ABSA BALANCED FUND
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.