Page 167 - Profile's Unit Trusts and Collective Investments 2021 issue 2

Fund Manager Interviews

where they’ll be reviewed and checked for consistency and once deemed accurate, will be
rectified as soon as possible.
A daily high-level risk report, which is reviewed by the Risk Manager daily to ensure all funds

are within their limits.
We make use of Bloomberg AIM as our All-In Portfolio Management, Trading, Risk and

Compliance and we successfully manage all our portfolios on AIM. This enables us to check
compliance pre-trade on all equity trades, run detailed compliance and risk reporting on the
portfolios, thereby enhancing the risk oversight of the portfolios systematically.
Operational risk is managed by the directors and leadership of the company. Regular
management meetings are held with clear responsibilities communicated and the individuals
held accountable for specific areas of the business. Financial accounts are distributed and
discussed among the directors on a monthly basis, while board meetings are held quarterly.
Please comment on the year ahead and, if possible, estimate the performance of your fund
over 2 or 3 years. What are your targets and objectives for the year ahead?
We believe reflation trade will continue but at a slower pace. The US job market is set to
increase rapidly over the rest of the year as additional unemployment benefits expire, kids return
to school and health risks fade. We expect wages to rise and inflation to remain higher than
markets currently price in. We expect on-shoring and infrastructure capital expenditure and
inventory build to underpin manufacturing activity. Global policy backdrop should remain highly
accommodative over coming 12 to 24 months and US dollar weakness should return. Equities
should outperform bonds and cyclical assets should perform well.
China's reserve ratio cut possibly signals that the credit tightening cycle might be nearing its
end. Regulatory risk may remain elevated over coming months, but we expect it to fade on an 18
months horizon. Commodity prices may be volatile but will likely remain high over the coming
years. We believe emerging markets will perform well from current levels.
In SA,wecontinuetolikeresources andbelieve that local retailers and banks will benefit from an
improving economy and fiscal dynamics. We believe the fiscal, institutional and economic reform
goals will remain largely intact under President Ramaphosa’s leadership although at a slow pace.
Fund’s performance objective
Fairtree Balanced Prescient Fund aims to generate inflation beating returns with its 3 primary
objectives:
Create wealth through a higher allocation to growth assets

Protect against market crashes by tactical asset allocation moves
Generate alpha by utilising specialist teams to manage security selection

The fund is managed to outperform the South African – Multi Asset – High Equity peer group
benchmark. The fund's objective is to create medium to long-term capital growth, within the
constraints governing retirement funds (Regulation 28). The fund invests in a diversified and
balanced range of asset classes and may invest in offshore securities when the benefit of higher
returns and portfolio diversification are available.
Which asset classes do you expect will give the best total rates of return over the next few years?
Our current outlook is that equities will perform well, including emerging market and South
Africa equities. We are also constructive on local fixed income and commodity prices.
Could you identify three shares that fall within your universe that you think will perform well
in the medium term?
Global equities
Amazon is exposed to secular growth markets, E-commerce and Cloud. Despite Covid-19
accelerating these trends, Amazon has underperformed global markets by more than 20% over the last
year. It means you can now buy into this company at less than 20x EBITDA, which we find compelling.
Kaspi.kz is the largest Payments, Marketplace and Fintech Ecosystem in Kazakhstan. They enjoy
very high margins, thanks to their super app network effect. They have an exciting growth runway
since e-commerce penetration is still low at 9%. Their take rates are low versus global peers,

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Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts