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Sanlam Investment Management Active Income Fund Sanlam Investment Management Active Income Fund

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Sanlam Investment Management Active
Income Fund

When you rely on your investment to provide you with a regular, stable income you cannot afford to take on too much risk, but you need some share exposure for your income to keep up with inflation over time.

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Quick Facts About The Fund

Sanlam Investment Management (SIM) Active Income Fund

Launch Date: 03 Nov 2016
Fund Size: R5 457.9 million
Benchmark: STeFI+1% p.a.
Time Horizon: 3 – 5 years
Risk Profile: Conservative
Fund Classification: SA - Multi Asset - Income
Min Investment Amount: Lump sum: R5 000 | Monthly: R200
Total Expense Ratio (TER): 0.92%
Launch Date: 03 Nov 2016
Fund Size: R5 457.9 million
Benchmark: STeFI+1% p.a.
Time Horizon: 3 – 5 years
Risk Profile: Conservative
Fund Classification: SA - Multi Asset - Income
Min Investment Amount: Lump sum: R10 000 l Monthly: R500
Total Expense Ratio (TER): 0.92%

Fund Strategy

Returns are sought through tactical asset allocation and high conviction bets across the income-yielding universe, including corporate and government bonds, money market instruments, preference shares and listed property. Opportunities are taken across the entire duration and credit spectrum. The fund is mandated to invest in unlisted financial instruments (derivatives) for efficient portfolio management. This portfolio may also invest in participatory interests of underlying unit trust portfolios.


Illustrative Annualised Investment Performance

Performance

Annualised as at 30 Jun 2016 on a rolling monthly basis
Retail Class Fund (%) Benchmark (%)
1 year 8.19 8.03
3 year 7.51 7.31
5 year 7.18 7.22
Since inception 8.69 8.24

Annualised return is the weighted average compound growth rate over the period measured
Actual highest and lowest annual figures for rolling 10 years
Highest Annual % 14.27
Lowest Annual % 5.51

Minimum Disclosure Document (Fund Fact Sheet)

Illustrative Annualised Investment Performance

Sanlam Investment Management (SIM) Active Income
Sanlam Investment Management (SIM) Active Income          Benchmark

Source of graph : Morningstar

This graph illustrates how an investment of R100 would have grown had you invested in 2010 until 2016. Like everything in life, all investments can change and come with some degree of risk. That’s why we need this disclaimer, to tell you that past performances are not necessarily a guide to future performances, and that the value of investments/units/unit trusts may go down as well as up. The performance shown in the table above is a graphical representation of your selection (of the benchmark’s past performance of the fund you selected) – including your investment objective, risk profile and fund choice – and is based on the past performance of the fund in relation to your investment. This performance is indicative and not guaranteed. The graph is for illustrative purposes only and investment performance is calculated by taking into account initial fees and all ongoing fees that you have to pay and the income reinvested on the reinvestment date. The actual fund performance can be viewed on the Minimum Disclosure Document. The Manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate.

1. CAP Sett Acc SACTIV 2.09%
2. R209 RSA 6.25% 310336 1.99%
3. Investec F/R 310717 1.77%
4. Capitec Bank F/R 080816 1.47%
5. FirstRand F/R 051217 1.45%
6. R186 RSA 10.50% 211226 1.45%
7. FirstRand F/R 040917 1.32%
8. FirstRand F/R 020218 1.27%
9. Standard Bank F/R 110918 1.24%
10. Standard Bank F/R 01032017 1.19%
1. CAP Sett Acc SACTIV 2.09%
2. R209 RSA 6.25% 310336 1.99%
3. Investec F/R 310717 1.77%
4. Capitec Bank F/R 080816 1.47%
5. FirstRand F/R 051217 1.45%
6. R186 RSA 10.50% 211226 1.45%
7. FirstRand F/R 040917 1.32%
8. FirstRand F/R 020218 1.27%
9. Standard Bank F/R 110918 1.24%
10. Standard Bank F/R 01032017 1.19%
Cash And Money Market Assets
Inflation Linked Bonds
Property
Bonds 12+ years
Bonds 7 - 12 years
Bonds 3 - 7 years
Bonds 0 - 3 years

Philip Liebenberg

Head of Absolute Returns – Sanlam Investments

As Head of Absolute Returns Phillip currently manages all Sanlam Investments flexible income portfolios, including the Active Income Fund. He first joined Sanlam Investments in 2005 as Senior Quantitative Analyst in the fixed interest team and was responsible for quantitative analytics and specialist fixed interest portfolios.

Before joining Sanlam Investments, Philip worked at RisCura where his responsibilities included quantitative analysis and consulting to pension funds and asset managers. He also gained experience at Kagiso Asset Management as a Portfolio Manager. He started his working career at BHP Billiton as a Production Engineer.

Philip is a Chartered Financial Analyst (CFA) and holds B.Eng. and M.Eng degrees from Stellenbosch University, as well as a Ph.D. (Chemical Engineering) from the University of Melbourne.

Philip Liebenberg

As Head of Absolute Returns Phillip currently manages all Sanlam Investments flexible income portfolios, including the Active Income Fund. He first joined Sanlam Investments in 2005 as Senior Quantitative Analyst in the fixed interest team and was responsible for quantitative analytics and specialist fixed interest portfolios.

Before joining Sanlam Investments, Philip worked at RisCura where his responsibilities included quantitative analysis and consulting to pension funds and asset managers. He also gained experience at Kagiso Asset Management as a Portfolio Manager. He started his working career at BHP Billiton as a Production Engineer.

Philip is a Chartered Financial Analyst (CFA) and holds B.Eng. and M.Eng degrees from Stellenbosch University, as well as a Ph.D. (Chemical Engineering) from the University of Melbourne.

