Category Investments

Flexibility critical to maximise income investing

25 May 2022 Sanlam Collective Investments

New flexible income fund launched by Sanlam Investment Management

South African bonds are currently offering uniquely attractive opportunities for investors seeking an income from their portfolios. Local government bonds have the benefit of being more than many other asset classes, while at the same time they offer an inflation-beating return potential. A flexible fund with a healthy exposure to local bonds can take advantage of this opportunity, with the added benefit of including some exposure to international assets offering further diversification and risk-adjusted return benefits. The flexibility of being able to move capital on and offshore – thus taking advantage of potential currency weakness in addition to the correlation effects between our currency moves and local bond yields – this offers a very solid option for an income investor.

Sanlam Investment Management has recently bolstered its flagship range of funds with the addition of the SIM* Flexible Income Fund, a retail unit trust targeted at investors with a one- to two-year time horizon. The fund opened to investors from 1 April 2022.

Melville du Plessis, portfolio manager for the SIM* Flexible Income Fund, says, “A more flexible income fund offers more diversification benefits to clients and, as a result, the potential for better overall long-term results. Locking yourself into fixed deposits, for example, can be very inflexible, with little options of taking advantage of market opportunities through asset reallocation down the line. The last few months have shown how dramatically things can change with associated asset allocation changes which can be made. Being able to fully take advantage of these opportunities is an exciting proposition for clients.”

Du Plessis explains that the multi-asset income fund seeks returns through tactical asset allocation and high conviction bets across the income-yielding universe. “We are able to invest in assets with a large investable universe to select from. This includes everything as stipulated in the ASISA South African – Multi Asset – Income category guidelines, including government and corporate bonds, money market instruments, preference shares, convertible securities, listed property, equity exposure as well as international assets.”

He said that local bonds have delivered good performance over the past few years, despite the volatile financial market and economic environment. However, the valuations still look particularly attractive and they still feature quite strongly in the portfolio holdings. “However, we have the flexibility to change this at a moment’s notice, should things change materially, while the allocation to attractively priced local assets are optimised with the blend of international assets which offer diversification benefits and act as a natural hedge or ‘shock absorber’ for when the unexpected happens – which seems to be the case more frequently these days.”

Du Plessis adds that investment decisions on the fund will be made by in line with all other Funds in the core range of funds. The fund will also be managed with the firm’s ‘Pragmatic Value’ investment philosophy, while benefiting from the vast benefits associated with the SIM* fixed interest processes and the entire fixed interest team. In addition, we are supported by the comprehensive credit capabilities of the Sanlam Group and also our desk dealing team. With their research and input, the economics team also brings a massive amount of value.

The new fund can be accessed as a tax-free investment and has a competitive management fee. Click here for more information.

*SIM stands for Sanlam Investment Management

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