Melville Douglas Investment Management (Pty) Ltd

GIPS

Are you GIPS compliant?

No

Are you GIPS verified? No

By whom have you been verified? –

Date of verification: –

Expiry date of verification: –

Investment mandates

What are your total assets under management as owned by South African clients only?

R37.2 billion

Please detail the mandates you currently manage and the size of each of these mandates:

Institutional: R10.8 billion

Retail: R25 billion

Life: R1.4 billion

Other: –

Key investment personnel

Size of investment team: 22

Bernard Drotschie

CIO

BCom (Hons—Econ), CFA, CFP

25 years of industry experience

20 years with the firm

Paolo Senatore

Head: South African Equities

MSc (Mech Eng)

25 years of industry experience

4 years with the firm

Mike Laws

Managing Director

BCom, CFA, CFP, AMP

24 years of industry experience

24 years with the firm

Natalie van Rooyen

Head: Diversified SA

BSc (Hons—Econ), CFA

10 years of industry experience

7 years with the firm

Nigel McKenzie

COO

MCom (Econ), BCom (Hons cum laude)

25 years of industry experience

9 years with the firm

Oliver Sonnbichler

Head: Commercial

BCom (GDA), HDip Tax

20 years of industry experience

11 years with the firm

Trevor Lukhele

Head: Portfolio Management Gauteng

BCom (Econ & Fin), MBA

10 years of industry experience

8 years with the firm

Simon Bothner

Head: Portfolio Management W. Cape

BBusSci, CFA

20 years of industry experience

14 years with the firm

Mzimasi Mabece

Head: SA Fixed Income

BSc

16 years of industry experience

2 years with the firm

Thandi Ngwana

Head: SA

MLaw, LLB, BSocSci, PGDip and APG Dip in FP

12 years of industry experience

4 years with the firm

Refilwe Moroka

Head: Domestic Equity Research

BCompt (Hons—Cost Man Acc), BCom (Acc), CFA

5 years of industry experience

5 years with the firm

www.mentenova.co.za

Company details

FAIS FSP registration number: 43937

Switchboard:

+27 11 447 7716

Fax:

086 272 1177

General email: info@mentenova.co.za

Address:

Oxford and Glenhove Building 3

114 Oxford Road, Johannesburg 2198 PO Box 10499, Johannesburg 2000

Compliance officer name: Francois Viljoen

+27 11 447 7716

Investment philosophy

The active vs. passive and the fundamental vs. market weighted indexation discussion originates from the perception that these strategies can only be used mutually exclusively. It misses the point that there are multiple active decisions that must be made to generate the outcome clients are interested in attaining. Yes, this includes the decision on where to go active and where to go passive. But a multi-asset solution also requires active decisions in allocating assets, finding the right securities to harvest various risk premiums, hiring the right managers, and dynamically responding to changing market conditions.

A carefully designed portfolio may very well contain passive investments – but only if they make sense in terms of the portfolio goals and an investor’s desired outcome. Basically, our approach employs passive in areas which don’t offer much reward, incorporates quasi-passive tactics or fundamental indices to harvest risk premiums in the marketplace when it makes sense, and then takes advantage of “best-of-breed” active managers to harvest bottom-up issue selection opportunities.

Of course, little is certain in the world of investing. That is why we believe it is now more important than ever for investors to consider combining active and passive strategies within a multi-asset approach. This way an investor can be confident that their total portfolio is wellpositioned to help manage the downturns and catch the upswings in the years ahead.

We consider the allocation of assets with a dynamic mindset to make sure we’re meeting desired client outcomes as markets and opportunities shift over time. We will for instance increase the allocation to passive equity investments in market conditions where Price/Earnings Ratios (P/E) are expanding, as active managers have notoriously underperformed their passive benchmarks in these market conditions.

In order to select investment managers in each asset class, Mentenova makes use of a proprietary investment manager consistency model to determine which investment portfolio and which investment manager has been able to produce real returns more consistently across a range of investment objectives that are specific to the asset class being analysed. The process is designed to select those portfolios that historically achieved the asset class specific objective with the highest level of consistency and lowest quantum of failure.

The quantitative investment manager selection process followed is focused on identifying those investment portfolios that have been able to consistently achieve the stated objectives. Only portfolios that have a track record of at least six years are considered, as the average economic cycle is estimated to be between five-anda-half and six years in duration. In order to measure consistency, a fund manager would have to be able to at least demonstrate how he or she performed during one full economic cycle.

To have a track record that looks fantastic but has only been achieved during a three-year period when interest rates were continually cut and with a strong bull market in equities only tells a portion of the story in terms of how the portfolio performs through the cycle. It is important to focus on the through the cycle performance as the exercise of trying to choose the best manager for the expected upcoming economic conditions could prove to be costly both in terms of switching fees and in terms of the expected conditions not manifesting itself as expected.

In order to select the investment managers to use in the equity building block we start with all available investment mandates in the market (over 370 portfolios) and filter these mandates in order to isolate the equity only mandates. We then rank these equity mandates according to three important metrics:

● How successful has the portfolio been in being able to outperform the FTSE/JSE All Share Index +2% (the objective) over each and every rolling six-year period in its existence?

● For every time that the portfolio missed the objective, how severely did it miss?

● Availability of the investment mandate on investment platforms.

If the investment mandates in general were unsuccessful in consistently outperforming the objective, a passive index tracking solution is recommended.