“We only allocate capital to those
investments which offer true value
and a rare combination of highly
commendable attribu...
CONSISTENT CONSERVATIVE
CONTRARIAN
PSG has a track record in value creation
CAGR = 56%*
R100k invested in 1995 = R60m toda...
CONSISTENT CONSERVATIVE
CONTRARIAN
By aligning themselves with great entrepreneurs...
2
PSG Tanzanite
CONSISTENT CONSERVATIVE
CONTRARIAN
Our Culture : Partnership
4
.
Factors PSG Tanzanite (Pty) Ltd
Equity ownership in firm
...
CONSISTENT CONSERVATIVE
CONTRARIAN
PSG Flexible Fund
Name Change
• On 1 September 2010 the name of the fund
changed from t...
CONSISTENT CONSERVATIVE
CONTRARIAN
Simplified Product Offering
6
Simplified product offering spanning the risk spectrum
CONSISTENT CONSERVATIVE
CONTRARIAN
PSG Flexible Fund - The Team
Jan Mouton – Fund Manager
• B.Acc (Stellenbosch) Cum Laude...
CONSISTENT CONSERVATIVE
CONTRARIAN
The Year to 30 Sep 2010
PSG Flexible Fund +25.0% ZAR appr. vs. USD 7.4%
Inflation (Aug)...
CONSISTENT CONSERVATIVE
CONTRARIAN
PSG Flexible Fund
• Regulated unit trust – easy to understand
• Flexible asset allocati...
CONSISTENT CONSERVATIVE
CONTRARIAN
Benefits of a Flexible Mandate
10
Over the five years to 30 Sep 2010 the PSG Flexible F...
CONSISTENT CONSERVATIVE
CONTRARIAN
Benefits of a Flexible Mandate
11
A flexible mandate can help you navigate difficult ma...
CONSISTENT CONSERVATIVE
CONTRARIAN
Investment Philosophy
• The core of our philosophy is to buy shares
in exceptional busi...
CONSISTENT CONSERVATIVE
CONTRARIAN
Fund Statistics – 30 Sep 10
• PSG Flexible Fund managed since 1 Nov 04
• Fund size grew...
CONSISTENT CONSERVATIVE
CONTRARIAN
Relative Rankings
• Rankings in the Domestic Asset Allocation Flexible
sector as at 30 ...
CONSISTENT CONSERVATIVE
CONTRARIAN
Risk vs. Return
15
The blue line joins the risk-free Govt Bond (bottom left) with the
J...
CONSISTENT CONSERVATIVE
CONTRARIAN
Return & Asset Allocation
16
We buy when there is fear and panic - our equity exposure
...
CONSISTENT CONSERVATIVE
CONTRARIAN
Fund vs. JSE All Share Index
17
The PSG Flexible Fund is 31% above its May 2008 high,
w...
CONSISTENT CONSERVATIVE
CONTRARIAN
Price Earnings Ratio (“PE”) = 13.8
18
Growth in underlying earnings per unit was 13.1%p...
CONSISTENT CONSERVATIVE
CONTRARIAN
Price to Book Ratio = 1.8
19
Average price to book is 1.7 - similar to current levels.
...
CONSISTENT CONSERVATIVE
CONTRARIAN
Asset Allocation – 30 Sep 10
Resources 9.3% AGL & SOL
Financials 11.1% No large banks
I...
CONSISTENT CONSERVATIVE
CONTRARIAN
The Fund’s Exposures
– Strong Stable Businesses
21
CONSISTENT CONSERVATIVE
CONTRARIAN
Top 10 Holdings – 30 Sep 10
30 Sep 10 30 Sep 09
1. Steinhoff Int Holdings Ltd 9.1% 9.9%...
CONSISTENT CONSERVATIVE
CONTRARIAN
Breakdown of Returns
23
Good contribution from Capitec, Steinhoff, CIC, SABMiller,
Angl...
CONSISTENT CONSERVATIVE
CONTRARIAN
Alignment of Interests
• In 24 out of the 33 shares that we hold we are partners
with a...
CONSISTENT CONSERVATIVE
CONTRARIAN
Summary - One Stop Solution
• The PSG Flexible Fund aims to be a one stop solution
– Gl...
