Retirement fund managers grow offshore exposure, but local is still lekker too

By Neesa Moodley

7 Apr 2024

Offshore allocations remain high, a survey shows, but some local sectors look promising.

The 2023 Alexforbes Manager Watch Survey of retirement fund investment managers released this week shows that Ninety One remains the largest asset manager. A 6% increase in assets has solidified its position.

Stanlib retains second place with a 6% asset increase. Coronation attained the third spot with an 8% asset increase, and Allan Gray leapfrogged both Sanlam Investments and Old Mutual Investment Group to clinch the fourth spot.

Multimanager assets continue to grow as the shift from single-manager portfolios continues. In 2023, the total assets under management increased 12% to R7.8-trillion, with the top 10 managers collectively holding 62% of the total assets.

In the Global Best Investment View category, a significant portion of investment managers reflected high offshore allocations. Thirty-four out of 45 increased their global exposure to exceed a 30% allocation, and 11 out of 45 surpassed the 40% mark. Three managers reduced their global exposure and two maintained it at 2022 levels.

The best performer in this category was Abax Investments, which ended the year with a return of 17.3%. Abax noted that all asset classes contributed to the growth, although global equities contributed about half of the fund’s total return.

The largest contributors at a stock level were all foreign shares, including Google, Shell and the BMW preference share.

The 2037 South African government bond also contributed strongly owing to its large weighting in the fund.

Aeon Investment Management was one of the funds that increased its global exposure to 40%. The main absolute contributors to performance were Alphabet, Amazon, Banco Santander, Microsoft and UniCredit, whereas British American Tobacco (BAT), Impala Platinum and Anglo American were among those that detracted from it. BAT actually dragged down more than one retirement fund portfolio, weighing heavily on performance for not just Aeon but also Allan Gray, Coronation and Old Mutual Investment Group.

Green shoots locally

Old Mutual believes it is starting to see some value coming through in South African equities, despite the general elections in May. Its head of equities research, Meryl Pick, believes that local appears lekker at the moment.

Pick says she is starting to see green shoots in some local sectors. The tilt towards South Africa includes a rise in exposures to domestic banks and clothing retailers, driven by the belief that the country has reached peak interest rates, as well as a reduced level of electricity blackouts.

“We have been incrementally tilting our portfolio back to SA Inc as we anticipate a better year ahead, primarily due to the reduced level of load shedding being factored into our projections.

“This should mitigate some of the commodity inflation pressures in areas such as food, oil and energy. As a result, conditions are improving slightly for consumers and potentially enhancing growth prospects,” she says.

However, Pick adds that geographic and asset class diversification and the careful screening of opportunities in these areas remain the best defence against the economic and political uncertainties that surround South Africa’s 2024 elections.

Allan Gray took the route of an overweight position in rand hedge stocks such as Mondi and Anheuser-Busch Inbev.

Dan Brocklebank, the director and head of Orbis Investments UK, Allan Gray’s offshore partner, says research on the average South African household’s spending habits on imported goods and services suggests that investors should hold at least 30% to 40% of their total investment portfolio offshore to protect against an erosion in local purchasing power.

“Investing offshore gives you access to sectors and companies that are simply not available on the local market.

“South African investors need to explore beyond their borders to access a broader range of attractive opportunities and benefit from the trends that are shaping markets globally,” Brocklebank says. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.

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Green shoots locally