AAA rating awarded to Nedgroup Investments Prime Money Market Fund

Ian Ferguson, Head of Investments Cash Solutions at Nedgroup.

The Nedgroup Investments Prime Money Market Fund has become the only South African money market fund to be assigned a AAA(za)(f) national scale rating. The rating was issued last week by Global Credit Ratings (GCR).

The Nedgroup Investments Prime Money Market Fund is the latest addition to the Nedgroup Investments Cash Solutions range. The fund is only permitted to invest in rand denominated instruments with a high investment grade of A- or better, on an international scale and will include exposure to the likes of HSBC, Societe Generale, BNP Paribas, resulting in a portfolio of extremely high quality money market instruments.

Ian Ferguson, Head of Nedgroup Investments Cash Solutions says the fund was launched with conservative investors, of particular appeal to multi-national companies, Insurance companies, and risk averse investors in mind after it became clear that low-risk exposure via a single portfolio to a range of international banks and corporate paper would be very attractive for certain investors.

“The spate of downgrades experienced last year and remaining threats of further downgrades also highlighted the need for a money market fund that is not directly affected by downgrades to South Africa,” he says.

“A fund rating is essentially giving an investor an understanding of potential return volatility and underlying credit risk, while also assessing the quality of fund management processes. We are therefore very pleased that the rating of this fund signals the high-quality paper and risk benefits the fund offers,” says Ferguson.

Ferguson says Nedgroup Investments’ Best of Breed™ Fund Manager, Taquanta Asset Managers, is working with international banks to develop a market for high-quality paper issued by international banks and corporates in South Africa. “South Africa has a lot to gain from expanding our markets to include access to international entities operating within our borders. It is encouraging to see the calibre of the international banks and corporates that are establishing economic presence in the local economy and we believe that supporting and growing this market has many advantages,” he says.

While Taquanta has been including such paper in other Nedgroup Investments money market funds, the Nedgroup Investments Prime Money Market fund is unique as it comprises only paper issued by the qualifying international banks and corporates.

While the fund does yield marginally less than a typical money market fund, it still provides fixed-deposit type yields with same day liquidity, and comes with a far better credit quality due to the fact that its exposure is to international banks and corporates. Ferguson says this offers a useful alternative for corporate investors looking to put their money to work but without taking on the additional risk. “In a market where lessons about yield chasing have been learned the hard way, the risk adjusted yield on the Prime Money Market fund is extremely attractive,” concludes Ferguson.