Patrick Cairns
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Articles by Patrick Cairns
Sizing and spreading risk: Inside PSG’s enhanced portfolio construction process
The last few years have been tough for many active managers. Market performance has been extremely narrow and momentum-driven, with concentrations becoming extreme in many areas. This is particularly not an environment in which one would expect a more contrarian approach like the one followed by PSG Asset Management to outperform. Yet, over the past three and five years the PSG Balanced Fund is one of the top-performing multi-asset high equity strategies in the country.
Finding the big quality in small caps
I had a fascinating discussion with Ken Applegate at Wasatch Global Investors about the global small cap strategy they were recently appointed to run for Bellamont Asset Management in South Africa. The recently-launched Bellamont BCI Small Cap Global Equity Fund offers South African investors a novel exposure.
Uncorrelated equity outperformance
I had a fascinating discussion with Stanlib’s Rademeyer Vermaak about how their multi-factor equity process has delivered long-term alpha at low correlation to peers. The systematic Stanlib Enhanced Multi Style Equity Fund has an impressive long-term track record of delivering incremental returns over its FTSE/JSE Capped SWIX All Share Index.
Getting out more than before
I had an interesting conversation with Mohamed Ismail at Mergence about how innovation is adding new dimensions to money market strategies. Money market funds don’t always get a lot of attention. Since the dispersion in returns between them tends to be limited, there doesn’t appear to be a lot of room for differentiation in this space.
The evolution of a top-performer
The Centaur FR Flexible Fund has built an extraordinary track record since it launched in December 2004. In the slightly more than two decades it has been running, it has generated a total return of 2,191%. That is nearly three times the average return of funds in the ASISA South Africa multi-asset flexible category over that period. The fund has evolved significantly over this time. In its early years, it had no offshore exposure and was invested in South African equities and cash.
Fundamental inputs, systematic outputs
In managing its income funds, Northstar Asset Management aims, as much as possible, to avoid unwanted human bias. “We strongly try to avoid running on intuition,” says director of fixed income, Mark Seymour. In this regard, the composition of Northstar’s local and global income funds is the outcome of a purely systematic process built on fundamental inputs.
The benefit of bald heads and grey hairs
In running the Amplify SCI Balanced Fund, Laurium’s thinking around risk management starts in a novel place. “One of the big things we think about is probably not a conventional definition of risk,” says co-portfolio manager Brian Thomas. “When we consider the investors in the fund, the biggest risk they face is that they might retire without enough money. “That feeds into how we think about this fund.
The source of better decision making
From its early days, Abax Investments understood the importance of diversity in thought and experience. “The firm’s three founders came from different backgrounds,” says CEO Lebo Thubisi. “Marius van Rooyen is an engineer by training, and Anthony Sedgwick and Tim Allsop come from the world of finance and accounting, respectively.
Is this the future of private credit?
Investor’s looking to access private credit are finding more options opening up to them. The latest is a hybrid vehicle launched by specialist private credit manager Creation Capital. While the Creation Yield Fund is run like a traditional private credit fund, investors access it through a listed note on the Cape Town Stock Exchange. “Investors come in as note holders,” explains Creation Capital CEO Kasief Isaacs. “For this strategy, this is the only access route.
Moving beyond life stage modelling in umbrella funds
AdviceWorx has moved into the institutional market with the launch of a novel solution for members of local umbrella funds. Their approach moves away from life stage modelling to incorporate more targeted “annuity pathways” that cover both pre- and post-retirement defaults. “South African umbrella funds have been following the life stage model for many years,” says AdviceWorx head of institutional investment consulting, Jason Becker.
Marrying the work of three great investors
The Flagship BCI Global Equity Feeder Fund has a track record dating back to 2020. However, the strategy underwent a complete overhaul from the start of August 2024. The fund was originally run as a concentrated, quality portfolio, but when management was handed to Philip Short and James Hayward just under two years ago, they took an entirely different approach. Short explains that the strategy now combines three things – fundamentals, technicals, and quant factors.
The portfolio manager is the chef
Key person risk is a double-edged sword for allocators. Some fund selectors will stay away from managers that are dependent on a single individual, but for others backing a key decision maker is what they do. Head of implemented solutions at Otto1890, Veenesh Dhayalam, tends towards the latter camp. “Whilst we like a strong team and a solid process, ultimately we back the portfolio manager,” Dhayalam says. “There has to be that accountability.
Aluwani: SA credit is not expensive
Head of fixed income at Aluwani Capital Partners, Conrad Wood, believes that the narrative around credit spreads in South Africa has become “too simple”. “A lot of managers have been very quick to say that credit spreads have come in a lot, and so credit is expensive,” Wood says. “My retort is that if equities have gone up, does that necessarily mean they are expensive?
