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SIM Unconstrained Capital Partners

At SIM Unconstrained Capital Partners, we are invested alongside our clients, ensuring we are completely aligned with your wealth-building objective of achieving superior returns over the long term.

We do so by implementing our best investment ideas, which our value-oriented approach enables us to identify.

We like to keep things clear and simple and our culture is one of high performance, driven by motivated and passionate investment professionals.

Our Investment Philosophy

Our investment objective is to deliver superior long term investment returns by capitalising on inefficiencies that arise in pricing assets. We achieve this through:

  • Focusing on the longer term.
  • Following a value based framework.
  • Having the right temperament.

We invest according to the following investment tenets:

  • Normalisation of profits.
  • Use a framework based on long run real returns from assets (incorporating reversion) to arrive at realistic expectations for future returns.
  • Focus on the facts
  • Attention to detailed competitive and financial analysis rather than short term earnings forecast.
  • Understand the markets' implied long term expectations
  • Compare our knowledge of a company to the expectations implied by the price.
  • Be realistic when pricing risk
  • Understand sources of risk in the context of what each investment could stand to lose and incorporate an adequate margin of safety into the price paid.

We believe that human behavioural factors (like fear and greed) provide many mispriced opportunities. We aim to exploit these phenomena.

The Value of Value Investing

The value approach to investing has of late been the recipient of some harsh criticism following several years of underperformance. We, however, do not believe that this is a secular trend but rather a function of the normal value “alpha” cycle which has persisted for the past 40 years.

Value investing has outperformed the market over the long term and we were unable to find any concrete factual evidence against the existence of the value premium.

The Value of Value Investing Download

Our Investment Process

Our investment process below refers specifically to the SIM Unconstrained Equity Product and follows a simple four-step process. This process is summarised below.

We have developed a number of proprietary screening tools that are used to identify mispriced opportunities. These tools are aligned with our investment philosophy and focus on the following key metrics:

  • Return on equity
  • Price to book value
  • Dividend yields
  • Normalised returns (e.g. normalised return on equity and normalised operating margins)
  • Price-to-earnings (PE) ratios and normalised PE ratios
  • Implied growth (e.g. implied growth in dividends, earnings and net asset value growth).

We look at long-term valuations and prefer to buy when the valuations are low/cheap relative to their own history. Our extensive research on mean-reverting factors, namely the above key metrics, provides conclusive evidence that mean-reverting factors do influence the direction of the JSE indices and that considerable outperformance can be generated by harnessing these phenomena.

Mean reversion is evident in factors related to the market price of stocks (probably caused by short-term investor overreaction), as well as in factors pertaining to business fundamentals and where the company is in its current business cycle. Although most factors generate outperformance for holding periods as short as twelve months, holding stocks for longer periods of up to five years increases the likelihood of achieving reversion-related gains from these strategies.

In our study, we tested eight different mean-reverting metrics. The results are as follows: Our analysis shows that the mean-reverting factors convincingly outperform the universe, on average by about 5% a year for longer holding periods. Note that returns generated by mean reversion in return on equity require longer holding periods to manifest. This is the only factor that contains no market information and would be expected to revert more slowly, following business as opposed to market cycles.

Once we have highlighted potential value opportunities, we overlay our fundamental research capability to identify stocks that give us the necessary conviction to make meaningful investment decisions. In this regard, we do our own proprietary research. Our focus is on understanding each company’s competitive advantage and translating this into an assessment of the company’s worth, based on its sustainable cash flows over time.

The more stocks you have in a portfolio, the greater the probability that the portfolio returns will look like the index. By owning fewer stocks you typically increase your odds of beating the index. Of course the opposite is also true if you get it wrong. We prefer to limit our exposure in any one company to 10% of the portfolio. By default, this means the minimum number of stocks in which we will be invested is 10 and we will only invest when we have a high level of conviction and the odds are in our favour.

