IN­VEST­MENT FO­CUS

Weekend Argus (Saturday Edition) - - FRONT PAGE - JOSEPH BOOY­SEN

South Africa’s lower in­fla­tion rate is an op­por­tu­nity for re­tire­ment funds to in­crease their al­lo­ca­tion to cash, to achieve mean­ing­ful in­fla­tion-beat­ing re­turns and re­duce risk, says Sean Se­gar, the head of cash solutions at Ned­group In­vest­ments.

Se­gar said that, for the first time since Au­gust last year, in­fla­tion is back within the South African Re­serve Bank’s tar­get range of 3% to 6%, and the Con­sumer Price In­dex for April was a lower-thanex­pected 5.3%, with the out­look for a sta­ble en­vi­ron­ment look­ing good.

He said this cre­ates an op­por­tu­nity for re­tire­ments funds given the high lev­els of risk and un­cer­tainty in the mar­kets.

“The flat yield curve means that cash is also a good al­ter­na­tive to bonds, as it of­fers sim­i­lar yields, with­out the volatil­ity of re­turns. With so much hap­pen­ing on the do­mes­tic front and in­ter­na­tion­ally, and with rat­ing agen­cies camp­ing in the coun­try, bonds are vul­ner­a­ble to cap­i­tal loses. Many be­lieve that for sim­i­lar yields cash is a safer bet,” he said.

Se­gar added that, be­cause re­tire­ment funds aim to earn steady, in­fla­tion-beat­ing re­turns, they gen­er­ally al­lo­cate to cash to pro­vide a pre­dictable and con­sis­tent pos­i­tive re­turn, not to

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