The Denker Sanlam Collective Investments (SCI) Balanced Fund has delivered top-quartile performance over multiple periods since inception. Such consistent performance across market cycles and macro developments is the ideal outcome for investors. But how do we generate this performance and at what cost? Traditional investment theory tells us that you cannot have both excellent performance and tolerable volatility – unless you find the perfect balance. We harness the best stock picking and risk management skills of all our portfolio managers to find this balance – and the results speak for themselves.
The fund has delivered outperformance irrespective of market cycles and conditions.
The Denker SCI Balanced Fund has delivered top-quartile performance over the periods shown in Figure 1, since inception. Over shorter time horizons, risk management may detract from relative performance. However, in the long run, idea generation, risk management and effective implementation build a solid long-term track record.
Figure 1: As at 30 September 2021, the fund has consistently delivered top-quartile performance.
Source: Denker Capital, Morningstar
The A class has an annual management fee of 0.85% (incl. VAT). Returns are net of fees. Returns for periods longer than one year are annualised. The highest annual calendar year return since inception was 8.6% and the lowest was 1.6%.
We bring together the experience and expertise of all the Denker Capital portfolio managers to generate performance.
Under the management of Madalet Sessions and Jan Meintjes, the combination of specialist stock picking skills across our investment team and our risk management discipline is the source of our performance. Figure 2 summarises our approach.
Figure 2: Combining superior stock picking and risk management is the source of our success.
The foundation of our approach: we don’t rely on one specific macro result for success.
In a global economy, there are a wide range of factors at play over which we have no control, which means we cannot predict or expect things to go a certain way. When we identify opportunities for attractive returns, we therefore ask: are these attractive return outcomes dependent on certain macro outcomes? If the answer is yes, we ask: are there other assets we can own that would mitigate this macro risk to the portfolio? In other words, we look for ways in which we can reduce the portfolio’s reliance for returns on specific outcomes.
We therefore focus on what we can control and plan for what we can’t with protective measures:
1. Focus on what we can control, using the skills of all our portfolio managers.
In constructing our balanced fund, we identify quality assets that are attractively priced that improve the likelihood of earning attractive returns over time. The portfolio managers in our investment team have an abundance of experience and expertise that come together to select the best equity ideas for the fund.
2. Manage risks by having protective measures in place for what we can’t control.
We reduce the portfolio’s reliance on specific macro outcomes, i.e. unexpected events that we cannot predict.
This means that the fund should deliver good returns over time at low levels of volatility. Over the longer term, due to the power of compounding and our investment approach, we aim to achieve outperformance (or above-average returns) through stock picking and not from taking unnecessary risks.
1. Expertise and experience of our portfolio managers
The Denker SCI Balanced Fund offers you the best of our investment team – harnessing the stock picking talent and skills of all the Denker Capital portfolio managers, who have navigated various periods of market volatility. Our investment philosophy is built on a process that prioritises:
• good business economics,
• quality management,
• environment, social and governance (ESG) factors, and
• favourable valuations.
To add to this, as a smaller manager, the team can also access more and different opportunities than larger managers, widening the scope for finding attractive investment opportunities even further.
The value that each of these portfolio managers add to the Denker SCI Balanced Fund is detailed below.
“I believe the Denker SCI Balanced Fund really offers investors the best of Denker Capital. As a portfolio manager on this fund, it’s a privilege to be able to leverage the skills of such highly regarded and experienced individuals for investors. My time in the market has taught me that business fundamentals are far more important to long-term outcomes than macro factors, but that macro can impact returns. My job is to allow the team’s stock selection skills to shine, while I focus on mitigating macro risk so that investors can sleep well at night.”
Years of industry experience: 15
Years with Denker Capital: 5
Madalet is head of the multi-asset capability and co-manages the Denker SCI Balanced and Stable funds.
On the balanced fund, she provides a diversification overlay and ensures that we apply integrated risk management throughout the process to ensure that the asset allocation is optimised for both performance and risk – with input from the team and Jan as co-portfolio manager.
“The fund’s exposure to South African small and mid cap stocks is a key differentiator in comparison to some of the larger funds in the category – and we have a proven track record over decades in this space. Valuations in these sectors provide a wide margin of safety in an environment where the South African economy continues to recover.”
Years of industry experience: 27
Years with Denker Capital*: 10
Jan manages the S-Alt SC Qualified Hedge Fund + (our small cap opportunity fund) and co-manages the Denker SCI Balanced and Stable funds.
Given his experience and knowledge of South African equities – which is the largest asset exposure in the portfolio – Jan’s role as a portfolio manager on this fund is to oversee all domestic equity selections and to contribute to the risk management process.
“We believe that owning companies that are both high quality and attractively priced is the best way to generate sustainable, long-term investment performance. I’m confident that our team’s experience and ability to identify opportunities add value to investors in the Denker SCI Balanced Fund.”
Years of industry experience: 29
Years with Denker Capital*: 11
Claude manages the Denker SCI Equity Fund and Denker SCI SA Equity Fund.
Claude managed the SIM General Equity Fund for five years, achieving consistent top-quartile performance for each of the five years. Under his management, the SIM Industrial Fund received both a Standard & Poor’s and a Raging Bull award.
