Nedbank Rainmaker amalgamation - 01 Nov 03 - Official Announcement30 Oct 2003
On the 1 November 2003, the African Harvest Rainmaker Equity Fund and the FTNIB Prime Select Fund merged to form the Nedbank Rainmaker Fund. The history of the African Harvest Rainmaker Equity fund has been retained. This fund is part of the Active Return Range.
African Harvest Rainmaker comment - September 2003 - Fund Manager Comment20 Oct 2003
The Rainmaker Fund had a return of 0.58%, placing it 2nd out of 55 General Equity Funds during September and 11.53%, placing it 3rd out of 55 funds for the quarter ended September. By comparison the All Share Index declined by 5% during September and rose by 5% for the quarter. The fund’s performance relative to the General Equity Unit trust averages has been equally good, maintaining a consistent record of out performance since inception in July 2000.
Since 1 July 2003, the fund has been managed by Polaris Capital comprising a team of investment professionals - Tim Allsop, Anthony Sedgwick and Marius van Rooyen. Marius van Rooyen assisted Tim Allsop with the management of the Prime Select fund between 1998 and 2000, while Anthony Sedgwick has provided back up for the management of the Rainmaker Equity Fund since 2001. The formation of Polaris Capital has brought the team together to ensure that the strong track record is maintained and that the quality of management is enhanced going forward. The investment approach remains consistent with that which has been applied over the past eight years. In summary this involves:
- a conscientious and determined mental approach;
- a focus on equity mandates with the same targets;
- proprietary research and stock picking rather than passive emulations of competitor portfolios;
- a belief that earnings growth is the prime driver of share price appreciation;
- investment in emerging growth companies;
- constant adjustment on a relative value basis to reduce risk and enhance performance.
The past quarter was again notable for the strong performance of the rand. It appreciated by 6% relative to the US dollar taking its gains since September 2002 to 33%. The fund’s strong relative performance over the quarter and past year is attributed to correctly anticipating the strength of the rand and by good rand hedge stock selection. (Trencor and Uniserve continue to grow their earnings strongly in dollar terms whereas Anglos is unlikely to achieve growth this year.)
In fact, the performance of the Resource sector was again surprisingly good this quarter and must be attributed to significant gains in dollar commodity prices. But rand realisations continue to decline and taking into account rising rand costs, the profit announcements for this highly rated sector are likely to be disastrous. The price to earnings multiple of the Resources sector has risen from a low of 8 times in April this year to a relatively high current 13 times. By comparison Banks, Retailers, Food, Electrical, Construction, Chemical, Hospital and Transport sectors trade on 35% to 40% discount ratings which, are anticipated to widen with the next round of profit announcements.
The fund is currently enjoying strong inflows. We will continue to accumulate selected stocks within the relatively attractive sectors mentioned above.
African Harvest Rainmaker comment - June 2003 - Fund Manager Comment01 Aug 2003
The Rainmaker Equity Fund rose by 4.4% during June and by 12.8% for the quarter. By comparison, the All Share Index declined by 2.2% during June and rose by 9.6% for the quarter.
From 1 July, the fund will be managed by Polaris Capital comprising a team of investment professionals - Tim Allsop, Anthony Sedgwick and Marius van Rooyen. Marius van Rooyen assisted Tim Allsop with the management of Prime Select fund between 1998 and 2000, while Anthony Sedgwick has provided back up for the management of the Rainmaker Equity fund from 2001. The formation of Polaris Capital brings the team together to ensure that the strong track record is maintained and that the quality of management is enhanced going forward. The investment approach remains consistent with that which has been applied over the past eight years. In summary this involves:
a conscientious and determined mental approach;
a focus on equity mandates with the same targets;
proprietary research and stock picking rather than passive emulations of competitor portfolios;
a belief that earnings growth is the prime driver of share price appreciation;
investment in emerging growth companies;
constant adjustment on a relative value basis to reduce risk and enhance performance.
THE PAST MONTH
The All Share lost 2.2% for the month (including dividends). The biggest gains were from telecommunication shares with the Telco Index returning 19.6% for the month. Most of these gains were as a result of good growth in earnings reported by MTN and Telkom.
The rand appreciated from R7.98 to R7.46 over the month, which caused the Resource shares to be the biggest losers for the month, with Sappi and Sasol - after their respective profit warning - the biggest contributors to the Resource sector losses.
International markets continued their impressive run - we are expecting it to come to an end as Q2 earnings reports are drawing near. This should highlight the high ratings of shares as earnings would not have kept pace with the rapid market upsurge. The S&P market is currently at a 41 times price earnings multiple - based on a core earning s index established in association with the S&P. We believe this is too expensive at a time when economic growth seems mediocre at best.
