DOTPORT STABLE PRUDENTIAL FUND OF FUNDS
* Raging Bull Award for the Best Domestic Asset Allocation Prudential Fund – the top-performing fund on a risk-adjusted basis over five years to December 31, 2010
A fund of funds managed by Pretoria-based father-and-son brokers has out-performed all other domestic prudential funds on a risk-adjusted basis to take the Raging Bull Award for the best domestic asset allocation prudential fund.
The Dotport Stable Prudential Fund of Funds returned 10.61 percent a year over the five-year period to the end of December last year, according to ProfileData.
Prudential funds are suitable for tax-incentivised retirement-savings. They invest across the asset classes, but with no more than 75 percent in equities.
On straight performance over five years to December 31, 2010, the Dotport Stable Prudential Fund of Funds was ranked 21st in its sub-category – the prudential variable equity sub-category.
However, the fund performed well on the four risk-adjusted performance measures used to determine the PlexCrown Fund Ratings. It obtained the highest PlexCrown rating of five PlexCrowns, and this earned it the Raging Bull Award for the top prudential fund.
On straight performance, the fund was the top performer in the asset allocation prudential variable equity sub-category over three years, returning 10.71 percent a year.
The fund’s manager, Martin Struwig, and his father, Nico Struwig, started providing financial advice in 1990.
In 1998 they obtained a licence to manage money and started offering clients wrap fund investments. In 2005, these funds were converted to white-label unit trust funds offered under the licence of Metropolitan Collective Investments.
Martin Struwig says he considers the management of downside risk to be more important than the pursuit of speculative upside gains.
He says the worst return by the Dotport Stable Prudential Fund of Funds over a one-year period since its inception has been 4.2 percent. This was during 2008, when the equity markets fell by more than 40 percent, he says.
The fund is managed using a quantitative-based model that analyses various economic data to determine a suitable asset allocation, Struwig says. Once this has been determined, the fund is invested accordingly with different fund managers.
Dotport uses a performance-ranking system to identify top fund managers and it conducts further due diligences on these managers by meeting and interviewing them, Struwig says.
Asset allocation calls made as a result of the quantitative-based model ensured that the fund reduced its exposure to equities at the end of 2007, Struwig says.
The fund underperformed a little at the beginning of 2008, but its position was justified when the market crashed later that year. “We weren’t fooled by the rush and the extreme exuberance in the markets ahead of the crash,” he says.
Currently, the fund has a high exposure to cash. At the end of December last year, 45.7 percent of the fund was in local cash and 5.9 percent was in offshore cash.
It had only 27.3 percent in equities at the end of 2010.
The fund uses both active and passive investments, such as index funds and exchange traded funds, Struwig says.
Dotport is neutral to negative on domestic equities, because they are offering no value, even assuming growth in earnings in the year ahead, he says.
The fund is exposed to property through an index-tracking fund, the Prudential Enhanced SA Property Tracker. Exposure to bonds is largely in Metropolitan’s inflation-linked bond fund, but this is at a low of 3.34 percent.
At the end of last year, the fund had an exposure of 5.4 percent to offshore equities.
Struwig says he believes that offshore equities offer the best value, but he is hesitant to increase investment in this asset class because of the unpredictability of the rand.
He thinks that the global economy will continue to grow, which will underpin the demand for, and stimulate the price of, resources. This could result in a further strengthening of the rand, he says.