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Sanlam Investment Management
Inflation Plus Fund

There are many things that can affect the economy. And if you’re a cautious investor who still wants bold results, you need an investment fund that can stay the course, no matter what happens.

The Sanlam Investment Management Inflation Plus Fund is a multi asset low equity fund which aims to deliver smooth, positive real returns (adjusted for inflation) targeting CPI +4% over a rolling 3-year period. This Fund is best suited to investors with a medium-term investment horizon (3-5 yrs) who require capital stability and real income growth. For more information contact your financial adviser or broker.

Quick Facts About The Fund

Sanlam Investment Management (SIM) Inflation Plus Fund

Launch Date: 01 April 1999
Fund Size: R13 455.8 million
Benchmark: CPI + 4% over a rolling 3 year period
Time Horizon: 3 years
Risk Profile: Cautious
Fund Classification: SA – Multi Asset – Low Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 1.25%
Launch Date: 01 April 1999
Fund Size:
Benchmark: CPI + 4% over a rolling 3 year period
Time Horizon: 3 years
Risk Profile: Cautious
Fund Classification: SA – Multi Asset – Low Equity
Min Investment Amount: Lump sum: R10 000 | Monthly: R500
Total Expense Ratio (TER): 1.25%

Fund Strategy

This actively managed fund is a combination of investments in equity, bonds, money market instruments and listed property both locally and abroad. It can invest 25% offshore, while equity exposure is limited to 40%. This Fund uses derivatives to protect capital. The Fund aims to outperform inflation by a margin of 4% (after annual service fees) over any rolling 3 year period, while also aiming to prevent capital loss over any rolling 12 month period.


Illustrative Annualised Investment Performance

Performance

Annualised as at 30 June 2017 on a rolling monthly basis
Retail Class Fund (%) Benchmark (%)
1 year 6.22 9.19
3 year 7.64 9.40
5 year 10.11 9.67
10 year 8.40 10.20

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 % 14.00
Lowest Annual % -0.61

Minimum Disclosure Document (Fund Fact Sheet)

Illustrative Annualised Investment Performance

Sanlam Investment Management
(SIM) Inflation Plus Fund
Consumer Price Index (CPI) +4%

Source of graph : Morningstar

Sanlam Investment Management (SIM) Inflation
Plus Fund
Consumer Price Index (CPI) +4%

Source of graph : Morningstar

Sanlam Investment Management (SIM)
Inflation Plus Fund
Consumer Price Index (CPI) +4%

Source of graph : Morningstar

This graph illustrates how an investment of R100 would have grown had you invested for the time period displayed. 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 Manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. The actual fund performance can be viewed on the Minimum Disclosure Document. Annualised return is the weighted average compound growth rate over the period measured.

1. Naspers -N- 4.28%
2. BTI Group 1.32%
3. Sasol 0.92%
4. Steinhoff Int Hldgs N.v 0.90%
5. MTN 0.87%
6. FirstRand / RMBH 0.82%
7. Stanbank 0.80%
8. Old Mutual 0.77%
9. Mondi 0.64%
10. Remgro 0.51%
Cash And Money Market Assets
International Assets
Equities
Bonds 3 - 7 Years
Bonds 0 - 3 Years
Bonds 12+ Years
Inflation Linked Bonds
Property
Bonds 7 - 12 Years
Preference Shares
1. Naspers -N- 4.28%
2. BTI Group 1.32%
3. Sasol 0.92%
4. Steinhoff Int Hldgs N.v 0.90%
5. MTN 0.87%
6. FirstRand / RMBH 0.82%
7. Stanbank 0.80%
8. Old Mutual 0.77%
9. Mondi 0.64%
10. Remgro 0.51%

Natasha Narsingh

Head of Absolute Return - Sanlam Investments

Natasha joined Sanlam Investments as a senior portfolio manager in 2007 and has been involved with the Absolute Return Funds and the SIM Managed Solution Funds. Since joining the Absolute Return team in 2009, Natasha now leads the Absolute Return efforts within Sanlam Investments. In addition to her responsibilities at Sanlam Investments, she also served as a member of the Investment Committee of Botswana Insurance Fund Management from 2007 to 2012.