STRATEGY
Lower interest rate for the remainder of the year and a ‘stronger for longer rand’ should drive a two-tier market. The one-tier being earnings downgrades for exporters and Resource companies, while lower interest rates and reasonably robust consumer demand should drive earnings growth in the second tier. We believe the upcoming results session will refocus the market attention on the above - with Resources being the clear loser. We will stay short of Resources, while we prefer exposure to consumer Industrials and selected Retail shares. The main risk to our strategy is the performance of the rand. We therefore maintain our selective exposure to rand-hedge counters other than Resources. Our top holdings remain Trencor, Uniserve and Nampak.
African Harvest Rainmaker comment - April 2003 - Fund Manager Comment03 Jun 2003
The Rainmaker Equity Fund performed in line with the All Share Index during April and in line with the General Equity sector mean performance. As anticipated in our March report, the rand strengthened against all major currencies and this was the dominating feature of the month.
Resource counters and rand hedges performed poorly whereas Banks and local consumer stocks performed relatively well. Measures taken to counter the negative impact of a strong rand - (the sale of foreign equities and repatriation of rands, the down-weighting of Resources in favour of Banks and the raising of the effective rand cash weighting) assisted the performance of the fund.
While a retracement of the rand to R8 per $ level could no doubt assist the JSE All Share Index in the short term, it would still not be sufficient to justify current valuations of Resource stocks in our opinion. We estimate that Mining companies are on average trading at prices representing in excess of 12 times forward earnings. We continue to favour selected Banks and Industrial counters with sub 8 times historic multiples, where already positive earnings growth prospects are supported by the long awaited decline in interest rates.
In this light we have increased exposure to Nampak, AVI, Johnnic/MTN, Applitec, AECI and African Bank. Rainmaker retains a significant exposure to rand hedge counters with the likes of Trencor, Uniserve, Steinhoff, Oceana, AGI, Grintek and Remgro accounting for 24% of the value of the fund.
African Harvest Rainmaker comment - March 2003 - Fund Manager Comment25 Apr 2003
The Rainmaker Equity Fund performed averagely during the quarter, in other words, more or less in line with its benchmarks, the FTSE/JSE All Share Index and the General Equity Sector mean. It was a quarter where as expected, world equity markets continued to decline in the face of continued economic slowdown and a host of negative factors including:
- growing US trade and fiscal deficits;
- rising oil prices;
- record levels of US household debt relative to income and assets;
- geo-political transition and war fears, and
- pension accounting and funding problems with the S&P 500 trading on an already suspect and overated 25 times price/earnings multiple.
Unexpected however, was the disappointing performance of the gold price in the face of such uncertainty. The retracement from a high of approximately $385/oz to current $324 levels has been particularly punishing for the SA gold shares given that it has been accompanied by a strenthening rand. Rainmaker suffered during February from its overweight position in gold stocks relative to Banks and Retailers. This underperformance was rectified in March by anticipating continued rand strength and its negative impact on the Resources and Mining sector. We reduced exposure to Resources (Anglo) and increased exposure to shares likely to benefit most from the long awaited decline in interest rates - Banks in particular. The subsequent relatively strong performance of Anglos has however, curtailed the fund's recovery.
Looking forward, we expect the bear market in equities to last for another two years. The divident yield of the All Share Index appears to be heading for the 6% level. This will in all probability have to be achieved by declines in Mining shares in sympathy with falling dividend payments.
The US dollar appears extremely vulnerable and it is difficult to see how the rand would resume its course of depreciation in the face of a continued US$ decline. However, the fund retainsa high exposure to Industrial rand-hedges to offset the down weighting of Resource stocks.
The chart that follows shows the performance of the fund against the General Equity sector mean [indexed to 100] from the inception of Rainmaker to the end of March 2003.
African Harvest Rainmaker comment - December 02 - Fund Manager Comment05 Mar 2003
The Rainmaker Equity Fund outperformed the FTSE/JSE All Share Index for the month of December and for the quarter as a whole. Relative to the General Equity Sector, the fund was 1st over three months and 6th for the calendar year. [Source: Micropal] Given the high base set at the end of 2001, we are more than satisfied with this turn of events.
The good relative performance led to strong inflows during December 2002 and at the time of wrting, the fund's market value stands at R 1,076 million.
The composition of the fund has been altered somewhat, principally reflecting our expectation of a stronger rand. Hence, the increased exposure to Banks and local consumer stocks and the trimming of rand hedges (mainly Tongaat, Palamin and Remgro. Note that the de-listing of Ozz is imminent).
The major themes of investment remain:
· global winners (mid-caps - Trencor and Uniserve);
· precious metals and oil (war threat and continuing US dollar weakness);
· construction & mining services;
· defensive consumers (strong cash flows - defensive) AND
· tourism
The fund has been quite resilient in the face of the rand's strength given the high exposure to mid-cap rand-hedges. In fact, in US dollar terms, the fund's unit price has risen from 135 cents (July 2000) to 180 cents (December 2002).
Looking forward, we are comforted by the thought that further significant rand strength is unlikely and are increasing exposure to underperforming rand hedges.