NAV on 2020/10/30
|NAV on 2020/10/29
|52 week high on 2020/09/21
|52 week low on 2020/03/24
|Total Expense Ratio on 2020/06/30
|Total Expense Ratio (performance fee) on 2020/06/30
Sanlam Collective Investments
South African--Multi Asset--Income
110% of STeFI Call
No email address listed.
No website listed.
Northstar SCI Income Fund - Dec 19
The Northstar Income fund delivered a subdued return of 63bps for the quarter, however the 12 month return of 8.31% was robust in the context of an average peer return of 8.08%, a strategic benchmark return of 5.83% and infla..on 3.6%.
The strongest 12month contributors to outperformance of the strategic benchmark were fixed bonds 3.76% (vs the benchmark’s component 1.57%) and infla..on linked bonds contribu..ng 1.68% (vs the benchmark’s component 0.41%). Money market and floa..ng rate notes (combined average weight of 39%) contributed 3.26% vs 3.53% for the benchmark’s money market component at a weigh..ng of 50%. A small underweight in global bonds detracted 25bps from rela..ve returns, with the global bond index delivering a rand return of 4.26%, despite the weaker dollar over the period.
Set against a backdrop of low global infla..on, lower oil price, weak domes..c demand and a stable local currency, local infla..on moderated to 3.6% for the year. The three categories having the largest impact on lower infla..on were, Fuel (4.6% weigh..ng) which fell 6.5%, Housing (24.1% weigh..ng) rising only 3.1% and Communica..on (2.6% weigh..ng) which was flat for the year. Conversely the three categories which contributed the most to rising infla..on were, Insurance (10.1% weigh..ng) rising 6.7%, Electricity (weigh..ng of 3.8%) up 12.0% and Educa..on (3.1% weigh..ng) up 6.6%. Water and Food prices also accelerated 10.3% and 4.0% respec..vely.
On the back of very weak demand, infla..on is expected to remain well within the target range, and poten..ally close in on the 4.5% midpoint, despite the poten..al upside risks. These include nega..ve base effects on fuel and food, price shocks rela..ng to middleeast tensions (oil) and adverse weather condi..ons (food), a weaker Rand (as a result of the widely an..cipated Moody’s downgrade) and higher administered prices (electricity).
Growth remains constrained due to a mul..tude of factors which include; electricity supply constraints (poor SOE management), an overburdened consumer (lower wage increases, rising debt servicing costs and increasing taxes), poor poli..cal environment (corrup..on) and weak economic policy implementa..on (constrained new investment) resul..ng in persistently low growth. GDP is forecast to improve and rise to 1.2% in Q420 however will be dependent on Eskom and its ability to supply electricity and changes in the poli..cal climate, which impacts firms’ ability to produce and their willingness to expand capacity.
The fiscal risk remains elevated, however it is an..cipated there will be an improvement in the budget deficit forecast from 6.5% (presented in the 2019 MTBPS), to a more palatable sub 6% level in the 2020 Budget. However, the na..on’s debtGDP ra..o is unlikely to stabilise at a level lower than 72% (even accoun..ng for the full implementa..on of the proposed savings), which will very likely result in a downgrade by all the major credit ra..ng agencies. Most notably an an..cipated downgrade to junk status by Moody’s on the 27... March, and the subsequent exclusion from the WGBI (World Government Bond Index).
Notwithstanding the poten..al undervalua..on of the Rand on a purchasing power basis vs. the dollar, elevated fiscal risks, weak economic growth and further electricity load shedding poses a risk to the rand.
Given the poten..al for modest monetary easing, coupled with elevated nominal bond yields creates an opportunity to own fixed bonds. As such the Northstar Income fund has a modest exposure of 19% with a weighted average yield of 9.3 and modified dura..on of 7.4. Infla..on linked bonds yields have con..nued to rise during the course of 2019 as infla..on expecta..ons have lowered. However with real yields above 3% presented across the curve, the lower dated maturi..es look par..cularly a..rac..vely valued, especially if infla..on expecta..ons stabilise. The por..olio currently holds 35% in infla..on linked bonds with a weighted real yield of 4.0% and modified dura..on of 4.4. A..er the rand’s rally to below 14 to the dollar at yearend, the offshore component of the por..olio was li..ed to 12.5%, with 4% of that exposure to shortdated US infla..on linked bonds.
The por..olio is well diversified across different asset classes and issuers, and is posi..oned to take advantage of further local policy easing, any unforeseen increase in infla..on and deteriora..on in the rand. The focus remains on delivering a strong real return on an a..er cost basis, coupled with a very low risk of capital loss on a yeartoyear basis.
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.