METAM scoops award for top bond fund

Metropolitan Asset Managers scooped Raging Bull Awards for the Metropolitan Gilt Portfolio for performance that is likely to confound many pundits and also for overall best domestic fixed interest fund. While the BEASSA All Bond Index - the benchmark for domestic bond funds—struggled yielding a negative 1,28% (over the past three years), theMetropolitanGilt Portfolio yielded an annual return of 9,63%—proving many analysts wrong about the bond market's attractiveness.

Deon van Zyl, manager of the Metropolitan Gilt Portfolio, says while the bond market has experienced volatility analogous with the equities in recent times, bonds will perform well within a global deflationary context. While slow off the mark, the Reserve Bank's monetary policy has fallen in line with global trends after rates were cut last December, the first cut since 2006.Metropolitan Asset Managers anticipates that this was only the start of the downward cycle and expects the Reserve Bank to cut rates by 250 to 300 basis points this year.Bond funds had a particularly good run last year—with an average return of 15.91% for the year to the end of December 2008, while the Metropolitan Gilt Portfolio earned 18,53%.

Van Zyl says longer-dated bonds performed particularly well when the Reserve Bank cut interest rates in December, surprising many analysts who had expected that the first rate cut would only occur early this year. Metropolitan Asset Managersanticipated the December rate cut and had already taken a sizeable position in the longer-dated bonds. Van Zyl believes that longer-dated bonds (with maturity terms longer than 12 years) look particularly attractive and willbenefitfrom further anticipated rate cuts.At the end of December last year, about one-third of the Metropolitan Gilt Portfolio was invested in these bonds, while slightly more than a thirdof the fund was invested in bonds with three to seven-year maturity terms.

Deon has 27 years of investment experience. He joined Metropolitan Life in 1982 as a dealer in the money and capital markets and is currently responsible for the fixed interest portions of all portfolios. He heads the fixed interest team and is the portfolio manager of the Metropolitan Gilt Portfolio, Metropolitan Income Portfolio, Metropolitan Inflation-Linked Bond Portfolio as well as the Metropolitan Money Market Portfolio.