An unavoidable consequence of this approach to investing is that the portfolio may be more volatile relative to a benchmark in the short-term than a benchmark cognisant fund. We construct portfolios based on potential long-term risk-adjusted returns (with a mindset of maximising long-term returns and minimising the risk of capital loss), not index weights, sector exposure or otherwise. In considering how much to own of each business, we take into account upside potential, conviction and liquidity. The first two factors have been well explored in areas outside finance by John Kelly, now known as the Kelly Criterion. We use the Capital Governance Model (CGM) as a guide to assisting us in allocating capital. The CGM uses a combination of the Kelly Criterion, mean variance and the Omega function to calculate the potential weight of a stock in our portfolio. We use this as a guide in determining the size of the investment identified in each opportunity. Key considerations of the CGM that dovetail with our view of investing are:

  • The importance of wealth preservation
  • The concept of only making big investments where the odds are in your favour and the risk-reward relationship is attractive

We have implemented the following guidelines for constructing the SIM Unconstrained Equity Portfolio:

  • Minimum holding of 1.5%
  • Maximum holding of 10% (this is not a prescribed rule, but one that is generally applied)

We normally start with a position of 1% (depending on liquidity) and build this up in small increments moving in a certain direction until something happens (most likely either the stock reaches fair value or we see better value elsewhere, we reach a liquidity cap or in the unlikely event the fundamentals change). We seldom make dramatic changes in either direction. Ultimately, however, the percentage of capital allocated to a stock is decided by the portfolio managers. Models are only used as a guide.

The total number of stocks we will own will depend on the number of opportunities. In the extreme case of the whole market being equally cheap, then the best risk-adjusted strategy would be to own more stocks. If there are fewer mispriced opportunities, then a far more concentrated portfolio would maximise risk-adjusted returns.

We always ask ourselves the following three questions before investing in a company:

  1. Is this idea significantly better than the existing ideas we have in the portfolio?
  2. Do we understand the risks being taken?
  3. Would we be happy to have a large portion of our personal wealth fluctuate in relation to the prospects of this business?

Investing is as much about avoiding the disasters as it is about picking the winners.

We do not see risk the same way as traditional modern portfolio theory would. Risk does not reside in relative price changes and cannot be summarised into a single number. The Oxford English dictionary defines risk as the possibility of harm or injury. In the world of investing, this translates into either:

  • A permanent loss of capital and/or
  • Your savings not keeping up with inflation (at worst) over time

Our focus is on the risk inherent in the underlying businesses in which we invest. We look at the risk of new competitors impacting on the returns that a company has generated in the past. We also carefully consider the balance sheet risk (amount of leverage a company can comfortably repay) and finally the quality and track record of the management team we are partnering.

We will consider any unintended consequences that may arise as a result of our bottom-up stock picking approach. This is more to gain an understanding of exposure to currency, portfolio cyclicality, companies with high degree of leverage and other factors that may be regarded relevant at the time.

Finally we are able to track different portfolio metrics over time such as upside to fair value, P/BV, ROE and implied variables (growth in earnings or dividends). This gives us a sense of the “valuation risk” of our client’s portfolios.


SIM Unconstrained Capital Partners (Pty) Ltd is a stand-alone investment firm within the Sanlam Investments business cluster, with more than R8bn in assets under management. The company was founded in April 2011 and the Unconstrained Equity portfolio managers, Ricco Friedrich and Claude van Cuyck, hold a significant minority shareholding in the company.

SIM Unconstrained Capital Partners was set up to enable Ricco and Claude to give their full, undivided attention to managing equity portfolios in line with their unconstrained philosophy. With Sanlam Investments being the major shareholder of the business, the team is able to leverage off the extensive resources of Sanlam Investment Management (Pty) Ltd (SIM), including the research platform, compliance, dealing, administration, distribution and legal services.

Conventionally investors tend to be invested in relative return portfolios, where the manager invests according to a pre-determined benchmark. We launched our unconstrained investment offering in January 2007, with the establishment of the SIM Unconstrained Equity portfolio.

We believe clients are much more likely to achieve superior returns if they invest in portfolios that have few constraints and thus allow the fund managers the freedom to invest where they see the best opportunities, irrespective of a company’s weighting in the market index.

With this in mind, we actively pick stocks that we expect to deliver superior performance over the long-term based on investment tenets that are both enduring and repeatable. Our fundamental research and long-standing investment expertise makes us well-placed to take high conviction positions in stocks we like and to avoid stocks that we do not believe offer compelling value.

During 2011, two new team members, Jan Meintjes and Francois Krüger, joined SIM Unconstrained Capital Partners to complement the original team. Jan brings additional idea generation and research capabilities to the team. He will be focussed on managing the COGNITIO Hedge Fund. Francois was appointed as Operations and Business manager and will be responsible for all non-portfolio related tasks, with specific emphasis on servicing our valued customers.

