Philip Liebenberg, head of Absolute Return at Sanlam Investment Management.
In an era of volatility and uncertainty, the world of investing often resembles a labyrinth of indecision and changing goal posts. Even the most focused investors can find themselves caught up in external noise and emotion, resulting in them questioning their investment choices.
During periods of volatility, investors need to be able to depend on funds that have proven their ability to reduce drawdowns and potential capital loss. Volatility therefore requires effective tactical asset allocation. The Sanlam Investment Management (SIM) Inflation Plus Fund meets this need.
Focused on protecting capital
The SIM Inflation Plus Fund falls under SIM’s Absolute Return strategy. The Absolute Return strategy at SIM is designed to offer explicit capital protection through the application of derivative strategies, enhancing the implicit capital protection of diversifying across asset classes.
Historically the market has gone through cycles when growth outperformed, but also periods when value outperformed. Risk-conscious investors that prefer consistency and a level of stability have a poor investment experience across changing market cycles if they choose a fund that does not meet their risk profile and desired investment outlook. The SIM Inflation Plus Fund provides a possible solution for investors that want consistency during and through changing markets. It has proven its ability to deliver a stable return profile, regardless of volatility and fluctuating market cycles. For example, the minimum 12-month return for the Fund has been 1.81% over the past 10 years (and the maximum has been 13.41%). Therefore, no one investing in the fund at any point over the past 10 years and staying invested for at least 12 months would have experienced a negative return over any 12-month period.
Stability through different cycles
The graph below illustrates that irrespective of which investment style is doing well, the SIM Inflation Plus Fund is designed to deliver a consistent level of return. Note we are not comparing the return of the Fund to that of the equity indices, but rather highlighting the stability of the level of return regardless of whether value or growth markets are trending.
Volatility is minimal compared to peers
When managing the SIM Inflation Plus Fund, the portfolio managers follow a risk-conscious approach and therefore the Fund is able to provide competitive downside protection and defends well during market weakness relative to most peers within the ASISA Multi Asset Low Equity category. Volatility is kept at a minimum by focusing on the risk/return budget of every single asset class.
Over time certainty increases
The graph below shows the range of returns experienced in the ASISA Multi Asset Low Equity category over the stated investment periods. Over shorter periods of time the returns within the category have a much wider range. However, as we increase the investment period (i.e. moving towards the right) the funnel starts to close in, approaching the ‘average return’ area. The returns of the Fund become more certain or less variable as we increase the investment period.
If we plot the SIM Inflation Plus Fund graph on the same axis we see that relative to the category, the minimum point of the range of returns that you could experience while investing in the Fund is consistently above that of the category minimum. Similarly the maximum and average returns that the Fund has historically given are also above that of the category.
At Sanlam Investment Management we believe the journey of your return experience is important. We understand that there will be times of market uncertainty and volatility – the SIM Inflation Plus Fund is designed and managed to give investors a level of stability during those times.
The stability of the fund is independently recognised
The Morningstar Awards have recognised the stability of the SIM Inflation Plus Fund by including the Fund in its shortlist of only two finalists in the Best Cautious Allocation Fund category. What makes this achievement even more remarkable is that it’s the only fund out of the qualifying universe of 83 funds to be nominated as a finalist in this category in both 2016 and 2017. With these awards, Morningstar honours funds that added the most value for investors against their peer group. The one-, three- and five-year returns of all eligible funds are adjusted for downside-biased risk to award funds that protect the capital of investors. Says portfolio manager Philip Liebenberg, ‘Capital protection is a key objective of the fund and it is gratifying to be recognised by the industry for our ability to differentiate ourselves in that respect.’
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