Traditional Investing (When you invest via a Financial Adviser or other)

  • A1-Class (%)
  • Advice initial fee (max.) 1.14
  • Manager initial fee 0.57
  • Advice annual fee (max.) 1.14
  • Manager annual fee 0.91
  • Total Expense Ratio (TER) 0.92

On 29 July the SIM Absolute Return Income Fund merged with the SIM Active Income Fund.

Sanlam Reality members may qualify for a discount on the Manager annual fee.

In April 2016 African Bank’s curatorship effectively ended. The old African Bank (ABIL) was split into a ‘good’ (ABK) and ‘bad’ (RDS) bank. 80% of all senior unsecured exposure to ABIL was rolled into instruments issued ABK, while a 10% cash repayment was received and 10% of nominal exposure remains in RDS. The ABK bonds will receive interest at the same rate as previous ABIL instruments and start to mature after a 2 year interest-only period. Recovery expectations w.r.t the 10% exposure in RDS is low at this stage, although recent results from African Bank were more positive than expected.

Total Expense Ratio (TER) | PERIOD: 1 July 2013 to 30 June 2016 Total Expense Ratio (TER) | 0.92% of the value of the Financial Product was incurred as expenses relating to the administration of the Financial Product. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER may not necessarily be an accurate indication of future TER’s.

Transaction Cost (TC) | 0.01% of the value of the Financial Product was incurred as costs relating to the buying and selling of the assets underlying the Financial Product. Transaction Costs are a necessary cost in administering the Financial Product and impacts Financial Product returns. It should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of Financial Product, the investment decisions of the investment manager and the TER.

Total Investment Charges (TER + TC) | 0.93% of the value of the Financial Product was incurred as costs relating to the investment of the Financial Product.

Income funds derive their income from interest-bearing instruments as defined. The yield is a current yield and is calculated daily.

The portfolio manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. This fund is also available via certain LISPS (Linked Investment Service Providers), which levy their own fees. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down

When you invest online

Traditionally, investment advice come with a fee of up to 1%. But our smart online system is working to make investing cheaper and more profitable for you. The management fee you do pay is based on the fund selected and calculated on your total contributions, and then applied to the overall value of your portfolio.

YOUR INVESTMENT WILL NOT CHARGE THE FOLLOWING FEES

  • No initial account set-up fees – usually charged at 1.14%.
  • No switching fees
  • No exit fees
  • No account changes fees
  • No rebalancing fees
  • No commissions
  • No debit order fees
  • No fund manager rebates

SO YOU’RE ONLY CHARGED THE RELEVANT FUND-MANAGEMENT FEE

  • Total Annual Fee: 1.0%

Sanlam Investment Management (SIM) is the local active asset management house within Sanlam Investments. When choosing a fund managed by us, you have on your side one of SA’s largest and most reputable, risk conscious investment teams, consistently meeting or exceeding our benchmarks. Sanlam Collective Investments has appointed SIM as the asset manager for its unit trust funds, catering for the full spectrum of risk profiles.

The big news for the quarter was the United Kingdom’s vote to leave the European Union (Brexit). The narrow vote to leave caught markets and ‘bookies’ offside and resulted in heightened volatility and a flight to perceived safe haven assets like the US dollar, yen, gold and developed market bonds. The biggest losers at this point in time seem to be the pound, UK property companies and banks. This event will have a marked effect on the UK’s growth prospects for the next few years with some knock-on effects for an already fragile Europe. Global markets recovered some of the losses, possibly pricing in looser monetary policy from central banks. It seems that investors have now conceded that we are in a low growth, low inflation environment. Overall the effectiveness of monetary policy has probably run its course for developed markets and at some point the burden will have to shift to the fiscal side to stimulate economic growth. In the meantime more and more developed market bonds are trading at negative yields. This, to some extent, confirms the notion that people are more concerned about return of capital than return on capital- safe haven assets are getting more expensive by the day.

The monetary policy committee (MPC) at the South African Reserve Bank (SARB) decided to keep the policy interest rate unchanged at 7.0% at the conclusion of the meeting held in May 2016. Inflation moderated a bit in the second quarter, but is still outside the upper limit (6%) of the bank’s target range. On the positive side, South Africa avoided a sovereign credit rating downgrade for now - the risk for a downgrade now shifts to December. The rand followed the ebb and flow of markets and was little changed over the quarter to close at R14.78/$.

The 10-year RSA bond yield decreased over the quarter to close at 8.78%. Not too long ago (end of 2015) it was trading at 9.69%. Fixed income assets had a good quarter with nominal bonds returning +4.4% and inflation-linked bonds +4.7%, while cash delivered +1.8%.

What we did

We used market volatility over the quarter to add longer-dated fixed rate negotiable certificates of deposit (NCDs) at levels close to a 10% yield. A weaker bias in bank funding spreads assisted in obtaining these at relatively attractive levels. Towards the end of the quarter we reduced the duration of the portfolios as bonds performed well against the backdrop of a generally stronger currency and a global shift toward bonds, including emerging market debt. South African government bonds traded below their pre ‘Nenegate’ levels for the first time this year. We still see select corporate credit opportunities, although corporate counterparties are trading slightly rich compared to the banks.

Our strategy

Compared to developed fixed income markets, South African investors do have something to smile about. Currently we have relatively high real rates with fixed income yields of between 7% and 10%, depending on term and credit risk. We believe that, given the heightened equity market volatility, slightly expensive equities and the murky global growth outlook, the local fixed income market does provide some rays of light for investors seeking diversification and income. We still view bonds as attractive with a real yield of about 3% and prefer this asset class over property and inflation-linked bonds.

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A professional financial adviser is an invaluable aid along your savings journey.

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