Sanlam Four multi-asset manager Mike Pinggera has defended a period of relative inactivity in his fund, warning this year was not opportune to express “conviction views” due to uncertainty around major political events.
Mr Pinggera, who runs the £112m Sanlam Four Multi Strategy vehicle with co-manager Johan Badenhorst, warned his fund’s return requirements, combined with uncertainty over “binary events” such as the EU referendum, had dissuaded him from making “hero” trades.
The fund aims to outperform the consumer prices index (CPI) of inflation by 4 per cent a year over a five-year period, with a target of generation-positive absolute returns on a rolling three-year basis.
“In the past 18 months we were in this trend where we felt there was no need to be a hero,” the manager said.
“We thought this is a classic time where fund managers will express high-conviction views. But recently, despite the level of conviction expressed by managers or politicians, the outcome was going to be highly uncertain, so we sat on the fence.
“Everyone has been very forthright with these events, but all of that was opinion.”
Consequently, the manager’s approach has been mainly to capitalise on market moves after events, including a play on property following June’s EU referendum.
This saw Mr Pinggera initiate positions in Land Securities and Grainger – whose share prices were among those to take a hit following the Leave vote.
He also added to existing holdings in the HICL Infrastructure and 3i Infrastructure investment trusts, and topped up a small position in the Empiric Student Property vehicle, which was initiated before the referendum.
“There was no point doing anything pre-Brexit,” he said.
“I did one trade on the day of the vote, where I bought put options on Europe. It was a 4 basis point (bps) position in the fund. After that it was worth 40bps.
“If everyone’s turning left and it’s cheap to turn right, it can make sense. It seemed to be a cheap hedge and it worked very well.”
Mr Pinggera noted that his play on property formed part of a wider strategy aimed at what he dubs “pillars of the economy”, focusing on long-term investments in areas such as education, transport, housing and healthcare.
“We are increasing our exposure to the pillars of a functioning economy,” he said.
“They are quite low volatility and they are income-producing. They used to be boring and now they are core holdings.”
The manager has since started to consider whether the fund could focus on the technology sector in the future.
“Another area that we have been noodling for some time but haven’t taken exposure is to technology,” he added.
“It’s a broad church, but that’s an area where it’s worth spending more time on. If you think about where we will be in 20 years’ time, technology is likely to play a very big role in that.”