A unique blend in hedge fund form
Since its launch 17 years ago, the Steyn Capital FR QI Hedge Fund has displayed a distinct character. “People speak about return-enhancing versus return-diversifying hedge funds. We try to do a bit of both,” says Steyn Capital CIO André Steyn. “The fund is trying to beat the market over long periods of time, and it has delivered alpha of 3% per year. But it’s trying to do that while at the same time taking on a lot less market exposure.” Since inception, the fund has averaged net exposure of 70%.
It's not just about the low fees
I chatted to Satrix CIO Kingsley Williams about how indexation has come into its own in South Africa based on performance, not just cost. Over the past 10 years, Satrix has grown its AUM from R53 billion to R323 billion. No other local asset manager can boast that rate of growth at that scale. As CIO Kingsley Williams points out, while indexation was slow to take hold in South Africa, the rate of adoption has now taken off.
John Biccard: I’ve never bought a quality share in my life
The Ninety One Value Fund has one of the best long-term track records of any South African equity unit trust. Since its inception in 1997, the fund has returned 16.5% per annum, which is 3.5% ahead of the general equity sector average. While deep value investing was a fairly common pursuit for South African managers when John Biccard started the fund nearly 30 years ago, he is arguably the last-man standing today.
The snow globe theory of manager selection
Boutique multi-manager Celerity Investments has one priority in manager selection: “We look for great decision-making ecosystems,” says MD Andries Kotzee. “We see the environment in which managers make decisions a bit like a snow globe. When things are shaken up, we want to have a sense of how they will settle.” This is predominantly a qualitative assessment, which Kotzee acknowledges is highly subjective.
A diversified inflation-protection play
For a long time, inflation protection was not something anyone investing globally had to think about too much. That is changing. While inflation in the US averaged below 2% over the past decade, New York-headquartered asset manager Cohen & Steers expects the next decade to see inflation average around 3%.
The predictable ape: Generating alpha from human behaviour
Robeco’s quantitative investment team has a central view on markets and market behaviour: it is possible to identify patterns in the way prices move because, ultimately, those movements are a predictable result of human emotion. “There are financial patterns in markets everywhere because human behaviour has not changed in thousands of years,” says Robeco’s head of quant client portfolio management, Jan de Koning.
The risk of empty empathy talk and challenges of automated empathy in healthcare communication
Abstract Recent studies indicate that large language models outperform humans in empathic performance within text-based healthcare communication. Yet, promoting automated empathy risks fostering “empty empathy talk”—language devoid of relational depth and embodied meaning.
Can you find sustainable business moats in the age of AI?
A key part of Lindsell Train’s quality approach is finding companies with “durable competitive advantages”. However, in a world being upended by AI, it seems that many competitive advantages may be up for grabs. Recently, software stocks and payment companies have sold off on fears that AI could disrupt their business models to the point of making them redundant. In this environment, how does Lindsell Train identify competitive advantages that are truly sustainable?
Generating alpha by focusing on what to avoid
Sesfikile Capital has been a consistent alpha generator in the local property space. Since it launched in 2011, the Sesfikile BCI Property Fund has outperformed the FTSE JSE All Property Index by just under 3% per annum. The fund is highly benchmark cognisant, and therefore mostly tilts exposures around the index. But for co-founder and portfolio manager Evan Jankelowitz a key element of generating long-term alpha has been the decisions Sesfikile has made to avoid the sector’s big losers.
Peregrine's changed response to a new world
For over 25 years Peregrine Capital largely avoided investing in commodities and commodity producers. That changed around 18 months ago. “Historically, we’ve just felt that it’s really hard to predict commodity prices,” says Peregrine CEO Jacques Conradie. “We think you should stick to the easiest way to generate alpha, and it’s just easier to analyse how specific companies will perform than making a call on a global commodity. “But over the last 18 months we think we’ve moved into a new world.
A unique approach that hedges "the losses that matter"
Since equities are the primary growth engine for most South African portfolios, local investors naturally have a high exposure to stock market beta. This is a long-term imperative for wealth creation. However, it does create concentration risk that can translate into acute drawdowns in market dislocations. Boutique firm Ironclad Asset Management takes the view that this equity concentration risk should, and can, be mitigated.
The manager burning down the haystack to find the needle
The recently launched Bellamont BCI Global Equity Feeder Fund feeds into a novel global quality strategy run by Finnish firm Sifter. I thought it was worth finding out more. South African investors haven’t had much exposure to Nordic fund managers. The Bellamont BCI Global Equity Feeder Fund that launched in May last year is therefore a refreshing standout. The fund feeds into the Sifter Fund Global UCITS, run by the Helsinki-based asset management boutique Sifter.