CONSISTENT CONSERVATIVE
CONTRARIAN
Disclaimer
Collective Investment Schemes in Securities (Unit Trusts)
are generally medi...
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Psg flexible fund 20100930

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Psg flexible fund 20100930

  1. 1. “We only allocate capital to those investments which offer true value and a rare combination of highly commendable attributes” PSG FLEXIBLE FUND & FLEXIBLE INVESTING
  2. 2. CONSISTENT CONSERVATIVE CONTRARIAN PSG has a track record in value creation CAGR = 56%* R100k invested in 1995 = R60m today * - Source : PSG Annual Report, Including unbundling of Capitec and re-investment of all dividends
  3. 3. CONSISTENT CONSERVATIVE CONTRARIAN By aligning themselves with great entrepreneurs... 2 PSG Tanzanite
  4. 4. CONSISTENT CONSERVATIVE CONTRARIAN Our Culture : Partnership 4 . Factors PSG Tanzanite (Pty) Ltd Equity ownership in firm  Low personnel turnover  Small portfolio sizes  Bottom-up stock selection  Value philosophy  Which factors have the greatest predictive power in future out-performance by an investment firm?† † - Source: Institutional or Entrepreneurial Management? An analysis of organizational factors and their effect on manager performance. By David Finstad
  5. 5. CONSISTENT CONSERVATIVE CONTRARIAN PSG Flexible Fund Name Change • On 1 September 2010 the name of the fund changed from the PSG Tanzanite Flexible Fund to the PSG Flexible Fund • Cosmetic change only: Fund manager and investment philosophy remains exactly the same 5
  6. 6. CONSISTENT CONSERVATIVE CONTRARIAN Simplified Product Offering 6 Simplified product offering spanning the risk spectrum
  7. 7. CONSISTENT CONSERVATIVE CONTRARIAN PSG Flexible Fund - The Team Jan Mouton – Fund Manager • B.Acc (Stellenbosch) Cum Laude • Hons B.Acc (Stellenbosch) • CA(SA) with articles at PricewaterhouseCoopers • M.Phil Finance (Cambridge) • Director of listed PSG Group Ltd and Capevin Investments Ltd Paul Bosman – Research Analyst • B.Comm Institutional Investments (Stellenbosch) • Hons B.Comm Financial Risk Management (Stellenbosch) • CFA Charterholder Henno Vermaak – Research Analyst • B.Comm Actuarial Science (Stellenbosch) • Hons B.Comm Actuarial Science (Stellenbosch) • Fellow of the Faculty of Actuaries (Edinburgh) • CFA Charterholder 7
  8. 8. CONSISTENT CONSERVATIVE CONTRARIAN The Year to 30 Sep 2010 PSG Flexible Fund +25.0% ZAR appr. vs. USD 7.4% Inflation (Aug) +3.5% ZAR appr. vs. EUR 13.9% All Share (incl. div) +21.1% ZAR appr. vs. GBP 9.2% Resource 20 +10.4% DJ Industrial - ZAR +2.8% Industrial 25 +26.3% FTSE 100 – ZAR -1.8% Financial 15 +19.1% DAX – ZAR -5.5% Money Market +7.2% MSCI World - ZAR -3.1% All Bond +15.3% Brent Oil - ZAR +12.6% 8 Sources: © 2010 Morningstar, Inc. All Rights Reserved, I-Net Bridge PSG Flexible Fund average asset allocation for the year to 30 Sep 2010: 54% domestic equity, 20% foreign equity & 26% cash
  9. 9. CONSISTENT CONSERVATIVE CONTRARIAN PSG Flexible Fund • Regulated unit trust – easy to understand • Flexible asset allocation mandate – Equity exposure can vary between 0% to 100% – Able to invest up to 20% directly offshore • Asset allocation is done based on opportunity: – If we can find many undervalued shares, we have a higher equity exposure and lower cash exposure • Benchmark: The fund aims to achieve high returns (inflation + 6% after fees) while maintaining relatively low levels of risk – Since 1 Jan 1966 the JSE All Share Index (incl. dividends) returned inflation + 7.7% before fees 9
