Daily Equity Report
Newsflash - The Seed Income Fund
This week it is my pleasure to introduce you to our recently launched fund – The Seed Income Fund. As with most of our unit trusts this is a multi-managed fund with 3rd party specialists managing segregated mandates. Seed is responsible for the selection of the strategies as well as the managers.
• Launch date: 19 June 2015
• Current size: R 141 million
• Portfolio Managers: Ian de Lange & Mike Browne
• ASISA Category: SA Multi Asset Income
• Benchmark: STEFI Call + 1% pa
The Seed Income Fund aims to maximise income and achieve a higher total return than traditional money market funds. Currently we have allocated 40% to Atlantic Asset Management and 60% to Prescient. The Atlantic benchmark is STEFI Call + 2% over rolling 12 month periods, and this portfolio will consist of rand denominated money market instruments only. The Prescient benchmark is110% of the STEFI Call rate and this portfolio can consist of fixed and variable rate instruments, listed real estate, equities, preference shares as well as derivatives.
The current asset allocation of the two mandates, as well as of the combined fund on a see-through basis, can be seen on the graph below:
A significant portion (55%) of the Seed Income Fund is invested into JIBAR (Johannesburg Interbank Average Rate) Linked floating rate notes. These notes are issued by banks, parastatals and corporates, and pay an annual coupon rate that is based on a spread (margin) above JIBAR. For example, a note issued by Standard Bank, with Anglo American as the underlying entity, yields a spread of 190 points above JIBAR, resulting in a total yield of 6.3% + 1.9% = 8.2%. Spreads will generally be the lowest for our big four banks, where the risk of default is very low.
The fund is a Regulation 28 compliant Fund and is suitable for investments in retirement funds. The net equity weighting (including international equity) will never exceed 10% of the Fund’s market value.
As can be seen below, the current issuer exposure is mostly towards our local banks which is in line with the low risk allocation of this fund:
Who should invest?
Some wealth managers make use of income funds to maximise returns for their clients by using the income fund as the portfolio’s bank and/or cash account. Any withdrawals, be it a once off or a monthly withdrawal like in a living annuity, would be from this account only. This would ensure that higher return generating allocations would not be reduced and returns can be maximised.
Another great example of where these funds are utilised is in the years just prior to retirement. In these years, risk of losing capital is highest and it is crucial to be invested in funds that protect your hard earned savings of the last 20 – 30 years just prior to retiring.
With the current uncertain market conditions, the biggest risk to investors is that of permanently losing capital. In the old days, methods used to prevent capital loss included buying physical gold or taking your cash and stashing it underneath your bed. These days we can properly maximise returns and reduce risk by being invested into funds that will protect capital even in massive market corrections.
At Seed we strive to not only provide you with superior returns but we take great care in properly assessing all risk and reducing it as best we can. If you would like to invest into this fund or find out more about our fund range, you can contact us directly at 021 914 4966 or speak to your financial advisor.
Tel +27 21 914 4966
Fax +27 21 914 4912
Seed is hiring: Click through to our LinkedIn profiles to see vacancies at Seed Investment Consultants and Seed Analytics
Tue, 25 Aug 2015- 17:12