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By Iona Minton, My Money Editor
It is a fact of life that anything new and innovative in the financial markets (or any market for that matter) attracts a lot of attention from its competitors, the media and ultimately the consumer. The established players guard their territory jealously and do not take kindly to neophytes who try to upset the status quo. It is not too difficult to get the media on your side if your ad spend is sufficient. As a result many good ideas are shot down in flames by over-zealous journalists who do not always check their facts.
The low to medium risk products available to investors over the last few years, have lacked lustre to say the least. The rather lame performance of the unit trust industry coupled with the volatility of the South African stock market has bitterly disappointed investors.
Well-known investment guru, Jack Milne decided to rouse the investment curmudgeons from their complacency with a unique product called PSC Guaranteed Growth, and boy did it rattle some cages. The public unlisted company, which was established in June 2000 as an exciting alternative to unit trust investment, specialised in investments into JSE listed equities, derivatives and other instruments. After a very public and emotional debate between Milne, members of the media, and the Unit Trust industry they laid down their swords to “wait and see”.
Six months later Milne has the naysayers eating humble pie. He has rewarded investors in PSC Guaranteed Growth by returning a whopping 60,64%. Led by Milne, PSC Guaranteed Growth has proved so successful that calls are now being fielded from institutional investors looking to improve the performances of their portfolios.
Shares trade at the company’s ruling net asset value (published daily on the www.compushare website) which is based on the performance achieved on its investments over and above that achieved by the average of all domestic equity funds, “Profiles all domestic equity fund index”(PADEFI), less guarantee fees and minimal admin costs.
The world’s sixth largest auditing company, Grant Thornton Kessel Feinstein, certify the company’s performance every six months. Financial services group, Tigon, which has underwritten any performance below the PADEFI, pays all costs except bank charges and brokerage. Thus investors pay no up-front fees, no annual commissions and no management or administration fees.
The PADEFI has only achieved a growth of 5,06% against the 60,64% returned by PSC Guaranteed Growth over the same period. Milne attributes his success to the basic principles, which he has taught for nearly 20 years at Progressive Systems College. These include a rigid adherence to a stop loss at preset levels, a spread of investments and an in-depth knowledge of the businesses he invested in. “I don’t believe anyone can make a value judgment just by looking at figures and listening to others – I make a point of personally getting to know the business and the people running it,” he says.
“Small funds, such as this one which is limited to 100 million shares, are manoeuvrable and tend to be leaders rather than sheep. The downside of large funds is that their very size inhibits their actions and makes them vulnerable to being locked into falling counters.”
So it would seem that it pays to be a little open-minded in today’s mundane markets. Hats off to Jack Milne, one of the few investment experts who has the courage to put his money where his mouth is.
