In for R100

Finweek English Edition - - UNITTRUSTS - MARC ASH­TON

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.

ER­ROL SHEAR

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