  10. 10. CONSISTENT CONSERVATIVE CONTRARIAN Benefits of a Flexible Mandate 10 Over the five years to 30 Sep 2010 the PSG Flexible Fund outperformed the average of the Domestic Equity General sector whilst taking much lower risk • The fund is in the Domestic Asset Allocation Flexible category, the domestic category with the least constraints – Fewer constraints = wider opportunities = higher potential return – Provides diversification across equity, property, offshore (max 20%), bonds and money market – Lower risk compared to equity-only funds • If used properly, a flexible mandate results in higher returns at lower levels of risk
  11. 11. CONSISTENT CONSERVATIVE CONTRARIAN Benefits of a Flexible Mandate 11 A flexible mandate can help you navigate difficult markets Source: I-Net
  12. 12. CONSISTENT CONSERVATIVE CONTRARIAN Investment Philosophy • The core of our philosophy is to buy shares in exceptional businesses at low valuations • Characteristics of exceptional businesses – Managed by individuals with proven track records – Some form of sustainable competitive advantage – Clear and understandable business model – Positive free cash flow, which is distributed to shareholders in the form of dividends – Honest and transparent financial reporting • If we are unable to find exceptional businesses trading at low valuations, we patiently wait in money market instruments 12
  13. 13. CONSISTENT CONSERVATIVE CONTRARIAN Fund Statistics – 30 Sep 10 • PSG Flexible Fund managed since 1 Nov 04 • Fund size grew from R3m to R683m • Annualised performance to 30 Sep 10, including income: Fund Inflation+6% JSE ALSI • Volatility (5 years): 11.6% (JSE ALSI = 19.1%) 13 5 years 16.0%pa 12.9%pa 14.9%pa 4 years 13.6%pa 13.4%pa 10.1%pa 3 years 11.9%pa 13.8%pa 2.3%pa 2 years 17.9%pa 10.9%pa 14.2%pa 1 year 25.0%pa 9.5%pa 21.1%pa Over the 5 years to 30 Sep 10, the fund outperformed its benchmark and the JSE All Share Index whilst taking much lower risk. Average cash exposure for the 5 years to 30 Sep 10 was 23.0%.
  14. 14. CONSISTENT CONSERVATIVE CONTRARIAN Relative Rankings • Rankings in the Domestic Asset Allocation Flexible sector as at 30 Sep 10: Return Rank 1 year 25.0% 4th out of 55 funds 2 years 17.9%pa 3rd out of 51 funds 3 years 11.9%pa 1st out of 46 funds 5 years 16.0%pa 3rd out of 28 funds • Over 5 years the fund had the 2nd best Sharpe Ratio out of 28 funds. Sharpe Ratio measures return per unit of risk (volatility) and is useful in comparing funds in different risk categories 14 Source: © 2010 Morningstar, Inc. All Rights Reserved Over 3 years the fund is ranked 2nd out of all 494 funds
  15. 15. CONSISTENT CONSERVATIVE CONTRARIAN Risk vs. Return 15 The blue line joins the risk-free Govt Bond (bottom left) with the JSE ALSI (top right) – funds positioned above this line added value by delivering higher returns given the risk taken Source: PSG Tanzanite Research, Morningstar
  16. 16. CONSISTENT CONSERVATIVE CONTRARIAN Return & Asset Allocation 16 We buy when there is fear and panic - our equity exposure increased to almost 100% in Mar 09, but has reduced over the past year as equity valuations recovered Source: PSG Tanzanite Research
  17. 17. CONSISTENT CONSERVATIVE CONTRARIAN Fund vs. JSE All Share Index 17 The PSG Flexible Fund is 31% above its May 2008 high, whereas the JSE ALSI needs to increase by a further 5% to reach a new high Source: PSG Tanzanite Research
  18. 18. CONSISTENT CONSERVATIVE CONTRARIAN Price Earnings Ratio (“PE”) = 13.8 18 Growth in underlying earnings per unit was 13.1%pa vs. growth of Fund at 19.1%pa. Despite the strong rand, earnings in rand is showing growth again Source: PSG Tanzanite Research
