Im­pres­sive man­age­ment strat­egy

The fund seeks to max­imise re­turns from a di­verse range of pri­mar­ily South African bonds.

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

Fund man­ager in­sights:

In­vestors who seek the ben­e­fits of an ac­tively man­aged bond fund and re­quire ex­po­sure to bonds as part of a di­ver­si­fied port­fo­lio would find the Coronation Bond Fund suit­able to their needs, says Nis­han Ma­haraj, head of Coronation’s fixed in­ter­est team and one of the fund man­agers.

He says the fund is strate­gi­cally man­aged to se­cure an at­trac­tive re­turn by in­vest­ing pri­mar­ily in a range of gov­ern­ment and cor­po­rate bonds. “It will hold var­i­ous tac­ti­cal po­si­tions to ben­e­fit from the best op­por­tu­ni­ties as they emerge.”

He goes on to ex­plain that in­vest­ments are “metic­u­lously re­searched and sub­jected to a strict risk man­age­ment process. Only qual­ity in­stru­ments of rep­utable in­sti­tu­tions will be con­sid­ered. All fac­tors that could af­fect th­ese in­vest­ments are care­fully mon­i­tored, in­clud­ing in­fla­tion, as well as cur­rency and in­ter­est rates.”

Ac­cord­ing to Ma­haraj, the risk of los­ing money over pe­ri­ods of more than a year is low, while it is slightly higher for pe­ri­ods of less than a year. The pri­mary risk ex­po­sures are to changes in in­ter­est rates and cor­po­rate credit events.

The fund in­vests up to a max­i­mum of 10% in off­shore fixed in­come as­sets which pro­vides it with added lev­els of di­ver­si­fi­ca­tion and re­turn en­hancers.

“In con­struct­ing the port­fo­lio, we take care not to po­si­tion to­wards any sin­gle out­come, which makes our port­fo­lios much more re­silient and durable to un­ex­pected mar­ket tur­bu­lence,” he ex­plains.

Cur­rently the fund’s yield sits at 9.9% with a mod­i­fied du­ra­tion of 6.6, which is very at­trac­tive when com­pared to the All Bond In­dex (Albi), which has a yield of 9% and a mod­i­fied du­ra­tion of 7.1, says Ma­haraj. (The mod­i­fied du­ra­tion is a for­mula that ex­presses the mea­sur­able change in the value of a se­cu­rity in re­sponse to a change in in­ter­est rates, ac­cord­ing to In­vesto­pe­dia.com.)

“So in ef­fect, one is in­vested in a fund which has a higher yield than its bench­mark with much less risk. This yield can also be thought of as a proxy for re­turn in the event of a static in­vest­ment en­vi­ron­ment, or the dif­fer­ence be­tween the yield of the fund and the yield of the bench­mark as a proxy of ex­pected al­pha to be de­liv­ered by the fund.”

Why fin­week would con­sider ad­ding it:

The fund is the top quar­tile per­former over five years and 10 years, and best per­form­ing fund in its cat­e­gory since the launch in 1997.

It won the cer­tifi­cate as Top Out­right Per­former for Best South African In­ter­estBear­ing Vari­able-Term Fund at this year’s Rag­ing Bull Awards. It was also awarded the cer­tifi­cate for Best South African In­ter­est-Bear­ing Vari­able-Term Fund on a risk-ad­justed ba­sis. ■

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