Analyzing the Foord Equity Fund’s Strong Performance Compared to Its Benchmark
For 22 years, the Foord Equity Fund has been a cornerstone in South Africa’s Equity – General unit trust sector. As of 1 October 2024, the fund transitioned to the newly formed SA Equity – General sector, designed for equity funds exclusively focused on South African stocks.
This article explores the rationale behind this transition, along with a review of the Foord Equity Fund’s investment aims and achievements.
Fund Classification
Launched in 2002, the Foord Equity Fund initially entered the widely recognized Domestic Equity – General unit trust category. At that time, exchange controls were newly relaxed, making JSE-listed equity funds particularly appealing to investors. The majority of funds concentrated on local share investments, neglecting those listed internationally.
Gradually, the government eased exchange controls for institutional investors, including unit trust portfolios. Currently, unit trust schemes can allocate up to 45% of their assets overseas. Managers have the flexibility to choose portfolios that are solely South African, those investing up to 45% abroad, and others that might invest entirely overseas—as long as the overall offshore allocation does not exceed 45%.
In the years since, approximately half of the funds in the Equity – General sector incrementally introduced international stocks into their portfolios. The result has been a mixed collection of funds with varying degrees of foreign investment, making meaningful comparisons impossible. Hence, the division of the Equity – General sector into distinct categories for funds with foreign exposure and those without was long overdue.
While many peers are venturing into hybrid SA-foreign equity funds, Foord has opted to maintain a SA-only strategy for several compelling reasons.
First, we wanted to offer a focused, single-asset class fund that investors can use as a fundamental component in their portfolios. For those looking to build a hybrid strategy, we already provide a global equity product. Additionally, our existing products, like the Foord Balanced Fund, can invest up to 45% abroad, and the Foord Flexible Fund is ideal for investors seeking a fund with broader geographical discretion.
Most importantly, we aim to maintain our outstanding track record.
Investment Objective
The Foord Equity Fund possesses a broad investment mandate to allocate resources into shares and listed property counters on South African exchanges. It benchmarks against the FTSE/JSE Capped All Share Index, which caps constituents at a maximum weight of 10% to prevent excessive concentration.
The fund seeks to outperform this benchmark after fees over extended time frames. By achieving this, we aim to provide investors with meaningful returns that exceed inflation.
Effectively outperforming the benchmark requires divergence from it, which comes naturally to us as we eliminate numerous companies based on quality criteria. We may also prioritize small or mid-cap stocks with greater weight than the index when we see promising growth prospects and favorable valuations.

Paul Cluer, director of Foord Asset Management. Image: Supplied
Strategy
To outperform the benchmark, we must be aware of it; however, we do not confine ourselves to it, a practice known as ‘benchmark hugging’ in the industry. Instead, fund managers project expected returns based on historical performance, current valuations, and anticipated economic indicators over the medium term.
They aim to significantly exceed these forecasts without being overly concerned about the weightings of individual shares relative to the benchmark. This informs portfolio construction while simultaneously ensuring that we manage the enduring risks of permanent capital loss by focusing on high-quality underlying companies and diversifying risks across various economic factors.
The portfolio’s starting point will predominantly include shares that align with our top-down (macro views) and bottom-up (fundamental analysis) criteria. Portfolio managers actively seek specific opportunities that can thrive even in challenging market conditions.
The current size of the Foord Equity Fund is approximately R4 billion. Therefore, any listed share with a market capitalization above R2 billion can significantly impact the overall portfolio’s performance. This allows the fund to diverge more from the benchmark than larger competitors typically manage. We believe it has substantial capacity for growth before returns become diminished.
Performance
Our approach of not being bound to the benchmark means that the fund’s performance will naturally fluctuate compared to it. This variation is expected and normal. Generally, the fund might underperform during periods dominated by strong trends, such as a resources boom, when the benchmark is heavily skewed or when the market is booming and even lower-quality stocks are rallying.
Conversely, it often excels during market downturns or protracted sideways trends—scenarios known as stock-picker’s markets—when the emphasis on quality becomes more pronounced.
Data supports this perspective: the Foord Equity Fund has consistently outperformed its benchmark in 71% of months when the benchmark was negative. Overall, we anticipate outperforming the unbalanced benchmark over rolling three- to five-year periods, with lower volatility and enhanced downside protection.
Over 22 years, the fund has generated an annualized return of 14.1% after fees and expenses, compared to the benchmark’s 13.8% a year. During this time, inflation averaged just 5.3%, providing long-term investors with substantial real returns.
A R100,000 investment at the fund’s inception would have grown to R1.9 million today. In the last three years, the fund has generated a remarkable 14.6% annual return for investors versus the benchmark’s 10.5%, and it boasts a 5.1% advantage over the benchmark in the past 12 months.
We firmly believe that the benchmark is surmountable in the long run. Our investment team dedicates considerable effort to this specific goal. Our investment process is clearly defined, well-resourced, and, in our view, replicable.
We ask our investors for the patience and time necessary to experience the rewards of long-term investing.
Paul Cluer is the director of Foord Asset Management.
This article is brought to you by Foord Asset Management.
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