Reg­u­lar in­come for low-risk in­vestors

The fund is a largely do­mes­tic, high-yield, fixed in­come port­fo­lio that aims to de­liver a rea­son­able level of sus­tain­able in­come and sta­bil­ity on cap­i­tal in­vested.

Finweek English Edition - - MARKETPLACE - Ed­i­to­rial@fin­

Fund man­ager in­sights:

In­vest­ing is nei­ther an art nor a sci­ence and should rather be ap­proached as an en­gi­neer­ing prob­lem, re­quir­ing a spe­cific so­lu­tion to achieve an in­vest­ment out­come, says Paul Craw­ford, fund man­ager.

“This is one of the fun­da­men­tal rea­sons be­hind the in­tel­lec­tual depth of our New­lands-based, Fairtree Fixed In­come Team [in Cape Town] that in­cor­po­rates spe­cialised quan­ti­ta­tive and math­e­mat­i­cal skills that com­ple­ment an en­gi­neer­ing, so­lu­tion-based fo­cus,” says Craw­ford.

The Fairtree Flex­i­ble In­come Plus Fund (pre­vi­ously known as the MET In­come Plus Fund) aims to con­sis­tently de­liver its tar­get re­turn by way of care­ful risk man­age­ment and broad di­ver­si­fi­ca­tion.

The fund is suit­able for low-risk, con­ser­va­tive in­vestors who re­quire reg­u­lar in­come from a flex­i­ble, multi-as­set fixed in­come fund, with tol­er­ance for some volatil­ity of cap­i­tal. Ac­cord­ing to Craw­ford the fund can be op­ti­mally blended with other in­come funds in or­der to cre­ate a holis­tic in­come port­fo­lio, as a re­sult of the low cor­re­la­tion of the fund within the peer group and the All Bond In­dex (Albi).

Ob­tain­ing de­sired re­turn out­comes and “runs on the board” are core to the phi­los­o­phy and process im­ple­mented in man­ag­ing the fund. The broad range of in­stru­ments from the in­vestable uni­verse en­sures a su­pe­rior risk-ad­justed re­turn from the fund over time, says Craw­ford.

“The fund has also pro­duced su­pe­rior risk-ad­justed re­turns when com­pared with the All Bond In­dex, and that in­clud­ing the Fund with Alsi [All Share In­dex] 40 ex­po­sure in­stead of tra­di­tional Albi ex­po­sure has the ben­e­fit of mov­ing the ef­fi­cient fron­tier curve up­ward and to the left – which means a higher re­turn pro­file for a lower level of risk,” he ex­plains.

Craw­ford says they be­lieve that a team-based, quan­ti­ta­tive ap­proach to the val­u­a­tion of as­sets, com­bined with cut­ting-edge port­fo­lio con­struc­tion tech­niques and risk man­age­ment, help build a fund to achieve the stated ob­jec­tives of su­pe­rior risk-ad­justed re­turns.

“The re­search process is vig­or­ous, so that when a po­si­tion is put on, no emo­tion need be in­volved, and we seek the ap­pro­pri­ate com­pen­sa­tion for the level of risk as­sumed,” ac­cord­ing to him. “The en­gi­neer­ing so­lu­tion to an in­vest­ment prob­lem re­moves the ‘heart or heart bias’ when ac­tively man­ag­ing the fund.”

Why fin­week would con­sider adding it:

The fund boasts a track record and av­er­age an­nu­alised gain of 9.51% since in­cep­tion in 2013. While this is slightly lower than the bench­mark’s 9.69%, it demon­strates in­fla­tion-beat­ing re­turns from a low-risk in­vest­ment.

The fund is also ranked first in Morn­ingstar’s SA Multi-As­set In­come cat­e­gory over two, three and four years to 3 June 2017. ■

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