“Our global financials team is highly regarded by management teams around the world for our experience and knowledge. Our expertise, combined with our ability to identify high-quality financial services companies, allows us to spot great investment opportunities for investors in the balanced fund.”
Years of industry experience: 33
Years with Denker Capital*: 18
Kokkie manages the award-winning Denker Global Financial Fund and its rand-denominated feeder fund as well as the Nedgroup Investments Financials Fund.
Under his management, the Denker Global Financial Fund received a Morningstar Award and the Nedgroup Investments Fund received several Raging Bull awards. Kokkie has received the prestigious UK-based Investment Week’s Fund Manager of the Year award four times (2010-2013) in the financials category.
“We follow a comprehensive process and use proprietary tools to identify global companies that have the potential to substantially grow shareholder value over time, and we invest in these companies when they are attractively priced. In addition, our size and our unconstrained approach enable us to include outstanding global opportunities in small and mid caps to benefit investors in the fund.”
Years of industry experience: 18
Years with Denker Capital*: 15
Jacobus manages the Denker Global Equity Fund and its rand-denominated feeder fund.
2. Risk management
The true meaning of risk management is proactively managing for unexpected curveballs so that we can deliver returns more consistently. It is not being cautious, but rather about taking more calculated risks because we consider risk as an integral part of what we do.
This is exactly what the Denker SCI Balanced Fund aims to achieve – long-term returns that are in line with or better than the benchmark, at lower levels of volatility. Figure 3 shows how the fund has performed since its inception in May 2017, relative to other funds in the same category and to the main asset classes available to portfolio managers. As you can see, the level of risk to which investors have been exposed is materially lower.
Figure 3: Low levels of volatility in returns means more certainty about your investment outcomes (risk and return comparison since inception).
Source: Denker Capital, JSE, ThomsonReuters and Morningstar, 30 September 2021
Returns are in rand, annualised and net of fees. The 10 largest funds were selected based on funds in the category with the highest fund sizes at 30 September 2021. The A class of the Denker SCI Balanced Fund has an annual management fee of 0.85% (incl. VAT). Inception date: 2 May 2017.
This fund is for anyone saving for the long term.
The Denker SCI Balanced Fund is appropriate for investors saving for the long term who want exposure to many independent ideas that aim to deliver superior risk-adjusted returns.
The fund is not constructed for a specific time period or a specific age group – investors of any age can benefit. Currently, most of the investors are retirement funds (the fund is Reg 28 compliant) and our own staff and their children. In fact, the majority of the Denker Capital team is invested in the fund. This varies from kids aged two to staff members who are approaching retirement.
Why should you consider investing?
The value of the Denker SCI Balanced Fund lies in the sum of the parts – combining the:
• best opportunities across the market to provide performance,
• overlayed with an asset allocation that ensures diversification for all seasons and cycles, and
• integrated risk management that enhances the prospects for long-term performance.
Click here to view the latest minimum disclosure document.
Contact us for more information or to invest.
Nigel Barnes
*Includes pre-2015, before Sanlam Investment Management (SIM) Global and SIM Unconstrained Capital Partners merged to form Denker Capital.
Disclaimer
The information in this communication or document belongs to Denker Capital (Pty) Ltd (Denker Capital). This information should only be evaluated for its intended purpose and may not be reproduced, distributed or published without our written consent. While we have undertaken to provide information that is true and not misleading in any way, all information provided by Denker Capital is not guaranteed and is for illustrative purposes only. The information does not take the circumstances of a particular person or entity into account and is not advice in relation to an investment or transaction. Because there are risks involved in buying or selling financial products, please do not rely on any information without appropriate advice from an independent financial adviser. We will not be held responsible for any loss or damages suffered by any person or entity as a result of them relying on, or not acting on, any of the information provided. The information to follow does not constitute financial advice as contemplated in terms of the South African Financial Advisory and Intermediary Services Act of 2002 (FAIS Act). Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision as not all investments are suitable for all investors. Sanlam Collective Investments (RF) (Pty) Ltd (SCI) is a registered and approved Manager in terms of the Collective Investment Schemes Control Act.
The Manager of the range of Denker Capital South African funds is Sanlam Collective Investments, a registered and approved Manager in Collective Investment Schemes in Securities. The Manager retains full legal responsibility for third party named portfolio. The Sanlam Group is a full member of the Association for Savings and Investment SA. A schedule of fees and charges and maximum commissions is available from the Manager. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments schemes. International investments or investments in foreign securities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information.
Returns are annualised and net of fees unless otherwise stated. Annualised returns are returns for a period that are scaled to one year. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. Changes in exchange rates may have an adverse effect on the value, price or income of a product. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (CISCA). The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002.
Awards information: Source: Raging Bull Awards, Investment Week, Morningstar, Standard & Poor’s, Denker Capital. The Nedgroup Investments Financials Fund received Raging Bull Awards for the Best Domestic Equity Financial Fund in 2011, 2012, 2013, 2015, 2016 and 2018. The SIM Industrial Fund received a Raging Bull Award for the Best Domestic Equity Industrial Fund in 2006 and S&P Fund Awards for performance in 2006 and 2007. The Denker Global Financial Fund received a Morningstar Award in the Equity Sector Financials category in 2012. Prior to January 2019, the Denker Global Financial Fund was called the Sanlam Global Financial Fund.
