NAV on 2020/02/25
|NAV on 2020/02/24
|52 week high on 2020/02/25
|52 week low on 2019/02/26
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
Old Mutual Unit Trust Managers (RF) (Pty) Ltd.
Low - Medium
BEASSA ALBI (1 to 3 year) Index
Wikus manages a range of fixed interest portfolios, which include the Income Fund, Enhanced Income Fund, Namibia Enhanced Income Fund and the fixed interest component of the Real Income Fund.
Wikus joined Old Mutual Investment Group in October 1999 as a fixed interest portfolio manager from ABN AMRO Securities. He started his career in the Economics Department of the South African Reserve Bank. In 1995, he joined ABSA Bank Treasury as a treasury economist and pursued this position until 1997.
Old Mutual Namibia Enhanced Inc comment - Dec 19
The delivery of the 2018 Medium-Term Budget Policy Statement (MTBPS) in October spooked financial markets. Against a much weaker macroeconomic backdrop than anticipated earlier this year, tax revenue collections kept underperforming, while an earlier call for mandatory expenditure cuts was abandoned. Moreover, underperforming stateowned enterprises (SOEs) once again took a bigger slice of the budget cake than earmarked earlier this year. With nowhere to hide, Government is once again forced to turn to financial markets with a higher borrowing requirement. The significant worsening of the fiscal outlook left Moody’s rating agency with no choice but to change the sovereign rating outlook from stable to negative.
As would be expected, both nominal and inflationlinked bond yields spiked in response to the worse than expected 2019 MTBPS. With the short end of the yield curve anchored by a benign inflation outlook as well as a reasonable expectation of a stable repo rate path, it was up to the back end of the yield curve to adjust higher. This led to bearish yield curve steepening. In terms of the 10-year point. The yield of the R2030 initially increased sharply from 9.00% at the end of September to 9.27%, but eventually managed to claw back losses to close the quarter only marginally higher at 9.02%. A strong finish for nominal bonds helped the JSE All Bond Index (ALBI) to render a return of 1.7% for the fourth quarter, slightly ahead of the cash return of 1.6%. For calendar 2019, the importance of base accrual was highlighted by the fact that the ALBI delivered great performance, especially considering the headwinds described above – a classical example of “bad news is already reflected in the price of nominal bonds”. For the year, the ALBI returned an inflation-beating 10.3% while cash rendered a return of 6.6%.
The fund outperformed the benchmark by 0.2% on a net-of-fee basis for the 12-month period ending December 2019. The overall defensive interest rate position and interest accrual from higher yielding, low modified duration variable rate bonds were the main positive contributors. The fund also benefited from the R186 (maturity 2026) bond holding. In light of our cautious investment stance, the fund is conservatively positioned. In terms of interest rate risk, this is demonstrated by the fund’s total modified duration position, currently at just more than half of the maximum allowed mandate limit of 2.0. The 40% variable rate bond holding forms the core of this strategy. This well-diversified holding of carefully selected nongovernment instruments was marked to market at an average weighted modified duration of 0.17 and a weighted average yield to maturity of 8.7% at the end of December. The fund also held 19% of the R186 (maturity 2026).
The selection is based on the fact that this government bond pays an annual coupon rate of 10.5% while it is anticipated to benefit from its position on the yield curve in terms of roll-down. It is also less sensitive to any negative fiscal developments compared to longer-dated fixed rate bonds.
This actively managed fund invests in a wide range of Namibian and South African interest-bearing assets (for example, money market instruments, bonds, listed property and preference shares). The fund manager moves actively between these assets, based on a relative value approach.
With no restrictions on the average duration of the portfolio, the fund may hold both short- and long-term securities. This gives greater flexibility in taking advantage of interest rate trends and thus to maximise capital gains and income yields. Interest income can be reinvested to generate further growth, or paid out to supplement income. With a secondary focus on capital gains, the fund will maintain a high quality bond exposure and seek out listed property companies showing good prospects for growth and yield.