COUNTERPOINT SCI VALUE FUND
- Raging Bull Award for the Best South African Equity General Fund (straight performance over three years to December 31, 2021)
- Raging Bull Award for the Best South African Equity General Fund (risk-adjusted performance over five years to December 31, 2021)
Cape-Town-based boutique asset manager Counterpoint Asset Management was founded in 2012 and is headed by Paul Stewart. It manages 16 unit trust funds under the Sanlam Collective Investments licence, and these range from interest-bearing, through multi-asset, to equity funds.
The Counterpoint SCI Value Fund, which invests in shares listed on the JSE, outperformed its peers and its benchmark, the FTSE/JSE All Share Index, over both the three-year and five-year periods to the end of 2021, delivering annualised returns of 23.87% over three years and 14.72% over five years, according to ProfileData. This was well above the benchmark, which delivered 15.71% and 11.38% respectively.
Personal Finance asked fund manager Piet Viljoen about how the fund is managed and the reasons behind its outstanding performance.
Can you outline the investment philosophy/strategy of the Value Fund?
The fund employs a strict value philosophy. Our interpretation of value means only buying shares that are trading below their intrinsic value, with a comfortable margin of safety. This strategy often requires investors to be patient and unmoved by short-term news flow and sentiment but has historically delivered exceptional outcomes for investors who are able to stay committed to their investment strategies.
In managing the fund, we employ a sensible risk management process which focuses on assessing business risk, market risk and applying sound diversification principles. The fund invests in listed equities as well as assets with equity-like returns, but they must be listed in South Africa. We believe investors can and should make their own decisions as to what proportion of their assets should be invested in South Africa and can then allocate across a pure South African and pure global value strategy based on their requirements.
The fund celebrates its 10th anniversary this year. It has outperformed its benchmark, the JSE All-Share Index, over that period, with exceptional returns in 2021. To what do you attribute the fund's excellent performance?
Sensible risk management, and the ability to invest across the size spectrum of companies listed on the JSE. Smaller companies have been – and continue to be – very attractively valued and will therefore likely deliver better returns than larger and more widely held companies that are more fully priced. The fund has had an overweight in smaller companies since the pandemic related sell off in March 2020.
Which counters specifically stood out for you over the past couple of years?
MTN has been a big winner for the fund, as well as Glencore. Both stocks were neglected by the market due to bouts of bad news.
How are you positioning the fund going ahead, taking into account the possible effects of inflation and higher interest rates?
Equities are reasonably good hedges against inflation, particularly equities that have a short duration – in other words, their cash flows lie immediately ahead of them, and are not reliant on many years of speculative growth ahead of them as is the case in high growth stocks. This is good for “value” stocks, as they generally don’t discount a lot of growth far out into the future, meaning the present value of their projected cash flows are not subject to being diminished by rising interest rates – as opposed to growth stocks. We think therefore that the next few years, where central banks may well hike rates in response to rising inflation, will in all probability offer nice tailwinds to the value strategy.
PERSONAL FINANCE