PSG Wealth Global Creator Fund of Funds

My selection isn’t tied to one specific stock. Rather, I suggest the PSG Wealth Global Creator Fund of Funds, a product that we’ve been recommending to clients for quite some time as part of a diversified portfolio. But why do I think that this fund is the answer? Briefly, my reasons are as follows:

1. Greater offshore exposure

We have, over a fairly long period, been recommending that our clients increase their offshore exposure. This is not necessarily because we take a negative view of South Africa, but because we believe that it’s the right thing to do over the long term. We might sometimes forget that South Africa is responsible for a meagre 0.46% of the world's total gross domestic product (GDP). Indeed, the JSE has only in the region of 343 shares that an investor can choose from, as compared to the 1 562 shares making up the MSCI World Index.

There are simply so many more options abroad. What about the rand, though? This question is not limited to the exchange rate, as the rand has recently shown just how unpredictable it can be. Nonetheless, we do believe that the rand is likely to weaken in the long run against, for example, the US dollar – this is due to the inflation differential between the two countries. If we look at our average inflation rate of 6%, versus 2% in the US, this means that the rand will probably, over time, weaken by 4% per annum against the dollar.

2. Excellent diversification

As the graph below reveals, the fund is made up of nine excellent, independent underlying fund managers, all of whom have a specific mandate and investment philosophy that they apply to the particular funds allocated to them. Their performance is continuously monitored and, where necessary, adjustments are made.

The Top Ten stocks in the fund are well-known companies that need no introduction, and we all probably deal with each of them regularly, either directly or indirectly. The Top Ten stocks represent only 16.9% of the total fund, meaning that investor exposure to a single share is limited.

3. Yield

The fund's performance against its benchmark has been excellent over the past five years and it has outperformed the average fund in the sector by 2.96% per annum, as shown in the graph below. The fund also outperformed the MSCI World Index over this period.

Because each fund manager employs a different strategy, they are able to complement each other when not all of them are able to perform equally well at the same time. The table below shows the returns that the various fund managers have achieved over different periods. As you can see, no individual underlying fund manager has consistently delivered the best returns, but in combination, they have contributed to the fund's ongoing performance improving over time.

4. Tax

Tax matters are facilitated through the annual issuing of the required IT3 certificates at the end of February each year. These certificates reflect the fund's interest, dividend and capital gains tax implications for the past year. The fund is also exempt from any possible situs tax that may arise upon the death of an investor.

Finally, it is also important to note that an investor can invest in the fund with either direct foreign funds or through asset swap funds.

Please feel free to contact us should you require more information about the fund.

Pretoria East | Lynnwood Bridge Office Park, Kaaimans Building, 4th Floor, Lynnwood Manor | Postnet Suite 96, Private Bag X025, Lynnwood Ridge 0040 Tel: 0861 774 000 | Fax: 012 349 5300 | pretoriaoos@psg.co.za | psg.co.za/pretoriaeast

The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG and do not constitute advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken on information in this newsletter.
PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728.