Issue: June/August 09
Expert Opinion

Performance is a given; credibility is the key

Test of time still crucial in institutional sector, says Absa Asset Management managing director Busisa Jiya.

Jiya...solid record
Jiya...solid record
Asset managers and trustees have at least one thing in common: their performance is scrutinised more closely today than at any time in living memory. Regulatory trends and market volatility see to that.

Though compliance requirements change and market dynamics shift, one factor in the institutional investment environment remains constant. It’s the emphasis placed on long-term credibility.

Form is temporary; class is permanent. So the sporting pundits tell us.

In the investment industry, this tends to mean that one year’s performance -- no matter how impressive -- does not make you a top player. Solid results over five years or more indicate whether you have the quality needed for the big league – or, in our case, the institutional sector.

An increasing number of institutional investors and their trustees are today applying the five-year yardstick to Absa Asset Management (ABAM) and its equity fund management track record.

Of course, the ABAM record goes back long before that. For years, trustees and their advisers have known us as leaders in the domestic cash management category. Our money market fund has long been the largest in the country, and at more than R60 billion it still is.

But in recent years, our asset management offering has been significantly expanded. Today, ABAM offers a comprehensive range of investment products and services backed by considerable professional expertise and award-winning results in various categories.

Solid industry positioning underpins the product development strategy. We have established credentials as a pragmatic, value-oriented investment manager. Our philosophy emphasises the need for long-term strategies and long-term results to match.

We believe long-term portfolio outperformance depends on superior investment skill, research excellence and continuous review of all micro and macro factors. In the critical equity category we embrace the principles of value investing by selecting shares in companies that trade below our objective assessment of intrinsic value.

Consistent application of these principles and a robust investment process have helped us develop a track record that today stands up to intense scrutiny by our professional peers, competitors and clients.

Inevitably, our growth strategy puts the initial focus on the retail investment sector while our funds built a solid performance history; first over one, then three, then five years.

Significantly from an institutional perspective, ABAM’s domestic equity products have now been top-quartile performers for half a decade. Our value fund, the ABSA Select Equity Fund, today has a record of outperformance against the JSE All Share Index going back to February 2004.

Another capability that attracts a lot of industry attention is our Absolute Fund. Its objective is capital preservation in the first year and, after that, returns that beat the consumer price index (cpi) by 4% a year over any rolling three-year period.

Since inception in November 2006, it has consistently achieved this objective, with only a temporary setback caused by the global financial crisis and its aftermath. The fund rode out the biggest market slide in 70 years and for the past three years has significantly outperformed its benchmark.

What’s more, over any rolling one-, two- or three-year period the fund has never returned a loss.

Long-term successes like these have helped garner considerable investor support for ABAM’s domestic equity funds. By mid-2012, assets under management in this area substantially topped R100 billion.

The investment team is also characterised by year-in, year-out performance. For five years or more, our chief investment officer Errol Shear has led a cohesive, stable group of professionals known for their rigorous approach and abiding sense of accountability.

We at ABAM are acutely aware of the responsibility of managing other people’s money. Our professionals know only too well that they have a duty to respect, preserve and increase the wealth of clients.

The business base is growing; so is the team. Mariette Warner – a pre-eminent figure in the listed property sector for more than 20 years – joined ABAM a year ago, in which time the Absa Property Equity Fund has consistently climbed the industry rankings.

It is also gratifying that another area of growth is institutional investment mandates in the domestic equity arena.

Credibility over five years has now been demonstrated. The five-year period could hardly have been more challenging as it coincided with the global financial crisis and subsequent equity market volatility.

Volatility continues. So does critical examination of our performance, quarter by quarter and year by year. Just like institutional trustees, we’ve grown used to intense scrutiny.