There are not many unit trusts that have very different investments from the norm. These funds populate their portfolios with shares that are very out of favour or hedge part of the fund quite uniquely. Funds like this are usually volatile by nature and will provide abnormally good or bad performance or can form an important hedge (insurance / diversification) to your portfolio. A fund like this is the Investec Value Fund, which is suited for long-term, aggressive investors.
The Investec Value Fund is positioned for a decline in US markets, a rush back to safe-haven assets (Gold – precious metals) and for the Rand to weaken. Its major investments are as follows:
- A 14% short-position on the NASDAQ 100 Index. The FANG (Facebook, Amazon, Netflix and Google) stocks comprise 30% of this index. The Index is seen to be grossly overvalued trading on a P/E of 27x versus a 10-year historical average of 21x and the current S&P 500 of 21x and the JSE of 17x.
- A 30% investment in gold shares. These shares are undervalued at the current gold price of $1200 per ounce but will really appreciate if the gold price increases. This will happen if offshore equity markets crash, the US dollar weakens or global inflation spikes.
- A 13% investment in platinum, 10% in Impala Platinum. An exceptionally undervalued share where the supply of platinum will reduce a lot quicker than demand in the future, which will push the platinum price up.
- The remaining 43% investments are in deep value unfavoured shares.
- Offshore comprises 35%, mostly in US dollars.
The Investec Value Fund was a premium, multiple award-winning fund for 14 years to 2014, producing an annual return of 22% per annum and outperforming the JSE All Share Index by a staggering average 4% per annum. From mid-2014 to 2016 it performed poorly, declining 30%, but then it had a miraculous recovery returning 80% in 8 months. Since then, the fund has declined 35% over the last two years and has underperformed the JSE All share Index by 50%.
So, is this the low point for the fund? i.e. buy low and sell high.Clearly the fund is very volatile and hence is suited for long-term and aggressive investors. If you have a negative outlook for global markets and the Rand, this fund will provide a valuable hedge to your aggressive long-term investment portfolio.