UNIT TRUSTS:Sanlam Income FundThis fund is in the high-income sector. It has 906 unitholders and assets under management of R211.4-million. Launched in March 1993, it is managed by Kobus Louw for Sanlam Asset Management
OBJECTIVE: To generate a stable quarterly income and to preserve and/or grow capital as the interest cycles makes it prudently possible. This trust invests only in interest-bearing instruments such as government and semi-government stock, debentures and bank deposits according to the Association of Unit Trust's regulations.
TARGET MARKET: The conservative investor with a low risk tolerance who needs a more regular and higher income than is generally offered by equity unit trusts.
CHARGES (incl VAT): Compulsory: 0.05%. Initial: 1.66% (on a sliding scale). Annual service fee: 0.85%.
MINIMUM INVESTMENT: Lump sum: R5 000; monthly: R500.
PAST PERFORMANCE (per Micropal):
JSE all-bond index: 21.8% (figure supplied by Sanlam)
Sector average: 56.3%
Performance is calculated on a buy-to-sell basis with income reinvested.
PAST TWO INCOME DISTRIBUTIONS: September 1997: 3.3c. December 1997: 3.3c.
MATURITY SPREAD: The pie chart depicts the fund's maturity spread. Unlike equity unit trust funds the investments of high-income funds have a maturity date. The longer the period of investment, the greater the fund's volatility, so the risk profile of the fund can, to an extent, be assessed from its maturity spread. The higher the cash content, the lower the risk (but this can also indicate an under-performing fund), and the higher the exposure to long bonds, the more risky the fund.
TOLL-FREE: 0800 220 567
ABOUT THE FUND MANAGER
QUALIFICATIONS: BSc Hon; MBA
EXPERIENCE: Joined Sanlam's actuarial department in 1974. Two years later he was transferred to the investment division as an equity analyst. For the past 10 years he has been actively involved in the fixed-interest market as portfolio manager. Has managed the fund since inception.
INVESTMENT ATTITUDE: Our investment philosophy is based on quality economic research and active management of the portfolio. The fund is actively and prudently managed to obtain capital growth when interest rates are declining and to preserve capital when the interest rate cycle is moving up.
VIEW ON PAST PERFORMANCE: The fund has a proven track record of consistently achieving superior returns at a very low volatility. This fund is the top performer over one and two years and second over three years in its category.
THE FUTURE: Interest rates have declined by more than 3.5 percentage points in line with a similar drop in the inflation rate. The expected decline of at least one percentage point in the prime interest rate should benefit the short end of the yield curve. At levels below 13% on the long rates we are shortening the duration of the portfolio to preserve our clients' capital while earning superior returns.
This fund made history in South Africa and created an interesting precedent by compensating investors when the fund manager got it wrong. For 1994 the fund had recorded a negative return because in its aggressive approach Sanlam had utilised longer-term bonds when the interest rates moved up. Investors suffered a capital loss. Because the fund had been sold as a "safe" investment, Sanlam settled investors' losses. Although the fund is managed with an average duration of less than two years, it is positioned at the more aggressive end of the scale. It has in excess of 33% of the portfolio in instruments with a duration of longer than three years. The fund has performed consistently with a moderate level of risk and volatility. Volatility has, however, decreased over the short term.
Lucienne Fild 3/98