Weekly Thoughts 10 July 2015

I didn’t get to write from White River last week. This is the mail that was half prepared.

The recent conversations that I mentioned I had had with my Coronation consultant, went around their asset allocation fund. Firstly how it owned assets, secondly the fund’s offshore exposure levels, thirdly about Coronation’s total ownership of the South African stock market and lastly some regulatory changes in the industry that they know of. This because one of their senior executives sits on an advisory committee to the FSB and Treasury on our behalf. I’ll discuss a few extra details of the discussion on the first point.

I asked if the fund owned offshore companies directly rather than owning a piece of their foreign fund. In some funds, the local fund might simply own a piece of their own foreign fund, in a way becoming what is called a Fund of Funds. He told me that in this fund we were discussing, the asset managers made their own choices and the fund owned the foreign companies directly, rather than a piece of the foreign fund. However, they obviously also talk closely with the asset managers of the foreign funds. I like that they’re doing this. Another way that a Fund of Funds can exist, is where the asset manager chooses a few unit trust funds from other companies to own in their own fund. I think this a lazy way of running an investment portfolio that does not justify the additional layer of asset management fees.