Page 178 - Profile's Unit Trusts and Collective Investments 2021 issue 2
P. 178

CHAPTER 9

         PSG Wealth Global Flexible Feeder Fund

         Sector:        Global–Multi Asset–Flexible
         Fund manager:  Adriaan Pask
         Benchmark:     EAA USD Flexible Allocation (ZAR) Average

          Returns to investors                                1 year             3 years
          PSG Wealth Global Flexible Feeder Fund              5.06%              16.95%
          Sector Average                                      4.14%               9.86%
          Inflation (CPI)                                     4.87%               3.85%
          ProfileData performance stats to 30 June 2021: CAGR with dividends reinvested
         Please describe your investment universe.
            The fund fulfils the role of a more aggressively positioned multi-asset portfolio focused on a
         flexible combination of global fixed income and global equities. The fund feeds directly into the
         PSG Wealth Global Flexible Fund of Funds (FoF) (USD) which is constructed using a combination
         of global multi-asset flexible allocation funds. The FoF falls in the Morningstar USD Flexible
         Allocation sector. Within this flexible allocation universe, although there are no limitations on
         asset class limits, we look for funds which use a multi-asset focused framework, allocating
         between a range of 40% to 80% to global equities, with the balance of their portfolio in fixed
         income securities and cash. A major benefit of our approach is that we consider the full universe of
         funds meeting these criteria across the globe and not only those in South Africa.
         Please comment on your investment year (July 2020 – June 2021) from a fund manager's
         point of view.
            The past year has been a very interesting and important one for investors. 2020 served as an
         effective reminder of the difficulty in making predictions. It showed that unforeseen occurrences can
         derail forecasts; the important take-away is to have astrategyand stickwithitthrough market cycles.
            The second half of 2020 saw Covid-19 cases generally increasing with a more transmissible
         variant spreading globally and leading to tighter restrictions. Strong efficacy data in early
         November 2020 and the subsequent regulatory approval, however, allowed vaccination
         programmes to start; this spurred excitement amongst investors as they hoped for a stronger
         recovery. Value shares rallied significantly, outpacing their growth counterparts as the sector
         rotation followed the release of positive vaccine trial data. Our underlying managers somewhat
         expected a recovery, albeit not the pace, and switched away from the higher quality, growth
         companies that they prefer in favour of more cyclical "Covid recovery" stocks. Oil, gas, and basic
         materials were the strongest sectors to recover; however, the FoFs had limited exposure due to
         ESG concerns. The value rally continued into 2021 but lost steam early in the second quarter as
         investors took profits and scaled back into the more quality-focused companies.
            Within equities, the encouraging fiscal support and pace of vaccine rollouts has been a tailwind
         for companies. As restrictions lifted so too did consumer spending. Our managers delivered strong
         absolute returns largely as a result of holding stocks which have continued to perform well
         operationally and have thus been rewarded in share price terms over this short period.
            Within fixed income, the widening spread post the sell-off seen in March 2020 created a
         positive environment for investment grade and high-yield corporate and sovereign fixed income
         securities. A number of our underlying managers took the opportunity to purchase fixed income
         securities at these elevated levels and subsequently disposed of them in December 2020 as the
         spread narrowed, realising a capital gain. For the 2021 half year, the first and second quarters
         delivered opposite results, illustrating the challenging environment we find ourselves in. The
         reflation narrative caused a significant pullback in fixed income over Q1 2021, particularly
         affecting developed market government bonds to which we have exposure. However, in Q2, as
         inflation concerns eased, positive performance was driven by the pronounced rebound in economic
         activity which caused falling yields in both developed government bonds and high yield credit.




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