Op­tion for those with short time hori­zon

The fund aims to of­fer a higher yield than a money-mar­ket fund by tak­ing ad­van­tage of the yields of­fered by a wide range of debt in­stru­ments, in­clud­ing cor­po­rate bonds.

Finweek English Edition - - MARKET PLACE - Edi­to­rial@fin­week.co.za By Niel Jou­bert

Fund man­ager in­sights:

The San­lam In­vest­ment Man­age­ment (SIM) En­hanced Yield Fund’s per­for­mance is driven by move­ments in in­ter­est rates and credit mar­kets, says Melville du Plessis, fund man­ager.

The fund is typ­i­cally aimed at in­vestors who have a six- to 12-month in­vest­ment hori­zon, but is also a valu­able so­lu­tion for clients who have spare cash.

Ac­cord­ing to Du Plessis, yield en­hance­ment is pur­sued by us­ing a com­bi­na­tion of both in­ter­est rate and credit op­por­tu­ni­ties.

On the in­ter­est rate side, the fund is pre­dom­i­nantly ex­posed to the move­ments of shorter dated bonds and the ac­tions of the South African Re­serve Bank’s mone­tary pol­icy com­mit­tee, and the fu­ture path of the pol­icy rate.

On the credit side, the fund looks to max­imise the value that can ac­crue from banks, cor­po­rate and other coun­ter­par­ties.

Du Plessis says the fund is man­aged within the fixed in­ter­est team at SIM and “thus taps into the full skillset of the en­tire in­vest­ment team, as well as the ex­ten­sive credit ca­pa­bil­i­ties of the en­tire San­lam group.

“The fund’s track record so far demon­strates that it is pos­si­ble to out­per­form dur­ing both in­creas­ing and de­creas­ing in­ter­est rate cy­cles, as well as favourable and even un­favourable credit mar­ket en­vi­ron­ments,” says Du Plessis.

He adds that it is of course im­por­tant to do thor­ough re­search and have a strong, cred­i­ble in­vest­ment process so as to iden­tify and take ad­van­tage of favourable in­vest­ment op­por­tu­ni­ties.

“But it is just as im­por­tant to avoid mak­ing un­nec­es­sary mis­takes. Al­though it is im­pos­si­ble to have per­fect fore­sight with re­gard to what the fu­ture holds, ap­pro­pri­ate risk man­age­ment and avoid­ing un­due con­cen­tra­tion risk is one of the best safe­guards against un­der­per­for­mance – and as such help de­liver out­per­for­mance,” he ex­plains.

“The fund was able to avoid un­der­per­for­mance, and thus also de­liver out­per­for­mance, by hav­ing ei­ther very lim­ited or no ex­po­sure to coun­ters that have un­der­per­formed in the past.”

Why fin­week would con­sider adding it:

The fund has out­per­formed its bench­mark of STeFI + 0.5% by 0.93% per an­num (net of fees) since in­cep­tion and over the lat­est one-, three- and five-year pe­ri­ods.

It aims to de­liver sus­tain­able out­per­for­mance while min­imis­ing the chance of a dis­ap­point­ing monthly re­turn. More than 90% of months since in­cep­tion have been pos­i­tive for the fund, while the few neg­a­tive months en­tailed very small draw­downs, and the re­cov­er­ies were quick. A lot of work has been done over the last year to fur­ther im­prove the per­for­mance pro­file of the fund.

It won a cer­tifi­cate at this year’s Raging Bull Awards for Best South African In­ter­est-Bear­ing Short-Term Fund.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.