NAV on 2019/09/18
|NAV on 2019/09/17
|52 week high on 2019/06/20
|52 week low on 2019/01/02
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
Old Mutual Unit Trust Managers (RF) (Pty) Ltd.
South African--Interest Bearing--Variable Term
All Bond Index
Old Mutual Investment Group SA
Old Mutual Investment Group SA (OMIGSA) was incorporated in 1993 as a wholly owned subsidiary of the Old Mutual Group. In June 1997 it became a fully contained and independent asset management company.
Based in Cape Town OMIGSA is a major player in the local institutional and retail market and offers a wide range of investment products to local and international investors as well as administering a variety of life fund products on behalf of the Old Mutual Group.
A team of over 30 investment analysts conducts in-depth, independent, in-house research. This makes OMIGSA unique due to the proprietary nature of the research as well as the fact that it is current across all sectors, markets and economies. In South Africa, OMIGSA provides institutional and retail investors with access to a spread of international markets and investment opportunities through its operations in the United Kingdom and USA.
Daphne manages the money market and active bond fund portfolios. In addition, she trades fixed interest instruments and is responsible for risk monitoring and fund exposures and she oversees asset administration.
Daphne joined Futuregrowth in April 2001 from NIB Asset Management.
Old Mutual Bond comment - Jun 19
Our main concern regarding the bond market remains the strong link between lacklustre economic growth and the lack of fiscal consolidation. More specifi cally, this points to the rising debt burden of the state, which arises as a consequence of the lack of fi scal consolidation. This continues to threaten the country’s sovereign risk profi le and places pressure on domestic funding costs. The risk of a failed economic recovery has certainly not dissipated; with this fi rmly supported by disappointing fi rst quarter GDP data. This makes us question the quality of tax revenue collections, and consequently the state of health of the tax base, which in turn keeps the risk of a budget defi cit overrun at elevated levels. The fi nancial burden of poorly managed SOEs on state fi nances has reached a point where the delivery of a credible national budget is nearly impossible in the absence of a substantial remedial action for the unfolding fi nancial disaster. The proverbial chickens, mainly in the form of Eskom, have come home to roost and this requires more than the usual liquidity provision. Addressing solvency is an entirely different matter, requiring more than simply kicking the can down the road via more liquidity bail-outs.
On the monetary policy front, we maintain our view, following the Monetary Policy Committee (MPC)’s decision to keep the repo rate stable in May 2019, that the central bank will remain hostage to the opposing forces of a lacklustre economic growth outlook and limited upside risks to infl ation in light of the strong disinfl ationary environment. This is best refl ected by the recent split decision by the MPC members, with two members voting for a rate cut. Although this implies a higher probability of a rate cut in the near term, we are sticking to a stable policy path for now, but acknowledging that the risk is to the downside in light of weak economic growth and strong disinflationary forces.
With the above in mind, we continue to endeavour to strike a balance between avoiding capital loss in the case of a market sell-off and losing out on the accrual offered by a steeply sloped yield curve. We have also considered the fact that longdated nominal bonds are currently trading at an attractive real yield of around 4%. So, while our broad interest rate investment strategy remains defensive, the modifi ed duration variance of -0.2 is some way off the maximum allowed position of -1.0. This acknowledges reasonable valuation, which partly offsets the relatively poor investment theme.
The fund underperformed the benchmark by 1.1% on a net of fee basis for the 12-month period ending June 2019. This was mainly due to the more conservative positioning of the fund relative to the benchmark, specifi cally the underweight modifi ed duration position during the period under review. This negative contribution was partly offset by the accrual earned from the higher yielding non-government bond holding in the fund.
The fund is defensively positioned, with an underweight modifi ed duration tilt of 0.2 relative to the All Bond Index modifi ed duration of 7.1. This is the result of a smaller holding of nominal bonds with a term to maturity of 25 years and longer relative to the benchmark. The underweight position at the back end of the yield curve is offset by a small cash holding and a signifi cant overweight to short- and medium-dated nongovernment nominal bonds.
The fund aims to offer a combination of capital growth and high income yields. Capital growth is primarily achieved by actively taking advantage of interest rate cycles.
This fund is suited to astute investors who have a particular view on relative asset class performance. The investor understands the impact of the interest rate cycle and accepts this risk in exchange for moderate long-term growth potential.
The fund invests across the full spectrum of the yield curve. It invests in public and private sector bonds and deposits, with at least 50% invested in bonds with an effective government guarantee.
The fund is not required to be Regulation 28 compliant in terms of its Deed, but the fund manager is mandated to comply with Regulation 28 on a day-to-day basis.