FAIRTREE ASSET MANAGEMENT - SELECT BCI CAUTIOUS FUND

BACKGROUND

Fairtree Asset Management is a multi-strategy fund management business, headquartered in Cape Town, with a total of R58 billion. The firm consists of approximately 40 investment professionals across more than 10 specialist investment teams. The portfolio managers are assisted by Fairtree’s individual investment teams, including a team of centralised equity analysts.

INVESTMENT PHILOSOPHY AND PROCESS

Fairtree’s objective is to provide investors with a consistent return, based on a predictable asset allocation framework which is dominated by a core exposure to their conservative Income Plus skillset and process. Other Fairtree building blocks will be blended with the Flexible Fixed Income strategy, to augment and enhance the return of the fund. The asset allocation philosophy is one which relies primarily on strategic asset allocation to drive the returns over time, with periodic rebalancing back to the desired asset allocation, which could be either on the back of market performance or flows. The desired allocation tilts will be based on a quarterly expected return estimate derived for each asset class, with the goal to maximise the Information Ratio of the fund over a rolling 3-year basis.

The Fairtree approach to SA equity investment is flexible and allows the team at Fairtree to move between the value and growth styles of investing as deemed appropriate given the market environment. In doing so, Fairtree can successfully navigate periods when a particular style underperforms the market. Fairtree Asset Management will tend to have a positive bias to reasonably priced leading companies in industries that are benefitting from prevailing economic conditions.

The objective of the Flexible Fixed Income strategy is to provide superior risk-adjusted returns over and above cash irrespective of market conditions. Fairtree believes that markets are not always efficient and therefore present mispriced opportunities, which can be taken advantage of to generate excess returns. Excess returns can be generated by extracting illiquidity and negative skewness premia.