Low fees, step-up instruments enable RE:CM monet market fund to outperform benchmark

A combination of a high volatility and low interest rate environment means it has become increasingly challenging for investors to earn satisfactory returns, while still ensuring the preservation of capital.

One such fund that has managed to deliver on these requirements is the RE:CM Money Market Fund, which aims to preserve capital, provide overnight liquidity and generate a yield in excess of the STeFI call rate.

According to Piet Viljoen, who manages the fund, low fees and better yielding step-up instruments are two reasons why the RE:CM Money Market Fund currently generates a yield of 5.5% versus a STeFI Daily Call yield of 5.3%. However, Viljoen, says that the high yield has not been earned by investing in risky instruments or counterparties. “We remain committed to our mandate of investing in high quality counterparties.”

He says the Fund has recently benefited from the decision to increase its investment in fixed instruments prior to the decline in money market rates. This has resulted in the fund having a weighted average duration of 73 days. The Fund now has a 50% split in floating rate and fixed rate instruments. “While rates have declined materially, we continue to see value in the step-up instruments. Step-up instruments provide good value over the long term, compared to the current flattening money market yield curve.”

He adds that the Fund is currently positioned to generate incremental interest income over the next 12 months.

RE:CM’s Money Market Fund fees also compares favourably to other similar funds with the lowest in the industry at 15 basis points (bps) annually, while other Money Market funds typically charge around 25bps, some even higher at 35bps.

TER is 0.19%.

There is no performance fee