Key aspects of our business philosophy are:
  • We manage our clients’ money the way we would manage our own money
  • We like to keep things clear and simple in everything that we do
  • Our culture is one of high performance, driven by enormously motivated and passionate people
  • We like to cement long term relationships with our clients
Clients can invest with us through:
  • SIM Value Fund (for retail clients and smaller institutional clients);
  • SIM Unconstrained Equity product (for larger institutional clients);
  • Sanlam Escalating Fund (for high net worth individuals);
  • COGNITIO Hedge Fund *

* Although COGNITIO Hedge Fund is not available to the general public you may call SIM Unconstrained Capital Partners for more information.

Our Products

A pure equity fund, our retail offering, is diversified across all sectors of the JSE. In addition to receiving a reasonable level of current income, clients will benefit from longer term capital appreciation of our value-oriented investment approach. The Fund Managers invest in shares that are undervalued in relation to the future cash flow stream, taking into account potential risks. The mandate allows the fund to hold a maximum of 25% in offshore equities.

Download fact sheet

The SIM Unconstrained Equity product is our institutional offering and offers investors access to our best investment ideas, without the restrictions that usually come with benchmark-related investing. The portfolio may not hold any offshore equity exposure.

Download fact sheet

The Cognitio Hedge Fund is primarily a market neutral Fund with the bulk of its exposure to the South African Equity Market. The Fund also has a small exposure to the South African Fixed Interest Market, also managed, on a market neutral basis.

This product is not available to the general public and all references to the Cognitio Hedge Fund is purely for information purposes.

This product is offered by Sanlam and provides a guarantee that the unit price of the Escalating Fund will always be at least 80% of the highest unit price it has ever reached, irrespective of what might happen to the underlying instrument.

It is offered as a 5-year endowment product which includes certain tax benefits to the investor.

The Team

Business and Operations Manager
Telephone: +27 21 950 2725 | Email:

Francois always had a passion for the financial markets, participating in stock market competitions and building his own portfolios from the young age of 15. After completing his B.Com Economics degree at RAU he joined Investec in 1997 as a unit trust consultant. He was offered a position at Huysamer Stals in 1998 as an institutional equities trader. Studying part time, he obtained his B.Com. (Hons) Investment Management degree that same year.

In 2001, Francois joined Deloitte in Johannesburg to do his articles, while studying part time to become a Chartered Accountant. After successfully completing the required exams, Francois joined Absa Capital as a fresh CA (SA) and worked as a line manager in the treasury’s middle office.

Francois joined SIM in 2007 as Fund Manager for the Sanlam portfolios. He has worked very closely with the Alco Team to ensure efficient management of Sanlam’s capital and policy holder’s assets. In November 2011, Francois was appointed as SIM Unconstrained Capital Partner’s Operations and Business manager and will be responsible for all non-portfolio related tasks, with specific emphasis on servicing our valued customers.

Portfolio Manager

Ricco Friedrich manages SIM’s unconstrained equity portfolios and the Sanlam Investment Management Value Fund jointly with Claude van Cuyck. He completed his articles at Grant Thornton Kessel Feinstein in 1998. He started his investment career at Franklin Asset Management as an equity analyst.

In 1999, he joined SIM, where he spent two years analysing industrial stocks before taking up the position of Head of Small Caps in 2001. Over the following five years, the Sanlam Small Cap Fund won several awards for performance including the position of best performing equity unit trust in South Africa. In 2006, he took over the management of the Sanlam Value Fund.

Ricco completed his B.Bus.Sc degree at UCT. He also has a Post Graduate Diploma in Accounting and, is a CA (SA) and a CFA Charterholder.

In 2011, SIM Unconstrained Capital Partners (Pty) Ltd was formed together with Claude van Cuyck and Sanlam Investment Management to focus entirely on the management of the SIM Unconstrained Equity Product and SIM Value Fund.

Outside work his passions are mountain biking, spending time with the family, reading and more recently taking up the piano.

COGNITIO Portfolio Manager

In July 2011, Jan Meintjes joined the business to set up and manage the COGNITIO Hedge Fund, which was launched in November 2011.

Jan comes with a thorough depth of knowledge of the SA equity market and a wealth of experience in the unconstrained equity environment, having managed hedge funds for the past nine years.

He brings additional idea generation and research capabilities to the Unconstrained Equity portfolio management team.

Jan was a founder member of Gryphon Asset Management in 1998 after spending three years at Sanlam Asset Management as an equity analyst. In addition to co-managing the Coris Capital Money Market Fund and ABSA Dividend Income Fund, Jan founded Gryphon Alternative Investments with the launch of the Gryphon Market Neutral Equity Fund in 2003. This low risk product was one of the longest running hedge funds in South Africa when Jan left the employ of Gryphon in 2010.

