Financial Mail - Investors Monthly - - Analysis: Balanced Funds -

This fund is the more con­ser­va­tive cousin of the Absa Man­aged fund. While Man­aged is the full-blooded bal­anced fund that can go up to 75% in eq­ui­ties, Bal­anced has a 60% cap.

Bal­anced is run by the Absa as­set al­lo­ca­tion team. Kurt Benn has seen quite a few shops in his time, hav­ing worked at BOE, San­lam and Cadiz be­fore join­ing Absa. His col­league Greg Ket­tles did not have such itchy feet, mov­ing to Absa after a lengthy stint at Stan­lib.

The fund has its full 60% equity al­lo­ca­tion, with 33% in lo­cal eq­ui­ties and 27% in for­eign ones. And that is even be­fore the 7% al­lo­ca­tion to prop­erty. This con­sists of three JSE-listed busi­nesses, which are made up of for­eign as­sets — Echo Pol­ska Prop­erty, Re­silient’s Green­bay Prop­erty and At­lantic Leaf. At­lantic Leaf has a yield of 8.5% from off­shore prop­erty.

The lo­cal eq­ui­ties are oth­er­wise fairly pre­dictable names, such as Naspers, Sa­sol, BAT, BHP Bil­li­ton, Stan­dard Bank, MTN and An­glo Amer­i­can. Benn prefers to take gold ex­po­sure through Gold Fields shares rather than the New­gold ETF. In in­dus­tri­als he says some stal­wart shares, such as TFG and Tru­worths, are look­ing at­trac­tive now.

Sim­i­lar weight­ings in both BHP and An­glo stand out, as does only one bank hold­ing in the top 10 — the fund would have noth­ing to gain and could take some flack if it held a big weight­ing in par­ent com­pany Bar­clays Africa.

As well as stock­mar­ket risk, Benn says, the in­ter­est rate risk is a spe­cific is­sue in this fund. More than 24% of the fund is in fixed-rate bonds and just a to­ken 0.5% in float­ing-rate ones. The value of fixed bonds falls when in­ter­est rates rise.

Absa has out­sourced its for­eign as­sets to Lon­don-based Schroders, where it in­vests in four funds, in­clud­ing broad and con­cen­trated equity funds and in­come­fo­cused prod­ucts. It also in­vests 2% in Africa though the suc­cess­ful Absa Africa Equity fund. Benn says this is not ex­posed to the com­mod­ity busi­nesses in Africa, and has low ex­po­sure to West Africa; the main fo­cus is in East Africa and Egypt.

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