Top quartile performance by Futuregrowth’s money market fund

Futuregrowth Money Market Fund, a leading performer in the hotly contested institutional money markets space, notched up returns of 9.85% for the 12 months to 31 October 2007, outperforming the Short Term Fixed Interest benchmark (SteFi) by more than 80 basis points.

In first position over three years and five years in the latest SA Money Market Manager Watch Survey produced by Alexander Forbes, the Futuregrowth fund was ranked fourth for the 12-month period.

In the past five years it has consistently had top quartile performance, remaining one of the top-performing money market funds in the country.

Futuregrowth portfolio manager Daphne Botha said that over a one-year period as much as 58 basis points separated the top fund from the worst performing fund in the sector, compared to only 8 basis points over a one-month period. “Over the longer term the difference in performance is more meaningful. This is why it is important that retirement fund investors focus on long-term consistency of performance,” she said.

The investment process had two key value-added areas, interest rate risk management and asset selection.

“In terms of interest rate risk management, the strategy of this fund is to invest in short dated paper with a focus on assets with a term of three months or less to ensure that the interest rate risk remains low. However, when the appropriate opportunities present themselves, we do invest in longer dated assets.”

Asset selection is a key ingredient in the investment process and to this end the fund leverages off the credit process within Futuregrowth’s fixed interest team.

“Diversification in terms of instruments and issuers is important in reducing the credit risk to a particular issuer in the fund,” said Botha. “We also try and ensure that we earn yields in excess of the relevant JIBAR* rates.”

She said the fund was fully invested at all times in high-yielding money market instruments.

“That being said, we need to ensure that the assets in the portfolio are very liquid, so that they can be converted to cash without material market impact or impact on the fund.”