0.32 /
0.25%
128.86
NAV on 2019/07/22
| NAV on 2019/07/19 |
128.54 |
| 52 week high on 2019/06/28 |
129.65 |
| 52 week low on 2019/01/21 |
123.47 |
| Total Expense Ratio on |
0 |
| Total Expense Ratio (performance fee) on |
0 |
| Derivatives |
2.47 |
0.38% |
| Fixed Interest |
106.44 |
16.19% |
| Gilts |
538.31 |
81.86% |
| Liquid Assets |
10.36 |
1.58% |
| Money Market |
0.05 |
0.01% |
|
U-PRUCOB |
103.48 |
15.74% |
|
U-PRUHGIN |
2.96 |
0.45% |
|
FUTURES M |
2.47 |
0.38% |
|
MONEYMARK |
0.05 |
0.01% |
Management company:
Prudential Portfolio Managers Unit Trusts Ltd. |
Formation date:
2000/11/01 |
ISIN code:
ZAE000266292 |
Short name:
U-PRUHYB |
Risk:
Unknown |
Sector:
South African--Interest Bearing--Variable Term |
Benchmark:
BEASSA Total Return All Bond Index |
David Knee
David joined Prudential Portfolio Managers SA, as Head of Fixed Income in January 2009. Prior to Prudential, he was the senior fixed interest portfolio manager in the London office of M&G Investments. David worked at Prudential in South Africa in 1999 and 2000, and was responsible for establishing our current fixed interest process. Before joining M&G, David worked for Hill Samuel Asset Management as a fixed income fund manager, managing both life and pension funds for a variety of clients. David graduated from the London School of Economics with a BSc in Economics and from Birkbeck College with an MSc in Economics. He is an Associate of the Institute of Investment Management and Research.
Gareth Bern
Gareth completed a B.Bus Sc [Finance] degree in 1999 at UCT and went on to complete a B. Com [Hons] degree in accounting in 2000, also at UCT. He then spent 3 years completing his articles at Ernst & Young, qualifying as a CA[SA] in 2003. After spending the early part of 2004 working in the asset management division of Ernst & Youngs New York office, he returned to South Africa, joining Prudential. Gareth has the following degrees, B.Bus Sc [Finance], B.Com [Hons] Acc. Gareth holds both the CA [SA] and CFA designations.
Prudential High Yield Bond comment - Mar 19
2019/05/23 00:00:00
South African assets were boosted over the quarter primarily by the easier global monetary outlook, recording gains across all asset classes. This mixed with some still-gloomy sentiment locally. The economy emerged with growth of 0.8% in 2018, slightly above expectations. Still, this was a very weak absolute growth level, and the SARB is now projecting only 1.3% GDP growth for 2019 (down from 1.7% previously), not including the negative impact of any ongoing electricity cuts.
Apart from the US Fed emphasizing that it would be 'patient' when it came to raising interest rates further, which bolstered bond markets around the world, SA bonds rallied on several local factors, as the BEASSA All Bond Index delivered 3.8% for Q1: the yield on the benchmark R186 bond (due 2032) fell from around 8.9% at the start of the quarter to end at around 8.6%. These supportive factors included good investor demand, subdued inflation (February CPI at 4.1% y/y, below the SARB's 4.5% midpoint target) and the SARB's decision to keep interest rates on hold at both its January and March MPC meetings. The SARB's latest interest rate projection model showed only one 25bp rate hike this year. Also importantly, Finance Minister Tito Mboweni's February Budget was greeted favourably by most analysts, reinforcing the government's commitment to reining in the budget deficit and cutting spending, while also reforming and reducing wastage at the parastatals.
The bond rally also occurred against the backdrop of the expected 29 March Moody's sovereign credit rating report. While many were pessimistic, Moody's final decision not to review the rating and leave it at investment grade with a stable outlook granted the country a big reprieve on the final trading day of the quarter, with the R186 rallying 10bps on the day. Further bond gains were, however, only reflected after quarter-end.
However, the SARB remains concerned about future inflationary pressures arising from the weaker rand, as well as higher costs from fuel and electricity, among other sources. SA inflation-linked bonds, meanwhile, again performed rather poorly in the low-inflation environment, returning 0.5% over the three months, while cash (as measured by the STeFI Composite) delivered 1.8%. Despite US dollar strength, the rand lost only 0.5% versus the greenback, but 2.1% against the UK pound sterling, while gaining 1.3% against the euro, which was hit by growth concerns and more dovish interest rate expectations.
Other worries remained Eskom's generation capacity and the negative impact of load-shedding on growth in 2019, the land expropriation debate, nationalisation of the SARB, and last but not least, the upcoming May elections.
Over the quarter the primary bond market issuance volume (excluding government issuances) was R35,5bn, up from both Q1 2018 and Q4 2018 where the issuance averaged at around R31bn.
As with previous quarters, issuance activity remains dominated by financials. State-owned enterprise issuances continued to gather pace driven by the three Development Funding Institutions coming to the market during the quarter: (IDC issued R2.6bn, split between private placement and public issuance; Land Bank issued R1bn publically and DBSA issued R1.2bn publically at the tail-end of the quarter). Corporate issuance was dominated by the property companies (Redefine, Growthpoint, Premium Properties, Emira, Hyprop and Investec Property Fund). We also saw sizable volume from the automotive sector with Mercedes Benz and Toyota issuing a combined volume of R2.6bn. The remaining issuance activity came from Netcare, Calgro, Telkom and SuperGroup.
PERFORMANCE
For the quarter, the fund generated a return of 3.6% (net of fees), marginally underperforming its benchmark by -0.2%. For the 12 months ended 31 March 2019, the fund returned 2.7% (net of fees) while the benchmark returned 3.5% over the same period.
STRATEGY AND POSITIONING
The fund maintained its long duration positon over the quarter as we continue to view current valuations as cheap compared to our assessment of their long-term fair value.
The fund's credit exposure continues to fall in the absence of new fixedrate issuances to participate in. We continue to look for opportunities to add to the fund's credit holdings.
The objective of the fund is to maximise income while securing a steady growth of capital. This is achieved by investing in a diversified portfolio of high-yield bonds in the South African market.
This fund is suitable for individuals that require a high level of income from their capital investment with relatively low risk.
Insider GOLD