  19. 19. CONSISTENT CONSERVATIVE CONTRARIAN Price to Book Ratio = 1.8 19 Average price to book is 1.7 - similar to current levels. Growth in underlying NAV per unit was 17.2%pa, slightly behind growth of Fund at 19.1%pa. Source: PSG Tanzanite Research
  20. 20. CONSISTENT CONSERVATIVE CONTRARIAN Asset Allocation – 30 Sep 10 Resources 9.3% AGL & SOL Financials 11.1% No large banks Industrials 26.3% Property 3.5% None local, only CSO Domestic equity 50.2% Resources 0.2% Financials 8.2% Mostly Berkshire Hathaway Industrials 9.2% Includes BTI Property 1.3% Foreign equity 18.9% Domestic cash 30.6% Foreign cash 0.3% 100.0% 20 Including domestic listed rand hedge shares, our effective rand hedge exposure is 41.2% TotalEquity=69.1%
  21. 21. CONSISTENT CONSERVATIVE CONTRARIAN The Fund’s Exposures – Strong Stable Businesses 21
  22. 22. CONSISTENT CONSERVATIVE CONTRARIAN Top 10 Holdings – 30 Sep 10 30 Sep 10 30 Sep 09 1. Steinhoff Int Holdings Ltd 9.1% 9.9% 2. Capitec Bank Holdings Ltd 8.1% 7.1% 3. Berkshire Hathaway Inc 6.9% 7.9% 4. Sasol Ltd 6.6% 1.2% 5. BAT Plc 4.8% 4.2% 6. Capital Shopping Centres Group Plc 3.5% 2.7% 7. Anglo American Plc 2.7% 4.3% 8. CIC Holdings Ltd 2.5% 1.9% 9. EOH Holdings Ltd 2.3% 1.3% 10. SABMiller Plc 2.3% 4.7% Total – Top 10 48.7% Total – Top 20 62.7% 22 We are long term investors, not traders. Top 10 different to that of JSE All Share Index.
  23. 23. CONSISTENT CONSERVATIVE CONTRARIAN Breakdown of Returns 23 Good contribution from Capitec, Steinhoff, CIC, SABMiller, Anglo & Shoprite. Disappointing contribution from Liberty International & Berkshire Hathaway (ZAR appreciation). Source: PSG Tanzanite Research
  24. 24. CONSISTENT CONSERVATIVE CONTRARIAN Alignment of Interests • In 24 out of the 33 shares that we hold we are partners with a large strategic shareholder • Examples included in our top 10 holdings: Shareholder Stake Steinhoff Steinhoff/Directors 17% Capitec Bank PSG/Le Roux/Directors 57% Berkshire Hathaway Warren Buffett 24% Capital Shopping Centres Gordon Family 15% CIC Paladin 49% EOH Asher Bohbot/Directors 9% SABMiller Altria/Santo Domingo 42% • As management are shareholders, interests are aligned - management is focussed on long term sustainability • Via the PSG Flexible Fund you are co-invested with these strategic shareholders24
  25. 25. CONSISTENT CONSERVATIVE CONTRARIAN Summary - One Stop Solution • The PSG Flexible Fund aims to be a one stop solution – Global brands at bargain prices - price to book of 1.8 – Positioned defensively – equity exposure of 69% (including 41% rand hedge) – Diversification across country and industry → reduces risk • Suitable for investors who – Have a medium- to long-term investment horizon – Wish to have exposure to the equity market but with managed risk levels – Wish to build or preserve wealth • The fund manager and team are co-investors 25 One of the biggest comforts of flying is that the pilot is also on board…
  26. 26. CONSISTENT CONSERVATIVE CONTRARIAN Disclaimer Collective Investment Schemes in Securities (Unit Trusts) are generally medium to long-term investments. The value of participatory interests (units) may go down as well as up and past performance is not a guide to future performance. Collective Investment Schemes are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from PSG Collective Investments Limited. Commissions and incentives may be paid and if so, are included in the overall costs. Forward pricing is used. PSG Collective Investments Limited is a member of the Association for Savings and Investment South Africa (ASISA). 26

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