Natasha started her career as an investment analyst at Greenwich Asset Management in 1998. She has served in many roles over the course of her asset management career, including resources analyst, head of resources/mining, and portfolio manager of resources, general equity, balanced, absolute return and multi-manager funds. She has 19 years of industry experience and has been managing multiple third party funds in both the institutional and retail fund space at SIM.

Natasha holds a B.Sc. (Chem) and a Master in Business Administration (MBA). She completed her MBA degree in 1997 taking top honours in the Investments and Portfolio Management and Advanced Industrial Relations streams.

Natasha Narsingh

Head of Absolute Return - Sanlam Investments

Natasha joined Sanlam Investments as a senior portfolio manager in 2007 and has been involved with the Absolute Return Funds and the SIM Managed Solution Funds. Since joining the Absolute Return team in 2009, Natasha now leads the Absolute Return efforts within Sanlam Investments. In addition to her responsibilities at Sanlam Investments, she also served as a member of the Investment Committee of Botswana Insurance Fund Management from 2007 to 2012.

Natasha started her career as an investment analyst at Greenwich Asset Management in 1998. She has served in many roles over the course of her asset management career, including resources analyst, head of resources/mining, and portfolio manager of resources, general equity, balanced, absolute return and multi-manager funds. She has 19 years of industry experience and has been managing multiple third party funds in both the institutional and retail fund space at SIM.

Natasha holds a B.Sc. (Chem) and a Master in Business Administration (MBA). She completed her MBA degree in 1997 taking top honours in the Investments and Portfolio Management and Advanced Industrial Relations streams.

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

Retail Class (%)

Advice initial fee (max.) 1.14%
Manager initial fee N/A
Advice annual fee (max.) 1.14%
Manager annual fee 1.14%
Total Expense Ratio (TER) 1.25%

Advice fee | Any advice fee is negotiable between the client and their financial adviser. An annual advice fee negotiated is paid via a repurchase of units from the investor.

Obtain a personalised cost estimate before investing by visiting www.sanlamunittrustsmdd.co.za and using our Effective Annual Cost (EAC) calculator. Alternatively, contact us at 0860 100 266.

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

Total Expense Ratio (TER) | PERIOD: 2 January 2014 to 31 December 2016
Total Expense Ratio (TER) | 1.25% 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) | 0.09% 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) | 1.34% of the value of the Financial Product was incurred as costs relating to the investment of the Financial Product.

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.

Please note that African Bank (ABL) has had a name change to African Phoenix Investments Ltd (AXL), with the effective date being 01/02/17. The suspension of the bank has been lifted.

When you invest online

Traditionally, investment advice come with a fee of up to 1.14%. But our smart online system is working to make investing cheaper and more profitable for you and hence no initial or annual advice fees will be charged. 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 2.28%.
  • 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: 1.14%

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.

Market review

The first quarter of 2017 was a good (or bad?) mix of Trumponomics, populism and another bout of local political instability which occurred towards the end of the quarter. A significant cabinet reshuffle occurred on the evening of 30 March, including the removal of finance minister Pravin Gordhan. Global equity markets had a healthy quarter with tailwinds still prevailing from the promises of the Trump presidency, while an uptick in developed market inflation was quite welcoming. After a pronounced sell-off in global fixed-income last quarter, most markets stabilised during the quarter. The Federal Open Market Committee raised US rates in March, as expected, but disappointed with a fairly balanced outlook on rates for the remainder of the year.

We can write a few pages on domestic issues, but we’ll stick to a few highlights (or lowlights). Minister Gordhan’s budget hit consumers fairly hard and the fiscal space left in future has diminished significantly. During the quarter SA bond yields reached levels last seen prior to ‘Nenegate’ while the rand reached lows of about R12.30/$, again wiping out much of the idiosyncratic risk premium. Some of these gains were, however, reversed towards the end of the quarter with the news that Gordhan was replaced.