"Scar tissue": Two decades of outperformance
PSG Asset Management’s Shaun le Roux is one of South Africa’s longest-tenured portfolio managers. He has managed the PSG Equity Fund for over two decades, and has co-managed the PSG Flexible Fund since 2016. While both funds are equity-centric, the flexible fund is able to leverage the fact that it doesn’t have to be fully invested at all times. “Different people in the category interpret flexibility differently,” Le Roux (pictured below) says.
Investing in the “chameleon factor”
The wisdom of crowds is a well-known statistical phenomenon. It holds that large groups of people are collectively smarter than any individual. It is also a principle on which Methodical bases its systematic equity strategy. “Share price movements are effectively the result of the views of all market participants,” says portfolio manager Edo Brasecke. “And the movement of all the shares in the market is what we see in an index.
The Matrix “safety first” approach to income
In running its highly successful fixed income hedge fund, Matrix Fund Managers is primarily focused on the front end of the curve. So, it makes sense that the firm could translate these skills into the long-only income fund space.
Truffle: Staying true to form
Over the past decade, Truffle Asset Management has enjoyed extraordinary growth. Driven by outstanding investment performance, the firm has seen its assets under management surpass R100bn, and has more than doubled its total staff from 16 to 38. As impressive as this success has been, the questions it raises are inevitable: If so much has changed, is it still the same business, able to generate the same returns for investors?
The trillion rand opportunity
Changes to Regulation 28 have widened the scope for institutional investors to hold more of their portfolios in private markets, particularly using the infrastructure allowance. Yet most South African institutions still have very little exposure to this space. Private credit in particular is still a niche offering. “We see private credit as an underserved space in South Africa,” says Kasief Isaacs, CEO of private credit firm Creation Capital.
Risk management is "security-specific", not an asset class question
ClucasGray has an important risk management principle: “We always talk about managing risk at an underlying asset level, not an asset class level, because you get very low risk equities or very high risk bonds,” says Portfolio Manager Andrew Vintcent. “For us, it’s always a security-specific issue.” This ties into the firm’s fundamental stockpicking approach, but doesn’t stop there.
Unconstrained, and uncorrelated
The Marble Rock FR MoonRock Global Opportunities QI Hedge Fund has one key objective: to deliver uncorrelated alpha. It does this by investing across a wide range of asset classes, including fixed income, commodities and currencies, as well as cross-asset opportunities that connect them. The fund does not typically take broad market bets, but concentrates on relative value positions.
A unique approach to building a robust asset management business
Evenlode Investment’s founders Hugh Yarrow and Ben Peters (pictured below) always had a clear idea of the kind of company they wanted to build. “We know this industry is cyclical, but we wanted to establish a robustness to what we do that ensures we can be here for clients over the long term,” Yarrow says. “We don’t want to give clients surprises. “In that respect, we think key person risk is a big one. If you are only investing in one brain, and that brain leaves, that is a problem.
The four things you want from your private credit manager
While private credit has become a growing part of many local fixed income and multi-asset unit trusts, there are relatively few dedicated private credit managers in South Africa. Greenpoint Capital CEO Ryan Wood-Collier says that he believes his firm is one of less than 10 in the country. “By broad classification, private credit is a large and diverse asset class.
Marrying top-down and bottom-up in SA equity
Terebinth Capital has a core investing principle across all of its strategies. “We believe that understanding the top-down perspective and then finding the best way to execute that view from the bottom up is what matters in every investment decision we make,” says head of equities at Terebinth, Ann Sebastian. The Terebinth SCI Active Equity Fund is structured exactly according to this philosophy.
Generating alpha from the predictability of human behavior
The global equity strategy that Mergence Investment Managers launched at the start of 2024 is notable for three reasons. Firstly, the firm decided to set it up as an AMC traded on the JSE rather than as a unit trust. Secondly, it opted for a multi-factor quant strategy managed by Fazila Manjoo, who previously ran systematic portfolios at Prescient and used machine learning techniques in managing a balanced strategy at STANLIB.
A change in focus leads to a change in fortunes
The Perpetua SCI Balanced Fund has seen a meaningful turnaround in the past half a decade. For the first few years after its launch in 2014, the fund’s performance was below par. Since 2020, however, it has been a consistent outperformer. It has returned 15% per year over the past five years, well ahead of the 12.9% average return from funds in the ASISA South Africa multi-asset high equity category.