Portfolio Manager

In 2011, SIM Unconstrained Capital Partners (Pty) Ltd was formed when Claude and Ricco in partnership with Sanlam Investment Holdings founded the company. This enabled Claude and Ricco to focus entirely on the management of the Sanlam Investment Management Unconstrained Equity Product and the Sanlam Investment Management Value Fund.

Prior to this, Claude was the Head of Equities at Sanlam Investment Management (Pty) (Ltd). He also successfully ran the Sanlam Investment Management General Equity unit trust for five years from January 2006, achieving consistent top-quartile performance for each of the five years during which the Fund was under his management. Before that, he ran the SIM Industrial Fund, which achieved S&P and a Raging Bull award. He has 21 years of investment and industry experience during which he has conducted in depth research on a number of sectors across the JSE and built up equity portfolio management expertise.

Claude began his career in 1993 when he worked for Karlein Investments (a private client investment company). He first joined Sanlam Asset Management in 1994 as an equity analyst. After five and a half years of service, he worked as an Analyst and Portfolio Manager with Gryphon Asset Management, where he was responsible for running unit trusts and pension fund portfolios as well as retaining research responsibilities. He returned to SIM in 2002.

Claude is a CFA charterholder and completed a B.Com (Hons) degree with distinction.

In his spare time, he enjoys cycling, especially mounting biking. He has completed the “big four” stage races including the ABSA Cape Epic, the TransRockies (Canada), the TransAlps and the TransAndes (Chile). Claude is also a scuba diver and holds a professional Dive Master certification.

Junior Analyst
Telephone: +27 21 950 2598 | Email:

Joachim attended St. Charles College High School in Pietermaritzburg and matriculated in 2004.

Before enrolling for B.Com Financial Management at UNISA in 2009 he operated his own catering business in Stellenbosch. He graduated in 2011.

Joachim worked at Integrated Mine Seismology (IMS) in Stellenbosch as a technical assistant, but his passion for the financial markets led him to enrol for CFA in 2012.

He has subsequently passed level 2 of CFA exams and joined SIM Unconstrained Capital Partners in September 2012 as a junior analyst.

Junior Analyst

Khuthadzo completed his B Sc (Eng.) Electro-Mechanical Engineering degree with honours at the University of Cape Town.

He passed his CFA Level 2 in June 2013. He is currently busy with a dissertation which is requirement for an MPhil (Financial Mathematics) degree at UCT.

Khuthadzo previously worked at ABSA Capital as a market risk analyst and at Allan Gray as a business analyst. He has been appointed as a junior research analyst and we are very excited to have him on board.

Social Responsibility

Durbanville Children’s Home

Ricco Friedrich and Claude van Cuyck of SIM Unconstrained Capital Partners have been giving back to the community for the last couple of years, through various fundraising ventures involving their love of Mountain Biking.

Both keen mountain bikers, Ricco and Claude entered the Trans Rockies Mountain Bike Race in 2007, a 7 day stage race through the Rocky Mountains in Canada. They used this as an opportunity to give back to the community, by raising money for the Durbanville Children’s Home. Ricco and Claude used to cycle past the Durbanville Children’s Home on many of their training rides, and together with their wives, got involved. Thanks to their friends, colleagues and their business community, Ricco and Claude managed to raise R200 000 for the Durbanville Children’s Home, through sponsorships and donations. This money was greatly needed, as the Durbanville Children’s Home is only 30% funded by the government, and need to raise all the other funds needed to keep the home going.

With a long-term goal of planning to tackle a Mountain Bike race on each continent, and each having completed the Cape Epic race on separate occasions (an eight-day Mountain Bike Race from Knysna to Cape Town), Ricco and Claude (together with Sean Friedrich and Steve Mills) embarked on the Trans Alps Mountain Bike race in 2009. This eight-day stage race took them through Germany, Austria and Italy.

The Chaeli Campaign

Once again, they used this opportunity to support a very worthy cause – The Chaeli Campaign. The Chaeli Campaign’s mission is to “Mobilise the minds and bodies of children with disabilities”, and they do amazing work in providing assistive devices to those in need. Thanks to overwhelming support from friends, family and business colleagues, Ricco and Claude raised R220 000 for The Chaeli Campaign.

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