Nedgroup Investments Stable Fund: Performance update 22nd September 2017
Foord has delivered excellent long-term performance for our clients since inception in 2007. Despite the disappointing returns in 2016 (where the fund underperformed the peer group due to the strengthening rand, positive Emerging Market sentiment and macro events such as Brexit) the fund continues to be amongst the top performers in the category since launch. The 3 year annualised return has also improved to 7.5% p.a. (ahead of the peer group of 6.5% p.a.).
Through 2017 the Fund has produced a strong return of 8.5% against the peer group of 6.7%, taking the fund’s 1-year return to 7.6% versus the peer group of 6.5%. This is also favourable when compared to current cash yields of 6.5% and inflation of 4.8%.
Capital preservation remains the primary focus. We believe investors will be able to maintain real levels of capital in the short term through a higher allocation to quality businesses locally, cash, shorter duration bonds, and a full allocation to offshore, mostly invested in global equities, in sectors where the earnings growth outlook is in excess of global GDP growth.
Foreign assets are maintained at maximum mandated limits – the increased volatility should present some attractive buying opportunities, specifically in companies which have been identified as having sound long-term growth prospects.
The exposure to the listed property sector remains significantly underweight – the yields on most listed property companies remain unattractive given the deteriorating sector fundamentals.
The bond component of the portfolio remains conservatively positioned. The overall duration of the portfolio still remains relatively short. Foord is currently able to achieve higher yields in a lower inflation environment compared to December 2016 and has locked in favourable deposit rates over the next 3-12 months. Although not a duration call, Foord have also increased longer-dated government debt due to the good running yield of greater than 9%.
Credit exposure is mostly through bank notes and high-quality corporate Floating Rate Notes with some attractive investments made in high credit quality medium-term fixed rate bonds.
The high SA cash component is retained – reflecting the cautious stance and capital preservation focus in the uncertain investment environment.