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The fund is intended to be a safe vehicle for conservative investors who are looking to earn more than they do from money-market funds.
It is ideal for the investor looking for safety, security and a little bit of an extra return from their low-risk investments.
“Furthermore, this type of cash investment is in a sweet spot at the moment in the South African economy and investment landscape,” says Albert Botha, head of fixed income portfolio management at Ashburton Investments.
“With the low inflation expectations in South Africa, this fund will give you worthwhile returns above inflation for the next 18 to 24 months.”
According to Botha, the fund is appropriate for both short-term parking of capital and long-term conservative investing.
“This fund is for everyone, whether you are looking for a safe space to park your money, a conservative investment option as part of a larger portfolio, or even if
you are a corporate treasurer looking for a highly liquid alternative to bank deposits,” he says.
It differs from a money-market fund in that the investment manager is able to put money in income-generating instruments that have a slightly longer maturity than a traditional money-market fund.
Such funds are limited to providing debt to banks and corporations for 13 months or less and in the sense that their average debt term may not be longer than 120 days.
The Stable Income Fund does not have this restriction, however, and is allowed longer-term instruments.
As a result, the average debt term is three years, he explains.
Ashburton believes that the investment environment is primarily driven by large global macro forces, he says.
Whether it is interest rates, inflation or the local currency, the primary factors driving their valuations are long-term in nature and driven by global forces.
“Understanding these global drives helps steer our investments into everything from cash to bonds and equities,” Botha says.
Why finweek would consider adding it:
The fund, previously named the Atlantic BCI Stable Income Fund, was named Best South African Interest-Bearing Short-Term Fund on a risk-adjusted basis at the Raging Bull Awards earlier this year – for the second consecutive year.
The fund is designed to provide investors with increased yield compared to money-market funds, while at the same time retaining as many of the desirable qualities of money-market funds as possible.
It invests in securities that have a stable pay-off profile, and historically this has allowed it to maintain its stability regardless of shocks or shifts in the economy or exchange rates.
This is apparently in the Stable Income Fund’s track record – the fund has not had a negative month for more than seven years. It has also outperformed its benchmark over one-, three- and five-year periods.
This article originally appeared in the 12 April edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
