NAV on 2019/11/20
|NAV on 2019/11/19
|52 week high on 2019/06/27
|52 week low on 2019/01/02
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
STANLIB Collective Investments (RF) Limited
South African--Interest Bearing--Short Term
BEASSA 1 to 3 year Bond Index
Standard Bank Fundisa comment - Sep 19
The three-month JIBAR rate decreased from 7.025% to 6.792% at the end of Q3 2019 after the South African Reserve Bank (SARB) cut interest rates by 0.25%. The Forward Rate Agreement (FRA) curve is pricing in further rate cuts in the near future. The fund size marginally increased by R4 million to R218 million during the third quarter.
Ongoing global trade tensions continued to affect confidence negatively in Q3 2019, putting further strain on emerging market assets. The rand was on the back foot, losing about 6% against the dollar, while the 10-year benchmark government bond was almost 20 basis points weaker at the end of the quarter. The global backdrop still remains supportive for emerging market bonds due to an increasing number of negative-yielding bonds in developed markets and lower-trending inflation globally. The US Federal Reserve cut interest rates for the first time since the financial crisis, indicating that these are midcycle cuts to provide “insurance” against weaker growth rather than a longer-term policy change. The Fed’s cuts have encouraged emerging market central banks, including the SARB, which are facing declining inflation and slowing growth, to follow suit. This provides further support for emerging market yields to perform well despite the volatility driven by the US/China trade war. SA’s headline inflation moderated to a low of 4% y/y in the quarter, and is expected to average 4.2% for the year. The SA government issued a eurobond that was over-subscribed, raising $5 billion instead of the $4 billion that was planned initially. This will go a long way towards improving the government’s funding requirements ahead of the MTBPS late in October. There has been some compression in the yield curve as the government is not considering any more switch auctions for this calendar year, which eases pressure in the ultra-long end of the curve with issuances. At a conference held in SA in September, Moody’s stated that SA’s fiscal deterioration over the past decade has been in line with the median Baa3 countries. This improves SA’s prospects of avoiding a downgrade, with the worst-case scenario being an outlook change from stable to negative. Moody’s sees the structure of SA’s debt as having lower refinancing risk than its peers. The South African CDS spread is trading wider than comparable peers that are already in junk territory, meaning that the markets have already priced in a downgrade to junk status. A reprieve by Moody’s would give SA an opportunity to produce a credible economic restructuring plan to deal with its persistent fiscal slippage and stimulate economic growth prospects. If there is no downgrade, this will be positive for the bond market.
With survey data in the US and eurozone continuing to indicate a slowdown in growth, coupled with dim growth prospects locally and inflation firmly inside the target range, local bonds are still expected to offer attractive returns given their compelling real yields in comparison to peers. The wider currency and credit risk premiums built into bond prices are expected to gradually unwind after the October MTBPS and Moody’s rating announcements. Globally, the ECB will resume its open-ended quantitative easing programme in the fourth quarter and the Fed is expected to continue cutting interest rates to manage the slowdown in the US economy. This leaves room for the SARB to cut rates in November.
The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.
The Standard Bank Fundisa Fund shall be a feeder fund portfolio.
The investment objective of the Standard Bank Fundisa Fund is to achieve an investment medium for investors, which shall have as its primary objectives a reasonable level of current income and the maximum preservation of capital invested.
Apart from assets in liquid form, the underlying assets will consist solely of participatory interests in a single portfolio of a collective investment scheme located in the Republic of South Africa and approved by the Registrar, namely the Central Fundisa Fund managed by STANLIB Collective Investments Ltd. The underlying assets of this last mentioned portfolio will consist apart from assets in liquid form, solely of participatory interests of collective investment schemes of fixed-interest income orientated portfolios of collective investment schemes registered in Republic of South Africa as permitted in terms of the hosting agreement with the Association of Collective Investments ('ACI'), the 'Fundisa Fund' trademark holder or any other association that may replace the ACI and who is the legal owner of the 'Fundisa Fund' trademark.
For the purpose of the Standard Bank Fundisa Fund, the manager shall reserve the right to close the portfolio to new investors on a date determined by the manager. This will be done to enable the manager to administer the portfolio in accordance with its mandate. The manager may in its discretion, open the portfolio again to new investors on a date determined by the manager.
The trustee shall ensure that the investment policy set out in the supplemental deed is carried out.