In for R100
FINWEEK won’t lie: there wasn’t very much technical that went into this week’s unit trust selection. Compared with its more glamorous peers, Absa doesn’t really have much of a reputation as a unit trust house and the primary reason it caught the eye this week is that it’s offering new and existing clients the opportunity to win one of two Toyota Yaris cars if you buy unit trusts between now and September.
But this isn’t quite a marketing plug for Absa, because whoever put together the competition forgot to test all the online links and you end up with a “The page you requested could not be found” message as you try to access more information. With all the investment Absa is making in technology infrastructure in 2011, hopefully it’ll get around to testing the basics.
Prizes aside, the other really appealing aspect about the Absa Balanced Fund is you can get in with a minimum investment of R100. Finweek is often asked which tools cash-strapped consumers or young novices can start off with and this is one of them. The fund has been a handy enough performer over the past few years. On a one-year basis it’s been ranked eighth out of 34 funds by Morningstar in its category and second over three and five years.
Since June 1994 the fund has delivered an annualised return of 12,5%. Not a superstar, but certainly not something to be ignored either if you’re trying to get your foot in the investing door.
Fund manager Errol Shear is well respected in the industry and last year won the Raging Bull award for Best Domestic Asset Allocation Prudential Medium Equity Fund. The Balanced Fund describes itself as a “medium” risk fund best suited to investors with a three-year plus investment timeframe.
One appeal this fund shows is it strikes quite a cautious note in its most recent commentary to investors. Shear notes: “With some uncertainty surrounding the economic fundamentals within South Africa, and equity markets in fairly expensive territory, we have attempted to keep our equity exposures to companies where we are comfortable with future earnings prospects.” In other words, if you believe the market is currently quite expensive, you won’t find your manager being overexposed to equities.
On the negative side, the fund is sitting with a total expense ratio (TER) of 1,72%, which is relatively high. So if you were even moderately aggressive as an investor you might start to feel those fees biting into your return quite quickly.
Shear continues: “While there are still pockets of value among some local stocks, they are fairly difficult to find. Nonetheless, some stocks are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets and better visibility of cash flows. We will continue to seek out such shares and position the fund appropriately.”
Finweek is pretty sure that for the majority of its sophisticated readers the prospect of winning a Toyota Yaris is highly unlikely to have them throwing money at the investment division of the big red bank. However, getting your kids in early with an entry level investment product such as the Absa Balanced Fund might not be the worst investment option around.