Delivering yield while hedging out market volatility
Cartesian Capital’s Anthea Gardner approaches fund management in a particular way. “I’m a conservative investor. That’s the way I manage money,” she says. “I developed my investing personality to ensure clients do not pay for excessive risk taking, with mandate compliance a major focus, and it’s what I’m comfortable with.” This comes through clearly in the way she runs the CAEP RCIS Fixed Income Retail Hedge Fund.
What counts as a competitive advantage?
There’s something odd that I hear in many conversations with fund selectors: that a lot of asset managers in South Africa struggle to articulate their competitive advantage. It’s a particularly confounding thing to hear in an industry with so many players. It would make sense for South Africa to have the array of asset managers it does if they were each doing something distinctive and therefore complementary.
The manager with no scheduled investment committee meetings
A distinctive feature of investment process followed by Abax Investments is that the firm has no scheduled investment committee meetings. Instead, it believes in viewing idea generation and implementation as an iterative process. “In a sense, our investment committee meeting never ends,” says co-founder Anthony Sedgwick (pictured below).
Is The Growth Of Passive Investing Messing With Markets?
(AP Photo/Julia Nikhinson, File)
Top manager snaps up ‘cheap’ growth stocks and calls turnaround
Growth stocks are back on track after their severe year-long slump, according to top-performing global equity fund manager Mark Baribeau. Baribeau, an elite investor tracked by Fix the Future and the head of global equity at Jennison Associates, said the scale of the growth selloff was ‘something we haven’t seen since 2001’. Baribeau’s funds have been hit hard.
Does the rand-dollar PPP actually tell us anything?
Your Name: Your Email: Send Email To: Keep this field blank For starters, there isn’t consensus on what the purchasing power parity level actually is. By Patrick Cairns, Citywire 10 Jun 2021 00:05 Over time, the rand has weakened more than just inflation differentials would suggest. Image: Waldo Swiegers, Bloomberg Views on the rand seem to be inherently controversial.
The remarkable turnaround for global equity funds
Your Name: Your Email: Send Email To: Keep this field blank We take a look at the impact of the value rotation on funds in the Asisa global equity general category. By Patrick Cairns 17 May 2021 13:41 For local investors, global equity funds were the undisputed champions of 2020. Some locally-managed portfolios produced stellar results last year. Most notably, the IP Global Momentum Equity fund and Anchor BCI Global Equity feeder fund both returned more than 90%.
Top-performing global property funds available in SA
Your Name: Your Email: Send Email To: Keep this field blank A look at which funds stand out over the past three years. By Patrick Cairns, Citywire 28 Apr 2021 00:01 South African firms are among the top performers in this sector. Image: Shutterstock Over the past few years global listed property has become an increasingly important asset class for South African investors.
Taking a balanced approach
Your Name: Your Email: Send Email To: Keep this field blank ‘You do not position for a single outcome at the turn of a cycle’ – manager of the Amplify SCI Strategic Income fund, Erik Nel. By Patrick Cairns, Citywire 19 Apr 2021 14:55 In the first quarter of 2021, the Amplify SCI Strategic Income fund returned 1.3%.
Adrian Saville departs Cannon Asset Managers
Your Name: Your Email: Send Email To: Keep this field blank He will however retain his position as a Professor of Economics and Finance at the Gordon Institute of Business Science. By Patrick Cairns, Citywire 13 Apr 2021 12:15 The founder and former CEO of Cannon Asset Managers Adrian Saville (pictured) has left the company. This week he formally joined London-based multi-family office Genera Capital as an investment specialist in their Johannesburg operation.
‘Local bonds offer investors significant opportunity’
Your Name: Your Email: Send Email To: Keep this field blank For foreigners, it’s a no brainer for local investors to invest in SA bonds: PortfolioMetrix’s Philip Bradford. By Patrick Cairns, Citywire 12 Apr 2021 00:01 South African bonds are currently offering the highest real yields in the world. The yields on long-dated local bonds are as much as 9.0% higher than equivalent instruments in the US, and 11.0% above those in Europe.
SA’s top-rated equity fund managers
Your Name: Your Email: Send Email To: Keep this field blank A look at the managers of local equity funds who currently carry the highest Citywire ratings. By Patrick Cairns, Citywire 8 Apr 2021 11:00 Just three South African equity fund managers currently have a AAA rating. Image: Supplied Given the JSE’s weak performance over the past few years, local equity managers have had to work hard to squeeze out returns.
SA’s top-rated equity fund managers
Your Name: Your Email: Send Email To: Keep this field blank A look at the managers of local equity funds who currently carry the highest Citywire ratings. By Patrick Cairns, Citywire 8 Apr 2021 11:00 Just three South African equity fund managers currently have a AAA rating. Image: Supplied Given the JSE’s weak performance over the past few years, local equity managers have had to work hard to squeeze out returns.
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