The rand strengthened somewhat over the quarter from R13.68/$ to R13.42/$ at the end of March. The 10-year RSA bond yield closed the quarter at 8.84% from 8.92% at the end of December. Generally, emerging market currencies did quite well over the quarter, supported by upbeat commodity prices. Nominal bonds returned 2.5% for the quarter, inflation-linked bonds lost 0.6% and cash returned 1.8%. For the quarter as a whole, the MSCI World Index added 6.4% in US dollar terms while the MSCI Emerging Markets Index returned 11.5%. At home, the FTSE/JSE All Share Index (ALSI) advanced 3.8% on a total return basis during the first quarter. On the local front, SA Industrials posted a return of 6.6%, SA Resource shares added 2.7% while the SA Financial Index lost 1.1%.

Asset allocation

During the quarter bond yields reached levels last seen before the firing of former finance minister Nhlanhla Nene. A more favourable inflation outlook, stronger emerging market currencies and some initial stability on the local political front provided us with an opportunity to reduce nominal bonds during the quarter. We continued investing in selected corporate debt, although spreads have narrowed recently.

Over the quarter we reduced the amount of downside protection slightly on the fund’s domestic equity component. The SA equity market (SWIX) trades on a current (rolled) price-to-earnings (P/E) ratio of about 15. Given earnings forecasts, based on current improved commodity prices, the P/E ratio could drop to about 13 in a year’s time. We believe our market is fairly priced at a 12 to 13 P/E. European equities remain cheap relative to other markets on all valuation measures and we therefore continue to hold an overweight position in Europe within our global equity allocation.

Investment strategy

We remain of the opinion that SA fixed-income assets are still an attractive investment destination. Real yields of between 2% and 3% are on offer against the backdrop of declining inflation. Breakeven inflation levels have come down from previous highs, but we still prefer nominal bonds over inflation-linked bonds over the medium term.

We believe that the SA market has become less overvalued relative to developed equity markets and would look to add to domestic equity exposure at lower levels. US equities are starting to look expensive on a number of valuation measures. The Graham & Dodd P/E multiple (current price divided by the average 10-year real earnings) for the US is at about 28 and was only higher during the internet bubble of the 1990s and in the run-up to the US stock market crash in 1929. European equities remain cheap relative to other markets on all valuation measures and we therefore continue to hold an overweight position in Europe, within our global equity allocation.

Equities

This quarter saw the ALSI post a return of 3.8%. SA Industrials rebounded strongly (up 6.6%), helped by some of the non-resource sector rand hedge heavyweights. SA Resources also did well (up 2.7%) with good performances coming through from Forestry and Paper (+12.1%) and Platinum (+7.9%). SA Financials took some body blows, down 1.1%, with the Competition Commission’s investigation into the conduct of banks in the foreign exchange market and the removal of the finance minister weighing on sentiment. The SIM houseview portfolio outperformed the SWIX All Share benchmark, which was up 3.3% this quarter. Some of the positions that worked in the fund’s favour were the overweight positions in British American Tobacco, which was up 15.7% this quarter on the back of the acquisition of Reynolds America, the strong rebound in Northam (up 26.9%) and Mondi (up 15.5%). The largest position in the portfolio remains Naspers, up 14.9% this quarter. Our underweight position in Financials helped, given that financial stocks were down 1%. On the other hand, our overweight in Steinhoff detracted from performance with the stock down 9.4% during the quarter with the newsflow being dominated by its acquisition of Mattress Firm, the largest bedding retailer in the US. Our overweight in Barclays Africa Group was also hurt by expectations that Barclays plc would sell 35% of its investment in the market with the share down 17.3% this quarter.

SIM equity strategy

The cocktail of volatility which afflicted us in 2016 has gone up a notch. In such an environment, a disciplined investment approach is key. Our equity portfolio retains overweight positions in rand hedges, which are likely to withstand shocks to the domestic economy. A number of dual-listed counters sold off in 2016 with the strong recovery in the local currency weighing on their performance. These stocks are now trading at attractive valuations and feature strongly in our top 10, such as Naspers, British American Tobacco and Steinhoff International. During the quarter, we invested in MAS Real Estate in a bookbuild as it gave us access to an offshore, high-growth real estate stock expanding rapidly in Eastern Europe. We also added to British American Tobacco after the share price pulled back due to its acquisition of Reynolds America. We took some profits on BHP Billiton and Sappi, post their good run.

