Fund manager


says that the fund has been sell­ing down its l arge po­si­tion i n nom­i­nal gov­ern­ment bonds to­wards the end of last year, prior to the rally that was seen i n global bond mar­kets i n Jan­uary. Nom­i­nal bonds cur­rently ac­count for 15% of the port­fo­lio, af­ter hav­ing been in the high teens. “Since Jan­uary, bonds have been spend­ing this year mov­ing higher. But we took the de­ci­sion last year to min­imise our ex­po­sure as it moved into fair value ter­ri­tory,” says Moyle. The S o uth Af r i c a n 1 0 - year gov­ern­ment bond yield now stands just be­low 8%.

Moyle ex­pects in­fla­tion to be higher next year. “We don’t make ex­plicit in­fla­tion tar­gets, but we do l ook at con­sen­sus fore­casts. In­fla­tion is fore­cast to bounce back into next year. We have seen some fore­casts as high as 7%, but we think it’s rea­son­able that it will be i n the up­per reaches of the South African Re­serve Bank’s in­fla­tion tar­get­ing band,” says Moyle.

The ex­po­sure to lo­cal listed prop­erty has also been re­duced. “We en­tered the year over­weight with about 1 0% in l i sted prop­erty. We now have about 6.5%. De­spite the to­tal re­turn f rom the as­set class ex­pected to be in the low dou­ble dig­its, I think the as­set class is look­ing ex­pen­sive and that is why we have been get­ting out,” ex­plains Moyle.

The re­duc­tions in listed prop­erty and nom­i­nal bonds have seen the pro­ceeds in­vested in cash. Like many other in­vestors, Moyle be­lieves for­eign eq­ui­ties are more at­trac­tively priced than lo­cal eq­ui­ties. “For t he as­set cl ass as a whole, we are over­weight. We have cre­ated the lo­cal e quit y por t f ol i o i n r e l ati on t o t he Share­holder Weighted In­dex (Swix). In the off­shore eq­uity port­fo­lio we use a va­ri­ety of funds – in-house Pru­den­tial group funds, third-party funds as well as ETFs to get that ex­po­sure,” he says. The fund was re­cently voted the best in its cat­e­gory at the re­cent Morn­ingstar Awards. The fund is ide­ally suited to in­vestors who need a com­bi­na­tion of re­li­able in­come, as well as the abil­ity for their in­vest­ments to keep pace with in­fla­tion.


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