At N-e-FG, we apply a GARP style investment approach with a Value bias when looking for buying opportunities. GARP is the acronym for ‘Growth at a reasonable price'. Essentially we blend value- and growth investment styles together to create a superior way to invest.

As GARP style investors, we seek to find companies that have strong earnings growth credentials at a good price. Although it is often said that growth investing and value investing are diametrically opposed, we believe a better way to view these two strategies is to consider a quote by Warren Buffett:

“Growth and value investing are joined at the hip.”
- Warren Buffett

Our investment philosophy explains what we aim to do for our clients. We believe in an investment culture of three C’s:

► Caution in applying our asset allocation framework
► Conservative in our valuation calculation
► Consistent in implementing our process

When we invest capital we apply a long-term approach for our clients. As a result, we are able to look beyond the immediate impact of current news flows and focus our research on assets that have been neglected or are out of favour with the market.

We spend a large part of our investment process focusing on downside risk issues. Asset Allocation strategies are at the heart of this downside protection philosophy. We believe that a good blend between different asset classes not only enhances your risk return credentials, but also introduces diversification.

We are value driven investors when it comes to buying assets. We add most value to our portfolios from our expertise in bottom-up stock picking. We look to buy cheap assets that are of a good quality. Importantly, we distinguish between price and value. Value is what we calculate an asset to be worth; price is what the market is prepared to pay for it. Sometimes they are the same, often they are not. When price is substantially below value, we become interested.

When a low price is associated with a good quality asset, we are even more interested. By quality, we mean the ability of a company to withstand competitive pressures as well as its ability to increase its intrinsic value over time.

These attributes of a good investment – quality and cheapness – help us to reduce the probability of our clients suffering a permanent loss of capital. A cheap asset has a large margin of safety to cater for the possibility of our analysis being wrong; and a good quality business can grow its way out of trouble over time.

During the transition phase our GARP approach starts to materialise. This is essentially when a cheap asset has rerated to a price above its intrinsic value. This is typically the time where value investors would sell out, while we will hold on to such an asset. As long as the market price over forward earnings of a company remains near the long-term growth rate of the company, we will remain invested. The moment when this decouples, we will sell out.

Our aim is to consistently outperform our investment benchmarks over the long term. However, temporary times of underperformance may occur when markets behave irrationally and excessively. For example, when assets become overpriced due to overly enthusiastic optimism we prefer to steer clear from such inflated situations. On the other hand, when assets are being beaten down beyond rational levels due to fear-driven negativity, we look to capture deals that offer substantial value. However, during times when such excessive market behaviours persist and extend (to the upside or the downside), our performance will lag the general index as we patiently wait for prices to return to rational levels and thereby provide above-benchmark returns for our clients. This approach provides enhanced capital protection after extreme market tops in times when markets aggressively sell off.


"Investments are unpredictable in nature and with the industry infested by incomprehensible terminologies and an overflow of news, we believe that returning to simplicity and basics coupled with a focused long-term view is the only remedy for this increasing madness, called investment markets."

- Erik du Preez

At N-e-FG Fund Management we believe in simplicity when it comes to investing and this theory consists of three simple steps:

Keep it Simple

► Cut out the noise
► Take the emotion out

Stick to the Basics

► Buy low
► Sell high

Take the Long-term View

► Have conviction and courage
► Be patient
► Be disciplined
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"If you do exactly the same thing as everyone else the outcome will at best, be average. We believe we are paid to deliver superior real returns over the long term. Our goal is to help our clients unlock the meaning of true and sustainable wealth!"

- Gerbrand Smit

Our investment philosophy explains what we aim to do for our clients. Our process defines the method in how we apply this philosophy.


We do not buy into specific geographies, themes or narratives. Once we decide to purchase an asset our position sizes are determined by their investment risk – not by their proportionate representation in any index. Ultimately, successful investment is about getting the risk/reward relationship right. Most investment philosophies only focus on buying undervalued or growth situations (i.e. investment winners). However, it is clear that avoiding disaster stocks has as much impact on performance. It is far more difficult to identify big winners than it is to put in place appropriate measures to minimise the occurrence of big losers.

