The glory period for SA equities is over – top fund manager
SA’s super-star fund manager John Biccard sees the next ten being significantly tougher.
Author: Malcolm Rees
24 January 2012
JOHANNESBURG - Well-known fund manager, John Biccard, has managed to guide
Investec’s Value Fund to second place
on the list of best performing funds over ten years with a very healthy
return of 767.6%.
The success of the fund is down to its value investment paradigm, says Biccard.
“It is a value fund, so all we really do is buy the most out of favour and the
cheapest shares; we are not worried so much about projecting what’s going to
happen in the future… We buy stocks which we believe are below their intrinsic
value.
“Usually, those are the shares that are out of favour and that people are
selling… Usually, they’ve got a macro-economic headwind… something external that
has put the market off the company in the short term and then the share price
falls below where the value is.”
While this strategy has resulted in some disappointments for the fund, moving
against the market has resulted in two big payoffs, driving the fund’s success.
Between 2001 and 2003, when the rand went to R12 to the dollar, “everyone was
buying rand hedges but we had 100% in domestic shares… The projection was that
the rand was going to go to R18 to the dollar but it went to six to the dollar”.
In mid-2008’s “resources super cycle… we had nothing in resources and everything
in domestic shares… When resources cracked we made up a lot of ground there”.
“The ten-year record was made in those periods,” says Biccard.
Going forward, Biccard says “they can continue, over a five-year rolling period,
to outperform the All Share Index. But, we don’t think the absolute level of
returns will be anything like the last ten years…
“The last ten years have been a glory period for SA equities and we see the next
ten being significantly tougher. SA has been one of the best performing markets
in the world for the last ten years and we don’t see very much value left.”
Biccard has taken 20% of his fund
offshore in anticipation of growth in foreign markets: “We see much better
value out of SA… Some of that has to do with the rand which is very strong and
there are a lot of shares overseas which are very depressed and fundamentally
cheap… There are shares that we’re buying oversees that are 90% off their
all-time highs.”
Biccard’s advice to investors is not to put money into fund sectors based on
their performance over the last ten years.
“My advice is do not use historic performance to guide you in the future. If
anything, you need to use it as a contrary indicator… The worst performers over
ten years, in a lot of cases will be the best performer of the next ten years.
“Everything depends on the price you pay and anything that’s been a winner for
ten years is unlikely to be the winner for the next ten years”.
All of the 25 worst performing funds over the last ten years have been foreign.
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