Investment envy is real and poses a challenge for advisers. While your client is earning a long-term return of 10% on his investment, knowing that a friend or family member is earning 11% seldom sits well with anyone. Wanting to compare results is only human, but it could take an investor’s eye off the real enemy: inflation.
At the recent All Access Summit hosted by Sanlam Investments, Natasha Narsingh, head of Absolute Return at Sanlam Investments, presented the disturbing impact of inflation on an investor’s capital. “Most investors are concerned about market crashes and the impact of interest rate changes. But what is under-appreciated is the damage inflation can do over the long term. We’re up against the decay inflicted by inflation,” said Natasha.
“Sometimes there’s a disconnect between the returns you need to achieve and what the underlying asset classes are doing for you,” said Natasha. “In down markets when your peers are getting -12%, you would not be happy with the better -8%. A negative return, irrespective of whether it is outperforming or not, is still lower than what you started out with. Beating your peers will not protect your capital. It’s inflation you need to beat.”
This is where an absolute return fund comes into its own because it’s built to combat ever present inflation. “Absolute return funds exist to give a relatively smooth investment experience. Essentially, you can use the fund as a stable component or investment building block of your portfolio and blend it with more aggressive funds, if you wish,” said Natasha.
“In the case of the SIM Inflation Plus Fund we have two goals,” said Natasha. “The shorter-term goal is to preserve capital over any rolling 12-month period and the longer-term goal is to explicitly deliver CPI + 4%.” This fund is not index sensitive; nor is it managed with the goal of outperforming its peers.
“But, if you allow us to brag a bit, it does stack up exceptionally well against its peers on a risk-adjusted return basis.”
Notably, the SIM Inflation Plus Fund takes just enough risk to deliver on the returns it needs to deliver. This is important, as not all absolute return managers are able to deliver positive 12-month returns in case of a market crash. “In years like 2008 and 2009 we’ve seen more aggressive, almost balanced-type fund managers purporting to be absolute return managers and who previously delivered outperformance well above the inflation target, failing hopelessly to protect capital when markets took a tumble,” said Natasha.
The SIM Inflation Plus Fund hits the investment horizon sweet spot for investors who want to invest for longer than three years, but don’t want to ride out the vagaries of the markets. And, most importantly, the managers never take their eye off investors’ number one enemy, inflation.
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Natasha was appointed to head up Absolute Returns after co-managing the SIM Absolute Return funds for 8 years. Natasha is involved in the management of R42.5 billion in assets under management. She has a wealth of experience in asset management, along with a breadth of experience across multi-asset classes including derivatives.
Natasha holds a BSc (Chem) and a Masters in Business Administration (MBA) degree. Natasha is a member of the CFA Institute.
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved Manager in Collective Investment Schemes in Securities. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”). The fund may from time to time invest in foreign instruments which could be accompanied by additional risks as well as potential limitations on the availability of market information. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments Scheme/ Standard Chartered Bank is the appointed trustee of the Satrix Managers Scheme.
The SIM Inflation Plus Fund may from time to time invest in foreign countries and therefore it may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The Retail class is the most expensive class offered by the Manager. The maximum fund charges include (including VAT): An initial advice fee of 1.15%; annual advice fee of 1.15% and annual manager fee of 1.15%. The most recent total expense ratio (TER) is 1.24%.
Please note that past performances are not necessarily an accurate guide of future performances, and that the value of investments / collective investment units / unit trusts may go down as well as up. Commission may be paid and, if so, would be included with the brokerage charges, securities transfer tax, auditor’s fees, bank charges, trustee fees and levies in the overall costs, which will be levied against the fund. A schedule of fees and charges and maximum commissions is available from the manager, Sanlam Collective Investments(RF) Pty Ltd on request. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total value of all assets in the portfolio including any income accrual and less any permissible deductions from the portfolio. The worst 12-month performance for the Fund is 5.80%. The best 12-month performance is 15.20%. Portfolio performance is calculated on a NAV to NAV basis and does not take any initial fees into account. An annualised growth rate is used for all performance data of 12 months or longer. Income is reinvested on the ex-dividend date. Total return performances are published. The source of performance data and risk statistics is Morningstar. Actual investment performance will differ based on the initial fees applicable, the actual investment date and the date of reinvestment of income. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has the right to close the portfolio to new investors in order to manager it more efficiently in accordance with its mandate