Equity outlook

We believe that the SA market has become less overvalued relative to developed equity markets. The SA equity market (SWIX) trades on a current (rolled) P/E ratio of about 15. Given earnings forecasts, based on current improved commodity prices, the P/E ratio could fall to about 13 in a year’s time. We believe our market is fairly priced when it is on a 12 to 13 P/E. On a price-to-book basis our market has fallen from a high of 2.8 in 2015, when we thought it was expensive, to a current level of 2.3. This, however, needs to be considered against a backdrop of increased uncertainty driven by political risk and the after-effects of the sovereign credit downgrade, meaning that our market is potentially vulnerable to yet another period of heightened volatility. It is often during periods when markets are gripped by fear that the opportunity to buy quality stocks at attractive prices arise. As value-driven fundamental investors, we remain on the lookout for such opportunities while maintaining our focus on preserving the capital invested in our funds. International

The global landscape is currently dotted with pockets of geopolitical tensions, event risks and monetary policy uncertainty. In the US, after raising expectations of a Federal Reserve Bank (Fed) rate hike, the Fed followed through with a 0.25% hike in the target range to 0.75-1.0%. The committee cited that inflation has increased to 1.9%, moving closer to the 2% long-run target. Currently, monetary policy seems to be asynchronous as the Fed tightens policy at a time when the European Central Bank (ECB) continues to actively ease through asset purchases. The ECB kept itsmain refinancing lending and deposit facility rate unchanged. In the UK, the invocation of Brexit Article 50 by Theresa May has now officially started the UK’s exit from the European Union. This seemed to be a non-event for the sterling with markets acknowledging that the negotiations are likely to be a long and drawn-out process over the next few years. In China, recent data have shown decent investment numbers, driven by infrastructure accelerating industrial production.

For the quarter in dollar terms, the MSCI Emerging Markets Index returned 11.5%, outperforming the MSCI World Index by just over 5%. Global bonds rose 1.8%, as measured by the Barclays Capital Aggregate Bond Index. The rand, having had a strong start to the year, took a wobble post 24 March after the political uncertainty leading to the removal of finance minister Gordhan and his deputy, Mcebisi Jonas, to close at R13.42 to the US dollar from R13.68 at the beginning of the year.

Looking to the international universe, we are of the view that international assets, specifically global bonds and the US equity market, are not pricing in the changes in the global political environment. Instead they have become more expensive. European equities, however, remain cheap relative to other markets on all valuation measures and hence we continue to maintain an overweight position in Europe, within the global equity component of our funds. Our select international property holdings at an average dividend yield of about 5.7% continue to be attractively priced relative to bonds and cash.

Bonds

The rand strengthened somewhat over the quarter from R13.68/$ to R13.42/$ at the end of March. The 10-year RSA bond yield closed the quarter at 8.84% from 8.92% at the end of December. Generally, emerging market currencies did quite well over the quarter, supported by upbeat commodity prices. Nominal bonds returned 2.5% for the quarter, inflation-linked bonds lost 0.6% and cash returned 1.8%. A more favourable inflation outlook, stronger emerging market currencies and some initial stability on the local political front provided us with an opportunity to reduce nominal bonds during the quarter. We continued to invest in selected corporate debt. Credit spreads have, for the first time in a couple of quarters, started to narrow on robust demand from investors. But we still believe spreads are generally fairly priced, although some corporates appear to be on the expensive side. We remain of the opinion that SA fixed-income assets are still an attractive investment destination.

Real yields of between 2% and 3% are on offer against the backdrop of declining inflation. Breakeven inflation levels have come down from previous highs, but we still prefer nominal bonds over inflation-linked bonds over the medium term.

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