Nedgroup Investments has appointed a new management team for the previously favored Rainmaker Fund following a prolonged period of disappointing performance.

The fund, which oversees roughly R6.5 billion in assets, has consistently underperformed compared to its benchmark (the average in the Asisa Equity: General category) over the past one, three, five, seven, and ten years. Furthermore, this benchmark has trailed both the FTSE/JSE Capped Shareholder Weighted All Share Index and the All Share Combined (prior to the Swix index) for nearly a decade.

Read: These two flagship unit trusts have underperformed CPI over a decade [Jan 2024]

Abax Investments (formerly Polaris Capital), a boutique asset manager established in 2003, has managed the Rainmaker Fund for Nedgroup Investments since its inception in 2000, with the same investment team overseeing its management from the start. Abax also manages the Flexible Income Fund, Opportunity Fund, and Entrepreneur Fund within the bank’s investment division.

Monitoring the management ‘closely’

In its 2021 annual report, Nedgroup Investments mentioned that “in 2020, we revised the mandate of the Nedgroup Investments Rainmaker Fund to allow the manager to invest up to 30% of its portfolio in offshore equities.”

“The fund achieved a return of 23.6% in 2021; however, its long-term performance (3.8% per annum over five years) is unsatisfactory, leading us to continue our close monitoring of the manager.”

Read: SA reforms spur money manager Abax to boost exposure [Jul 2024]

Following updates from National Treasury, the maximum offshore allocation increased to 45%. In 2023, it was noted that the “fund performed decently (9% for 2023), but its long-term results continue to be disappointing (4.6% per annum over five years). We will persist in closely monitoring the manager.”

Welcome Ninety One …

On December 11, Nedgroup Investments disclosed its intentions to replace Abax as the Rainmaker Fund manager with the “Ninety One quality team.”

Nic Andrew, head of Nedgroup Investments, indicated that this decision followed an extensive review and aligns with their Best of Breed philosophy to secure optimal outcomes for clients.

Listen/read: Ninety One remains positive despite concerning outflow volumes [Nov 2024]

Nedgroup argues that “in 2020, the mandate was amended to include global equities, and in 2022, the SARB [South African Reserve Bank] raised the prudential offshore limits to 45%, allowing nearly half of the portfolio to be allocated to global equities. Based on this, Nedgroup Investments assessed the requirements for managing such an equity mandate.”

Andrew remarked: “In light of the mandate change to include nearly 50% global equities and the fund’s performance, we determined it was in our investors’ best interest for Nedgroup Investments to seek better options aligning with the fund objectives.”

Read: Have investors been ditching SA’s biggest asset managers? [May 2023]

Following a thorough review based on Nedgroup Investments’s rigorous Best of Breed standards, the Ninety One Quality Team was selected to assume management of the flagship fund for Nedgroup Investments, pending regulatory approval.

“We believe the Ninety One Quality team is well-equipped to manage this mandate due to their strong capabilities and proven success in both South African and global equities. They exemplify the qualities we seek in our partner managers, and we are confident that their expertise will yield superior results for our clients.”

Exclusive access point

The Rainmaker Fund will act as the exclusive entry point to the Ninety One Quality capability within a South African General Equity Fund.

Thabo Khojane, MD of Ninety One South Africa, expressed: “We are privileged to be selected by Nedgroup Investments as a Best of Breed manager for the Rainmaker Fund and anticipate a fruitful partnership.”

Clyde Rossouw, head of the Ninety One Quality Team, added: “Our team is enthusiastic about providing investors in the Rainmaker Fund with our extensive experience in managing both South African and global equities.”

“We are fully committed to achieving the fund’s goal of delivering long-term returns.”

By the end of November, the Rainmaker Fund’s top 10 holdings included FirstRand (5.3%), Naspers (4.9%), Anglo American plc (4.3%), Pepkor Holdings (4.2%), British American Tobacco plc (3.5%), Sanlam (3%), Visa Inc (2.9%), Microsoft Corp (2.9%), Amazon (2.9%), and Bidvest (2.9%). Foreign equities accounted for 41.7%, alongside an additional 1.4% in offshore cash.

Abax remains a vital partner

Andrew emphasized that Abax Investments continues to be an important partner for Nedgroup Investments.

“Abax Investments will continue to manage the Nedgroup Investments Opportunity Fund, the Nedgroup Investments Flexible Income Fund, and the Nedgroup Investments Entrepreneur Fund. All of these funds have delivered outstanding returns, and we are confident they will maintain this positive trajectory.”

Over the past year, the Rainmaker Fund faced net outflows of R71 million in Q3, R85 million in Q2, and R72 million in Q1, according to Asisa data.

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