable returns are based on three diversified components
to an investment strategy. This stability stems from the premise that these three components react in different ways to market
events, and that the correlation of respective returns is low. In essence, this requires different forces to drive the performance of
the different components.
The Fund therefore invests in a range of equity, bond and alternative funds, giving investors access to the skills of some of the
world’s best specialist fund managers. The Fund will also invest directly in an asset class if the managers consider this to be
more efficient, for example, to gain tactical exposure to an anticipated market move. This creates a Fund with the flexibility to
invest in a broad range of asset classes and categories, including equities, private equity, property hedge funds, bonds,
currencies and commodities.
Investec Global Diversified Growth aims to provide a cost-effective investment strategy structured to combine wealth
reservation and superior long-term returns. By allocating an overall risk budget among the various components of the portfolio,
it offers access to all the main areas of investment opportunity, while seeking to limit exposure to adverse market events in any
one area.
Fund performance - Period ending 30.09.2014
Annualised return
Investec IAL Global
Diversified Growth Fund
1 Year
3 Years
5 Years
18.7%
18.8%
13.3%
Source: Investec, returns are net of fees in South African Rand for untaxed policyholders, calculated on a bid to bid basis with income reinvested.
Market background
Both equity and bond markets ended the third quarter weakly. The MSCI AC World NDR Index returned -2.3% in US dollars,
3% in sterling and 5.9% in euros. The S&P 500 Index returned 1.0%, the MSCI Europe ex UK NDR Index -7.5%, the UK’s
FTSE All-Share Index -6.1% and the TOPIX Index (Japan) -2.3%. The MSCI Emerging Markets Index returned -3.5% and the
MSCI Asia ex Japan Index -1.7%. Smaller companies underperformed, with the Euromoney (formerly HSBC) Index returning 8.1%.
Yields on 10-year government bonds eased lower to 2.49% in the US and to 0.53% in Japan in the quarter, while falling to
2.43% in the UK and 0.95% in Germany. Spreads of government 10-year bonds relative to Germany fell to 1.19% in Spain and
to 1.39% in Italy. Spreads on investment grade corporate bonds relative to government issues widened a little while those on
high yield bonds widened further. Local currency emerging market debt spreads narrowed slightly. The US dollar rose 5.2%
against sterling, 7.8% against the euro and 8.2% against the yen. The return on the Citigroup World Government Bond Index
was -3.8%.
With estimates of US growth remaining strong (4.6% annualised in the second quarter) and inflation pressure low, attention
shifted from the approaching end of quantitative easing (QE) to the timing of higher interest rates. While this may still be 6
months off, the US dollar has started to account for this, rising steadily in the quarter. The weakness of the euro-zone economy
and consequent ‘QE light’ initiatives by the European Central Bank accentuated this trend with the euro weakening. The
Japanese authorities also seemed happy to allow their currency to weaken as they sought to bolster flagging growth. Overall,
developed market growth of 2% looks likely with emerging market growth of below 5%, especially as the reform process stalls in
at least 3 of the BRIC’s (Brazil, Russia, India and China). Global growth, on a purchasing power parity basis, looks likely to
continue at around 3% this year and the next.
The Brent oil price fell to $93.17 per barrel while the gold price fell to $1,208.16 per ounce. The DJ-UBS Commodities Index fell
11.8%.
All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not
purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough
examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to
the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any
person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. The investments referred to in this document
are generally medium to long term investments. Their value may go down as well as up and past performance is not necessarily a guide to future performance. Fluctuations or
movements in exchange rates may cause the value of the underlying international investments to go up or down. A schedule of fees and charges and maximum commissions is
available on request from Investec Assurance Limited (IAL). Commission and incentives may be paid and if so, would be included in the overall costs. A prospectus is available in
respect of the underlying investment fund on request from IAL. Life funds are offered under the life licence of Investec Assurance Limited (a registered long term insurer) and are
administered by Investec Asset Management (Pty) Limited (a registered financial services provider).
Currency: ZAR
Annual Management Fee: 1.50%
* The launch date reflects the date of
establishment of the underlying fund.
Contact details
36 Hans Strijdom Avenue
Foreshore Cape Town
8001 South Africa
E-mail: [email protected]
Telephone: (021) 416 2000
To find out more about this and other Investec
Asset Management funds, visit
www.investecassetmanagement.com
Investec IAL Global Diversified
Growth Fund
As at 30 September 2014
Performance review
The Global Diversified Growth Fund returned 0.49% (‘A’ share class, net of fees, source Morningstar) over the quarter while the
US CPI Index grew by 1.70% in the year to August 2014.
The defensive and uncorrelated sub portfolios produced positive returns over the quarter, while the growth sub portfolio
detracted from performance. Government bonds made the largest contributions to returns in the defensive portfolio, while our
portfolio protection positions in high yield and volatility detracted from performance.
In the growth portfolio, our core global equity position contributed significantly, and our healthcare equity allocation was another
strong performer. Our energy, gold and UK retail recovery equity positions were all detractors however, taking the overall
balance of growth returns into negative territory. In the uncorrelated portfolio, infrastructure and reinsurance made material
positive contributors to returns.
Market outlook
October has a bad reputation among equity investors but the reality is more that it can be a contrary month, often reversing or
interrupting the trend from earlier in the year. Since equities have made little progress this year, there should be no need to
worry. However, the third-quarter reporting season will greatly reduce the uncertainty of the outcome for the full year and raise
sights to 2015. On the basis of current expected earnings growth for 2015, equities are reasonable value, which should lead to
a positive final quarter.
The overall outcome for 2014 might seem dull compared to the returns of 2013, but modest economic growth and valuations
that are no longer low mean that high returns are not sustainable. However, there will be plenty of opportunities to add value
from good stock-picking and thematic selection. The underperformance of smaller companies in the year to date provide a
notably attractive opportunity while Japanese equities still lag the improvement in earnings growth of recent years.
Government bond yields remain low in absolute terms, although low inflation and the likelihood of only moderate growth makes
it likely that returns will be positive. Corporate spreads are at historic lows but the principle threat is only likely at the end of the
cycle. Emerging market debt is reasonably attractive, but considerable care with specific currencies and countries is necessary.
The US dollar remains undervalued in our opinion and appears likely to trend higher, but this is certainly not risk free. Overall,
we remain positive around the outlook for investment returns for this year and the next, but it would be prudent to keep
expectations modest.
All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not
purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough
examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to
the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any
person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. The investments referred to in this document
are generally medium to long term investments. Their value may go down as well as up and past performance is not necessarily a guide to future performance. Fluctuations or
movements in exchange rates may cause the value of the underlying international investments to go up or down. A schedule of fees and charges and maximum commissions is
available on request from Investec Assurance Limited (IAL). Commission and incentives may be paid and if so, would be included in the overall costs. A prospectus is available in
respect of the underlying investment fund on request from IAL. Life funds are offered under the life licence of Investec Assurance Limited (a registered long term insurer) and are
administered by Investec Asset Management (Pty) Limited (a registered financial services provider).

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