NAV on 2019/09/13
|NAV on 2019/09/12
|52 week high on 2019/06/28
|52 week low on 2018/10/11
|Total Expense Ratio on 2019/03/31
|Total Expense Ratio (performance fee) on 2019/03/31
Old Mutual Unit Trust Managers (RF) (Pty) Ltd.
South African--Multi Asset--Low Equity
Prior to joining MacroSolutions, he was the Investment Strategist for South Africa at UBS South Africa for nine years. In his last two years at UBS, he was also responsible for the emerging EMEA Equity strategy. John has 12 years of work experience in financial markets in South Africa and London. In addition, he has seven years of experience as an economist in public and private sector capacities in Namibia and South Africa.
John joined MacroSolutions in June 2014 as a portfolio manager. As a member of the MacroSolutions team, he is responsible for managing conservative funds including the Profile Capital and Stable Growth Funds and the Old Mutual Real Income and Stable Growth Funds. John’s background as an investment strategist enables him to integrate top-down and bottom up analysis into portfolio construction.
Zain joined MacroSolutions in July 2015 as an investment analyst. In March 2018 he became co-portfolio manager of the Old Mutual Real Income Fund. In addition to this role, he is responsible for identifying 'between the gap' investment opportunities for MacroSolutions portfolios in areas like preference shares, convertible bonds and international assets. He also contributes to MacroSolutions’ overall asset allocation.
Prior to joining MacroSolutions, Zain was a Fixed Income and Quants Analyst at Old Mutual Investment Group’s fixed income boutique, Futuregrowth Asset Management, for three and a half years.
Old Mutual Real Income comment - Jun 19
The second quarter of 2019 proved eventful on both the global and local fronts. Global macroeconomic conditions have deteriorated, due in part to heightened US-China trade tensions. While there was positive news stemming from the G20 meeting over the last weekend of June, much uncertainty remains on the subject of global trade. The gloomier economic picture has resulted in central banks adopting a looser monetary policy rhetoric. While some central banks have already cut rates - for example India, Australia and Malaysia – many market participants now expect the US Federal Reserve to loosen monetary policy during the second half of 2019. Locally, the consensus view has moved to a rate cut from the South African Reserve Bank at the next meeting (in July). This follows a particularly poor Q1 GDP print of -3.2% y/y and a subdued inflation outlook. The results in the national elections in May, together with the stronger and smaller cabinet announced shortly thereafter, were necessary but unfortunately still not sufficient conditions for the sought-after local economic recovery we require. Government now needs to urgently implement reform plans, with the future of Eskom being the most pressing issue.
All told, local asset classes outperformed their respective global counterparts in the quarter, aided by the strengthening of the rand. Local bonds delivered good returns over this period, ahead of local equities. Global bond yields fell during the quarter, with German bund yields once again falling below zero while global equity markets advanced by 3.8% (MSCI All Country World Index in US dollar terms).
The Old Mutual Real Income Fund aims to deliver an income that grows over time while protecting capital. Fund performance net of fees exceeded domestic cash and bonds for the quarter, benefiting from the domestic property exposure. Over the last year the fund returned 8.1%. This was ahead of inflation of 4.5%, exceeding the fund’s target CPI + 1-2% net of fees.
Performance over the year was ahead of domestic fixed income assets, with nominal bonds (JSE All Bond Index) leading the rest, returning 7.6%. Fund performance was driven by yield enhancement within its domestic credit, as well as strong performance from property A-shares and preference shares. The latter in particular have had a stellar last two years, with the index returning in excess of 10% a year. Having a meaningful exposure of 5% in the fund, these 'between-the-gap assets' have provided a diversified source of alternative real yield, and some capital growth.
The core of the fund remains invested in domestic fixed income assets, with a preference for low duration variable rate non-government instruments. Interest rate risk in the fund is at benchmark, with domestic bond valuations fair in a historical and global context. Having priced in what we expect to be a moderate rate cutting cycle, we will reduce exposure here into any further strength.
While the fund’s recent equity performance has been lacklustre, exposure remains below benchmark and has not been a material drag on performance. After several years of poor performance, valuations in South African domestic equities are attractive for the first time since 2013. We have been adding domestic shares that offer a combination of attractive valuations, and high quality yield. We will continue to deploy cash towards domestic growth assets as we progress towards rate cuts and as opportunities present themselves.
The average yield of the fund is 8.1%, above our inflation expectations of 5%. Growth asset exposure within the fund is low enough to maintain the capital preservation mandate of the fund, while providing diversification to the portfolio.
The fund aims to provide an income that grows in line with inflation, while sustaining the level of capital over time and minimising any losses over a 12-month period. The portfolio manager actively manages asset allocation to take advantage of changing market conditions. This fund is suited to investors who can accept a lower initial income in return for the expectation of inflation-matching growth in income over the recommended investment term, while maintaining the value of their capital. It is suitable as a low-risk investment in retirement. The fund invests in the full spectrum of fixed interest investments. The fund may invest up to 25% of its portfolio in selected listed property shares and up to 10% in equities. The fund may gain exposure to foreign assets up to a maximum of 30% of its portfolio (with an additional 10% for African ex-SA investments). Derivatives may be used for efficient portfolio management purposes.