Over the long term, equity investments deliver superior returns to investors. For this reason, the portfolio will almost always be invested in equities to the maximum allowable extent (75%), unless we consider equity valuations to be expensive or we need to contain risk.

When evaluating equities, we tend to follow a value investment approach with a preference for high quality companies with the potential to generate stable, consistent returns. The importance of identifying and investing in these companies is to harness the compounding effect on shareholder return.

As we believe that international diversification is important, a substantial portion of our assets will always be invested in offshore equity via investments in our own Worldwide Flexible Fund and other direct offshore holdings. Locally-listed stocks with rand hedge qualities are also important when considering international diversification.

The remaining 25% of the portfolio not allowed in equity is currently invested in listed property stocks. We prefer property to bonds or cash, as the current interest rate environment is not favourable for the latter two asset classes. Within the property sector, we favour international property assets where you can get quality assets at attractive real yields. As we prefer not to use our limited direct international exposure in this part of the portfolio, we look for locally listed property stocks with international assets. These property stocks are ample but mainly give exposure to UK and Europe thus for diversification within this sector we also include some high yielding property stocks with local assets.

Old Mutual has been one of the biggest equity positions in this portfolio for the past few years. Not only for the long term anticipation of an unbundling, but also due to the quality of its local business and the discount to embedded value it trades at compared to the other South African insurers. Management officially announced its plans for a managed separation in 2016 and recently it was announced that they are aiming for completing of this separation by the end of this year. We believe that this separation will unlock value for its shareholders and hence we are remaining with our substantial position (8.2% of our portfolio) in Old Mutual.