Old Mutual High Yield Opportunity Fund investors in for a windfall
23 July 2009 | Investments | General | Old Mutual
Investors in the Old Mutual High Yield Opportunity Fund are in for a windfall after the managers of this unit trust – Value Equity Investments, a boutique in Old Mutual Investment Group (SA) – announced a 53% increase in its distribution in July compared to December 2008. “This is obviously great news for our investors in these rather challenging times where corporate profits are under pressure and many companies are passing dividends in order to preserve cash and protect their balance sheets,” says Portfolio Manager Feroz Basa.
“By focusing on those sectors in the market where yields are high, we managed to achieve a large distribution increase and, at the same time, preserve value for our investors. Although the FTSE/JSE All Share Index lost 24.2% of its value over the past 12 months to June, the Fund was virtually steady with a return of -1.4%. The Fund was ranked an impressive fourth out of 70 SA General Equity unit trusts funds during this period.”*
The Fund has large holdings in food retailers, furniture retailers and banks, and has invested heavily in selected life assurers. “We caught the tail end of the resources boom, particularly in iron ore, where we were able to increase our exposure after the shares had fallen,” explains Basa. “But as we expected, the higher dividends were still forthcoming. We also managed to exit platinum shares before their decline. They had been high-yielders previously, but are now consuming capital.
“In addition, there has been a seasonal influence on this distribution: Some of our holdings, such as Altron and Datatec, are high dividend-yielders but only pay out once a year, and July includes these payments. And we also had a small once-off benefit from the Telkom unbundling. As a result, we do expect that the January 2010 distribution will probably be somewhat smaller. However, this should still represent an increase on a rolling 12-month basis.”
Mike Schroder, Head of Old Mutual Value Equity Investments, adds: “The High Yield Opportunity Fund is a shining example of the power of dividends. Investors who put R100 into this fund at its launch in November 1998 (about 10 years ago) have already received R163 back in distributions. Their annual yield on this initial investment is close to 33% at this stage, which is tax free. In addition, the value of the investment has grown to R473 (at the closing price of 30 June 2009). The long-term total returns of this fund are outstanding, placing it third of all SA General Equity unit trust funds over 10 years.”*
* Source: Morningstar