A good process does not guarantee a good outcome each and every time. But if we apply a sensible process to a sound philosophy consistently over time we believe we are able to generate a good overall outcome. In this way, we manage the central risk of investing, which we define as a permanent loss of capital.

The three investment pillars that form the basis of our investment process are:

Firstly, determining the correct asset mix

We believe that a majority of investment alpha returns (outperformance) can be attributed to the asset allocation decision. Asset classes, locally and globally, include not only traditional listed developed and emerging market equities, cash, government bonds and property, but also high-yield and emerging market bonds and alternative strategies, such as hedge funds.

Every asset class or investment has an economic value. This economic value does not fluctuate greatly over time. Market perceptions of the economic value of asset classes, however, typically fluctuate strongly. In the real world, market prices often diverge from economic value. We base our investment decisions on this under- and over-valuation of asset classes. These investment markets price volatility can be extremely unpredictable over shorter periods. Through the effective combination of different assets in a portfolio, one can successfully reduce risk without compromising returns.

A portfolio that consists of a range of asset classes, or sources of return that perform inversely in different market circumstances, is robust and should preserve and grow wealth consistently. All the members of our investment team are highly regarded as being experts when it comes to understanding the investment landscape, the drivers and sources of returns, as well as valuations for each asset class in different sets of economic circumstances. This understanding of the fundamentals of each asset class is used to determine the investment’s most likely future behaviour and potential returns.

It is this insight, supported by a consistent research process, which forms the basis of how we create wealth for our investors. A constant revaluation of the different asset classes and the yield valuations form the foundation of our asset allocation process.

Secondly, our investment style blends Value and Growth characteristics.

Although we are hybrid investors, we are value-driven when it comes to buying assets. We add most value to our portfolios from our expertise in bottom-up stock picking. We look to buy reasonably priced assets that are of a good quality. Importantly, we distinguish between price and value. Value is what we calculate an asset to be worth; price is what the market is prepared to pay for it. Sometimes they are the same, often they are not. When price is substantially below value, we become interested.

When a reasonable/low price is associated with a good quality asset, we are even more interested. By quality, we define the ability of a company to withstand competitive pressures as well as its ability to increase its intrinsic value over time.
These attributes of a good investment – quality and a reasonable price – help us to reduce the chances of our clients suffering a permanent loss of capital. A low-priced asset has a large margin of safety to cater for the possibility of our analysis being wrong; and a good quality business can grow its way out of trouble over time.

During the transition phase our GARP approach comes into play. This is essentially when reasonably priced assets have retracted back past the intrinsic value of the asset. This is typically the time when value investors would sell out, however we will hold on to these assets. As long as the market price for forward earnings of a company remains near the long-term growth rate of the company, we will remain invested. The moment when this decouples we will sell out.

Our investment approach is to consistently outperform our investment benchmarks, but during times of extreme market top and bottom we will underperform. However, when markets turn for the better (during extreme market bottoms) we will excel faster than the market average. Likewise we will protect capital better after extreme market tops during periods when markets aggressively sell off.


Thirdly, we know our market space

Investment insight is driven by determining our position within the broader spectrum of the investment universe. We are an actively managed boutique investment house, and due to our size, we have the availability and flexibility to optimise our stock convictions more-so than our larger counterparts.

Markets are influenced by the behavioural patterns of investors, which are fearful creatures and prefer to conform. Furthermore, it is human conditioning to extrapolate the present in a linear manner into the future. These departures from fair value create opportunities to generate superior returns.

Economies go through cycles and industries have life cycles. This cyclical nature influences investors, and most investors have a vested interest in short term trading. These interest groups also tend either to have preferential access to information or play a major role in the distribution of information. As a result, their influence tends to drive the behaviour of investors. By taking a long term view that focuses on sustainability and factual data, these short-term aberrations generate departures from fair value as well as a reduction in trading costs. By implementing this process we generate excess returns for our investors.