NAV on 2019/03/22
|NAV on 2019/03/21
|52 week high on 2019/03/22
|52 week low on 2018/10/05
|Total Expense Ratio on 2018/12/31
|Total Expense Ratio (performance fee) on 2018/12/31
Sanlam Collective Investments
South African--Multi Asset--Income
110% of STeFI Call
No email address listed.
No website listed.
Northstar SCI Income Fund - Sep 18
The Northstar Income fund returned 1.6% for the quarter vs. 1.78% for the STeFI composite index and 1.29% for the fund’s strategic benchmark. The fund’s underweight positions to property (-3.48% return) and inflation linked bonds (0.41% return) were the primary contributors to outperformance relative to the strategic benchmark. The portfolio also benefited due to enhanced yield from credit exposures to NCDs, floating rate notes, fixed bonds and inflation linked bonds.
A number of factors have resulted in headwinds for a broad range of fixed income returns outside of US cash. The Federal open market committee continues to raise interest rates at a steady pace, with three 25bp hikes so far this year, and an expected further four 25bp rate hikes over the next 12 months. The US economy continues to power ahead (4.2% QoQ GDP Sep 2018) with core inflation breaching the 2% level in March 2018 (currently 2.2% Aug 2018) and unemployment falling below 4% (May 2018) and remaining below this level. Rising US rates coupled with the scaling back of its asset purchase program is improving the relative attractiveness of yields on US cash and putting upward pressure on longer dated US bond yields and global bond yields.
Additional factors which are negatively affecting global fixed income returns currently are: 1) the escalating trade tensions between the US and its trading partners which is rapidly translating into growth uncertainty and risk aversion in global markets, 2) emerging market risk aversion, largely initiated by the collapsing Turkish Lira as a result of US trade sanctions, raised Turkish USD debt interest payments and Turkish government influenced central bank rates 3) Italy’s rising debt concerns, 4) Brexit negotiation difficulties and 5) poor emerging market growth and spill-over into deteriorating emerging market debt metrics.
As a result of these factors, the dollar has appreciated, with US cash outperforming longer dated US bonds and global bonds over the last 12 months. The US cash relative performance has been more pronounced over the last 6 months in Rand terms (US cash has appreciated 20.1% in Rand terms), as the local currency and other emerging market currencies have weakened. Over this period, local bond yields have spiked with the R186 yield rising from 8% in April to 9% currently and reflecting a negative -3.03% return for the All Bond Index.
Over the last month, the rand has rallied from very old sold levels (USDZAR 15.5) to a more reasonable level of 14,40 USDZAR, however remains undervalued relative to the Dollar (12.10 USDZAR) based on a purchasing power parity basis. Using the same analysis for the rand vs. other major global currencies, the rand looks more reasonably valued vs the Pound and the Yen and remains undervalued vs. the Euro.
Based on current yields and prospective returns, the fund is overweight modified duration fixed bonds 2.2 vs. 1.4, underweight inflation linked bonds however lifting exposure as yields spike higher, underweight property, no exposure to global bonds, an underweight exposure to global currencies and an underweight to floating rate notes. We note that preference share yields have spiked over the last couple of months, but yet to reach levels which compensate investors for the associated lower credit quality and higher liquidity risks vs. other income yielding assets.
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.