NAV on 2019/07/22
|NAV on 2019/07/19
|52 week high on 2019/06/07
|52 week low on 2018/10/05
|Total Expense Ratio on 2019/03/31
|Total Expense Ratio (performance fee) on 2019/03/31
Sanlam Collective Investments
South African--Multi Asset--Income
110% of STeFI Call
No email address listed.
No website listed.
Northstar SCI Income Fund - Mar 19
The Northstar Income Fund returned 8.6% for the year vs. inflation of 4.1%, the benchmark (STeFI Call x110%) 7.2% and the strategic asset allocation return of 6.8%.
All asset classes held within the portfolio made positive contributions over the 12 months. Fixed bonds were the largest contributor with 5.2% followed by floating rate notes 2.5%. Inflation linked bond holdings also made a positive contribution of 0.9%, despite the index being down 3.1% over the period. Local property holdings, NCDs, foreign cash and US bond exposure also made small positive contributions.
Relative to the Northstar Income Fund’s strategic benchmark, the largest attributors were fixed bonds, followed by inflation-linked bonds and then NCDs. Listed property also added positive alpha. Being underweight foreign cash and global bonds however detracted from relative returns. The Northstar Income Fund added 1.8% alpha relative to the strategic asset allocation benchmark.
The fixed bond exposure in the Northstar Income Fund has been reduced as yields reach fair value. Under current conditions, we estimate the front-end of the curve to be expensive (R208 & R2023) and longer dated bonds (R186, R2030, R213 etc) to be undervalued, with a fair-value 1 year exit yield of 8.3% for the R186. The interest rate outlook is positive for fixed bonds, with inflation forecasts moderating more than expected and developed markets (lead by the US) taking on a dovish tone and indicating a neutral stance on the future direction of interest rates.
The inflation-linked bond weighting has been gradually increased over the 12 months, with a bias for shorter dated maturities on real yields above 3%. Although 3% real yields are very attractive on an outright basis, their prospective nominal returns look muted relative to the returns from fixed bonds with the same maturity. Currently the R186 (fixed bond which matures in 2026) is set to deliver an 8.6% return whereas the R210 (inflation linked bond maturing in 2028) will only outperform the R186 if inflation averages above 5.5% for the period to maturity. Inflation-linked bonds however, do offer a great deal of protection in the event of the central bank not being able to maintain price stability.
Should the environment favour fixed bonds and their yields rally below fair value, this exposure will be switched into higher yielding floating rate notes and or inflation linked bonds and listed property where valuations are supportive.
Up until recently, valuations on listed property stocks have looked unfavourable, given the deteriorating economic environment, weak consumer, declining business confidence, electricity disruptions, rising vacancies and over-supply. The result for companies, has been weaker top-line growth and reduced profitability as costs have increased and balance sheets leveraged in order to explore offshore growth opportunities. Despite this backdrop, valuations are looking more supportive, especially if economic conditions stabilise and improve.
In the interim, cash is being diverted to short-dated NCDs on yields of 8.1%. The foreign cash exposure has been marginally increased in the lead up to the scheduled Moody’s credit review and the national elections. The portfolio remains marginally underweight foreign currency, however the duration of the portfolio has decreased somewhat, reducing the risk of price shocks.
The Northstar Income fund is on a yield of 8% and operating with an effective duration of 0.9, which should mitigate the portfolio from any adverse price shocks and allow the portfolio to continue delivering a healthy real return.
The Northstar Sanlam Collective Investments Income Fund is an income portfolio with an objective to provide investors with a regular and stable income that targets inflation beating returns over the long term, while actively managing the risk of capital loss in the short term Investments to be included in the portfolio may, apart from assets in liquid form, consist of equity and non-equity securities, fixed interest instruments (including, but not limited to, bonds, corporate bonds, inflation linked bonds, convertible bonds, cash deposits and money market instruments), debentures, preference shares and property securities as well as any other income enhancing securities which are considered consistent with the portfolio's primary objective and that the Act may allow from time to time. The portfolio's equity exposure will be limited a maximum of 10% of the portfolio's asset value.The portfolio may from time to time invest in financial instruments, in accordance with the provisions of the Act and applicable legislation, as amended from time to time, in order to achieve the portfolio's investment objective. The manager may also include forward currency, interest rate and exchange rate swap transactions for efficient portfolio management purposes.The Manager may include participatory interests and other forms of participation of local and global collective investment schemes, or other similar schemes operated in territories with a regulatory environment which is to the satisfaction of the manager and trustee of a sufficient standard to provide investor protection at least equivalent to that in South Africa and which is consistent with the portfolio's primary objective. The Fund will be managed within the requirements of retirement funds prudential investment guidelines as well as the requirements of the Act. For the purpose of this portfolio, the manager shall reserve the right to close the portfolio to new investors on a date determined by the manager. This will be done in order to be able to manage the portfolio in accordance with its mandate. The manager may, once a portfolio has been closed, open that portfolio again to new investors on a date determined by the manager. The Trustee shall ensure that the investment policy set out in this Supplemental Deed is carried out.