An­chored in bonds and lower-risk as­sets The fund aims to achieve cap­i­tal growth as well as some level of cap­i­tal pro­tec­tion in the long term. The bulk of the fund is in­vested in do­mes­tic bonds.

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The fund is skewed to­wards bonds and es­pe­cially lower-risk as­sets with ex­po­sure skewed to­wards debt with a shorter du­ra­tion, ac­cord­ing to Mar­ius Ober­holzer, Stanlib’s head of ab­so­lute re­turn strate­gies and man­ager of the fund. This is in or­der to lessen ex­po­sure to in­ter­est rate risk, he ex­plains.

“That said, we have been in­creas­ing our du­ra­tion in our as­set al­lo­ca­tion mix as there is a grow­ing re­al­i­sa­tion that this is no nor­mal cy­cle and South Africa’s eco­nomic growth tra­jec­tory con­tin­ues to slow, as is the case glob­ally,” he says. “It’s typ­i­cal for us at this point in the cy­cle [slow­down] that we would like to be­gin skew­ing the port­fo­lio in this man­ner.”

In the mean­time, Ober­holzer be­lieves much of the neg­a­tive ef­fect of a sov­er­eign rat­ings down­grade of SA’s gov­ern­ment has al­ready been priced. With Moody’s In­vestors Ser­vice con­firm­ing SA’s rat­ing at two notches above in­vest­ment grade, it re­mains to be seen what Stan­dard & Poor’s and Fitch will do over the next few weeks. The lat­ter two agen­cies have his­tor­i­cally been the most neg­a­tive on SA’s abil­ity to re­pay its debt.

“Should the mar­ket re­act neg­a­tively to a down­grade in the ab­sence of new in­for­ma­tion, we would be buy­ers of bonds,” says Ober­holzer.

The fund’s eq­uity al­lo­ca­tion hap­pens through po­si­tions in fu­tures in the Swix, Top40 In­dex or an equal-weighted Top40 In­dex or com­bi­na­tion of in­dices, he ex­plains.

“We try to avoid dis­cussing our spe­cific com­pany po­si­tions, al­though I will say that we be­lieve that the SA banks of­fer in­trigu­ing val­u­a­tions and are be­ing priced for a rea­son­ably sig­nif­i­cant credit cy­cle,” says Ober­holzer. “Given our view that bonds are look­ing in­ter­est­ing, it stands to rea­son that some of the banks po­ten­tially of­fer some com­pelling val­u­a­tions al­beit with­out Satur­day night ex­cite­ment lev­els.”

Why fin­week would con­sider adding it:

Mar­ius Ober­holzer Fund man­ager and head of ab­so­lute re­turn strate­gies at Stanlib

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