SA's Top Equity Funds

Generating alpha amidst a market-wrenching pandemic has been a challenge and a half for many fund managers.

- Timothy Rangongo

Week in and out, the arduous search for funds to review for finweek’s Fund in Focus page, for which outperformance is part of the criteria, has attested to the challenge of generating alpha (the additional performance when compared to the general market or benchmarks). The pursuit of outperformance has been no different to that of searching for needles in haystacks.

For the past year-to-date, returns in minuses and red have been custom and this is across almost all asset classes save for the commodities and multi-asset managers who were spared the wrath of Covid-19.

In this article, we will look at the investment strategy and approaches employed by a handful of SA equity funds that have successfully manoeuvred the lingering market uncertainty and ensuing losses, how they went about picking unbeaten stocks and where they are searching for their next alpha.

Forensic accounting analysis as key competitive advantage

The investment strategy of Steyn Capital’s Equity Prescient Fund is premised on maximising investor capital by buying securities with trading values materially lower than their intrinsic values.

Steyn Capital applies developed market research techniques gleaned from experience garnered by US hedge funds (which manage billions of dollars) into a less efficient market like South Africa, to generate alpha over time, according to the fund manager and founder, André Steyn.

He says Steyn Capital has a team of forensic accounting analysts who pore over company financial statements to convert reported data into economic reality and populate a proprietary research screen, which they use as a starting point for their intensive research process.