Top Fitch ratings for STANLIB's Standard Corporate Money Market Fund

STANLIB’S Standard Corporate Money Market Fund has been awarded ‘AAA’ credit and ‘V1’ volatility ratings from international rating agency Fitch Ratings.

René Levy, STANLIB Head of Cash Solutions says these ratings are based on an independent evaluation by Fitch of several factors such as credit quality, asset diversification, management strength and operational capabilities. “Funds with the AAA/V1 rating have the lowest credit risk and the combination of these two ratings reflects our high credit quality standards, investment strategies and security of the principal amount relative to similar local funds.”

Levy says that STANLIB chose to apply for the voluntary rating as it is evident that clients are becoming more conscious of managing their investment risks and in turn require a high level of security. “Institutions are increasingly applying more stringent criteria to their investments, whether these are self-imposed as part of internal governance or by specific industry regulations. Multinationals are particularly concerned with fund ratings when considering their investment options. The AAA rating provides clients with a high level of comfort around the security of their investment.”

This conservative risk fixed interest fund is managed by Ansie van Rensburg, STANLIB Head of Money Market, who has 23 years of industry experience, and funds under management now sit at R7.6 billion.

The primary performance objective of the fund is to obtain as high a level of current interest as is consistent with capital preservation and liquidity. Capital gains - as opposed to capital preservation - are of secondary importance.

The Corporate Money Market Fund is ideally suited to companies wanting to house operating cash over the short-term that can be accessed within 24 hours if required. It is a unit trust, regulated by the SA Financial Services Board and the Collective Investment Schemes Control Act (CISCA).

Launched on 1 March 2003, The Standard Bank Corporate Money Market Fund was created in response to client demand for dynamic cash management with a conservative bias. It is designed for clients who traditionally hold large cash balances, but who wish to remain liquid for operational reasons. Clients benefit from wholesale cash management rates at competitive fees.

The Standard Bank Corporate Money Market Fund invests predominantly in the major South African Registered Banking institutions and has Rand exposures to the SA branches of foreign banking institutions authorised to conduct business in South Africa, and which additionally have appropriately sound credit ratings. Quality counterparties are the big five SA banks and offshore banks with AA ratings that have branches in SA.

The portfolio comprises local negotiable certificates of deposit, promissory notes and fixed deposits, with these underlying instruments being of 90-days maximum average duration. Institutional exposure at present is weighted towards Absa, Nedbank, Investec, Standard, First Rand and Deutsche.

South African registered institutions must have at least a national short-term credit rating that is defined as “highest credit quality” (being Fitch F1/A). Authorised Foreign Banks are evaluated against their international credit ratings or a national rating consistent with that applied to South African institutions and are required to have a short-term credit rating equivalent to or better than an A1. If any instrument is rated by more than one approved credit rating institution, the lower of the ratings will apply. The fund has no derivative or foreign (direct or indirect) currency exposures and exposure to a single issuer does not exceed 10%, well within the 30% rating limit.

Another recent coup for this fund is that the SA Money Market Manager Watch Survey, which measures funds aimed at the institutional and corporate markets, revealed the fund was top performer in the 90 day instrument category for May 2008. The fund returned 1% for May, beating the STeFI benchmark - the short term fixed interest rate index - which came in at 0.92%. It was also top performer for the three month quarter March to May 2008 with a return of 2.94% versus the benchmark of 2.71%. Year-to-date and for the 12 month period to May, it ranks second.

Van Rensburg says it is challenging to achieve and then to maintain a competitive edge in this conservative asset class where returns are in a narrow band and just a few basis points set the various funds apart.