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Cape Town - Foord Compass [JSE:FCPD], the debenture-based investment company, has markedly reduced its exposure to local equities to take a cautious stance at mid-year.
Results released by Foord Compass on Monday night showed the portfolio's local equity holdings reducing from 53% at the end of December to just 35% at the end of June 2010.
Foord Compass chairperson Mark Hodges said cash holdings had been increased, with the company cautious on investment prospects for the next six months.
He said the possibility of a double-dip recession remained, as previous economic stimulatory measures were reduced and some governments were forced to adopt strict austerity plans for their economies.
Hodges said that while short-term interest rates were unlikely to rise in the next six months, Foord Compass expected increased dividends from the investment portfolio to help preserve the final distribution at year-end.
Foord Compass paid an interim distribution of 21 cents per debenture – almost half the previous interim period's distribution of 39c/debenture.
While the local equity positioned was cut, Foord Compass interestingly did increase its exposure to foreign equities from 24% to 27%. That meant the total equity holding at the end of June was 62% from 77% at the end of 2009.
The balance of the portfolio was held 12% in property, 26% corporate debt, 2% commodities and 48% cash (the bulk of which was held domestically).
While the positions total more than 100%, it should be pointed out that Foord Compass also retained a hefty short position in government bonds (-50%).
For the interim period the net asset value (NAV) of Foord Compass' portfolio increased from 713c/debenture to 723.5c/debenture (on a cum-interest basis).
This yielded a modest return on the debentures of 1.5% for the period on a NAV basis.
Hodges said lower share prices, lower dividends and lower interest rates all contributed to the low return earned by debentures in the first half of 2010.
He said the investment focus moved to capital preservation in the second quarter as markets declined.
"The risk diversification provided by actively managing the portfolio's asset allocation was again helpful in preserving capital, with a positive contribution from equities more than offsetting the negative contribution from the short SA bond position."
- Fin24.com
*The author is a Foord Compass debenture holder.
Results released by Foord Compass on Monday night showed the portfolio's local equity holdings reducing from 53% at the end of December to just 35% at the end of June 2010.
Foord Compass chairperson Mark Hodges said cash holdings had been increased, with the company cautious on investment prospects for the next six months.
He said the possibility of a double-dip recession remained, as previous economic stimulatory measures were reduced and some governments were forced to adopt strict austerity plans for their economies.
Hodges said that while short-term interest rates were unlikely to rise in the next six months, Foord Compass expected increased dividends from the investment portfolio to help preserve the final distribution at year-end.
Foord Compass paid an interim distribution of 21 cents per debenture – almost half the previous interim period's distribution of 39c/debenture.
While the local equity positioned was cut, Foord Compass interestingly did increase its exposure to foreign equities from 24% to 27%. That meant the total equity holding at the end of June was 62% from 77% at the end of 2009.
The balance of the portfolio was held 12% in property, 26% corporate debt, 2% commodities and 48% cash (the bulk of which was held domestically).
While the positions total more than 100%, it should be pointed out that Foord Compass also retained a hefty short position in government bonds (-50%).
For the interim period the net asset value (NAV) of Foord Compass' portfolio increased from 713c/debenture to 723.5c/debenture (on a cum-interest basis).
This yielded a modest return on the debentures of 1.5% for the period on a NAV basis.
Hodges said lower share prices, lower dividends and lower interest rates all contributed to the low return earned by debentures in the first half of 2010.
He said the investment focus moved to capital preservation in the second quarter as markets declined.
"The risk diversification provided by actively managing the portfolio's asset allocation was again helpful in preserving capital, with a positive contribution from equities more than offsetting the negative contribution from the short SA bond position."
- Fin24.com
*The author is a Foord Compass debenture holder.
