Page 176 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 9

Naviga BCI Worldwide Flexible Fund

Sector: Worldwide–Multi Asset–Flexible
Fund manager: Carey McElhone
Benchmark: CPI + 5% p.a.

Returns to investors 1 year 3 years
Naviga BCI Worldwide Flexible Fund 24.01% 26.66%
Sector Average 13.14% 9.54%
Inflation (CPI) 4.87% 3.85%
ProfileData performance stats to 30 June 2021: CAGR with dividends reinvested
Please describe your investment universe.
The fund’s mandate is broad, allowing the fund to invest in a range of asset classes, with no
bias towards any one geographical location or sector. Having said that, the fund’s growth strategy
is to invest in equities, the asset class with the highest expected return over the long-term.
At inception in September 2017, the fund held a mix of SA and global stocks. Towards the end
of 2018, the market took a turn for the worse and the fund rotated somewhat into money market
instruments.
Today, the fund is predominantly a US equity fund after rebalancing towards high momentum
growth stocks, most of which happen to be in this region. The US stock market is wide and diverse,
with a large enough universe of stocks to select from. We continuously search for high growth
companies worldwide and have investments in companies outside of the US too.
Please comment on your investment year (July 2020 – June 2021) from a fund manager's
point of view.
For the year ending 30 June 2021, the fund returned 24% in rand terms and 51% in US dollar
terms. The end of 2020 was sluggish with the market going sideways for the last few months. This
continued into 2021 with the market's rotation into value stocks. The second quarter picked up
nicely and the stocks we have invested in have performed well.
Navigating Covid-19 times has been challenging but it has also presented many excellent
investment opportunities as it accelerated the adoption of online shopping, remote work and
automation. The fund's investments in e-commerce, chipmakers and other related sectors have
been very beneficial.
In terms of risk management, what methods or strategies are you able to use to protect your
clients' investments?
As the fund is invested exclusively in equity stocks, it tends to be volatile and the fund is
considered to have a high risk profile. Volatility is often equated to risk, but we regard risk as the
danger of permanent capital loss. Investors with long term investment growth objectives should
not face the need to liquidate in weak market periods. In that case volatility does not pose a risk of
capital loss.
The biggest risk of capital loss is posed by company failures caused by poor business
management decisions and lapses in corporate governance practices. We protect investors by
aiming to choose stocks of companies that have good long term growth prospects and by
monitoring their business fundamentals and governance standards. We do not engage in risk
hedging activities as we believe that their net effect detracts from superior returns.
We purposefully do not over-diversify the portfolio as this reduces excess returns. We keep a
smaller statistically relevant selection of stocks that should outperform the indices over the long term.
Every investor has their own personal circumstances and tolerance and they need to be
comfortable with some volatility. The risk of capital loss is higher over shorter periods, however,
expected long-term returns are also higher. The investment horizon for any investor should be at
least 5 years.

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