“Creating unique and differentiated best in class fund solutions”

SELECT BCI BALANCED FUND

managed by Fairtree Asset Management

Background

The Select BCI Balanced fund aims to generate long-term wealth for investors by producing inflation beating returns. The Fund is managed to outperform the South African – Multi Asset – High Equity peer group benchmark. The Fund’s objective is to create medium to long-term capital growth, within the constraints governing retirement funds – Regulation 28. The Fund invests in a diversified and balanced range of asset classes and may invest in offshore securities when the benefit of higher returns and portfolio diversification are available.

Investment Philosophy and Process

Fairtree believes that their investment approach is based on their strengths. Their strategic asset allocation is purposely designed with high allocation to growth assets in mind. Only when they deem an economic crash to be imminent, given the array of variables they monitor, would they meaningfully tilt the portfolio’s tactical asset allocation away from growth assets to provide protection against a crash. 

  • They believe that security selection is the most important driver of risk and returns over the expansion phase of the economic cycle.
  • Due to the breadth of the South African equity market, security selection can be effectively used to tilt the fund to incorporate changing mid-cycle macro dynamics.
  • Equity and property play an important role in capital growth over the long run.
    Fixed Income and cash play a key role to reduce portfolio volatility, enhance the portfolio’s yield and acts as a hedge during periods of economic recession

Within each asset class, specialist portfolio managers are responsible for security selection given their bottom up and top down analysis. The team at Fairtree believes that each step in their approach (high strategic allocation to growth, defensive tactical asset allocation and specialist security selection) adds value, but given their track record, the majority of outperformance comes from security selection followed by asset allocation.

The multi strategy team sets the strategic asset allocation levels using historical data across multiple business cycles and optimising for risk adjusted returns, the probability of achieving the target return, the optimal diversification, and drawdown risk. Their process is designed to have a higher relative allocation to growth assets over time, resulting in a larger outperformance profile. Underlying asset class building blocks are each managed by specialist and independent teams recognized as leaders in their respective fields. They fundamentally believe that security selection is the most important factor when it comes to outperformance of a balanced fund.

Fairtree will only shift tactical asset allocation meaningfully away from strategic asset allocation in periods before a market crash. They use a dashboard of indicators and metrics to establish when they believe the risk of a market crash is rising and will adjust portfolio exposure appropriately. Lastly, they have a disciplined and uncomplicated rebalancing process which ensures that appropriate exposures to growth assets are adhered to.

Team member Position
SA Cash
7.50%
SA Bonds
17.50%
SA Property
7.50%
Global Equity
17.50%
SA Equity
50.00%
Portfolio
100.00%

CORE INVESTMENT TEAM

Stephen Brown

  • Equity Portfolio Manager
  • BCom, MBA, CFA
  • Joined Fairtree in 2011
  • 23 years’ experience

Jacobus Lacock

  • Macro Strategist
  • BCom (Financial Economics), CFA
  • Joined Fairtree in 2011
  • 16 years’ experience
Team member Position Qualifications Years’ experience
Paul Crawford
Fixed Income Portfolio Manager
BSc Eng Elec, MBA, CFA
16
André Malan
Portfolio Manager
B Comm, MBA
26
Rob Hart
Property Portfolio Manager
CA (SA), CFA
24