Fund manager

Finweek English Edition - - FUND IN FOCUS - “We think the

next move in in­ter­est rates is up,” says Le Roux. “What hap­pens in the US is key. If and when the Fed­eral Re­serve starts to hike rates – some­thing that could begin hap­pen­ing as early as Au­gust – then we think our rates will begin to move, too.”

Le Roux and Ma­haraj have pre­pared the fund for this sce­nario by in­vest­ing in pa­per (short-term in­stru­ments) and bonds that can ad­just quickly to changes in in­ter­est rates. “The float­ing Ne­go­tiable Cer­tifi­cates of De­posit (NCDs) is­sued by the banks re­set ev­ery three months and are cur­rently pay­ing us 1.2% above JIBAR,” says Le Roux. (JIBAR is an in­ter­est rate that the banks bor­row and lend to one an­other over very short du­ra­tions.) Float­ing NCDs ac­count for well over a quar­ter of the fund.

The fund used the tremors in fixed-in­come mar­kets post the col­lapse of African Bank to buy cor­po­rate bonds pro­vid­ing very healthy yields. “We didn’t hold any African Bank debt; we just never liked the risk-re­ward trade­off, and we had cut all ex­po­sure as far back as 2012,” says Le Roux.

Le Roux adds that the fund has been with­draw­ing its ex­po­sure to listed prop­erty. “This is now less than 6% of the fund, and we also think in­fla­tion­linked bonds are fairly priced. We cur­rently hold just 5% of the port­fo­lio in th­ese in­stru­ments.”

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.