Speaker 0:
Hello and welcome to the fund Fit Summit Today. I'm joined by JP DUI portfolio manager at Methodical Investment Management. Welcome, JP. Thank you. What is the fund that you're putting forward today? I'm

Speaker 1:
putting forward the Methodical Income Fund. The fund is aimed at investors that are, um, looking for

Speaker 1:
decent returns above in above cash. So it's not a money market fund, but it's not an aggressive, uh, bond fund. Uh, it's it's looking for returns above cash, as I mentioned, and also, um, looking at beating inflation. And that's really where it sits in in it. Should sit for clients, um, that are looking to

Speaker 1:
beat, beat inflation, keep keep the value of their money intact, but get better returns than you get in a money market fund. OK,

Speaker 0:
so how's the performance been on this fund? Um, of late over the past six months and perhaps over the past year?

Speaker 1:
Well, you know, it's been a difficult environment up until very recently to beat inflation because we've

Speaker 1:
had central bank policy that has been, um, had interest rates very low, and now has has, um, hiked those interest rates up. So we now have rates. Uh, interest rates above inflation. But for a long period of time after covid in 2020 our, um, interest rates were much lower than inflation. So that was a difficult environment,

Speaker 1:
um, in which to, uh, to beat inflation. You you could beat cash, but it was hard to beat that second target, which is to beat inflation. And that's what a lot of income investors or most income investors are looking to achieve to retain the value of of their of their money that they've parked it in the fund. Um, now we're in an environment where it's substantially easier. Um, you know, one year N. C DS are over 9%. Inflation is at seven, so you can beat. You can beat inflation. Short term inflation linked bonds give you over 3%

Speaker 1:
uh, above inflation. So you know that that has become a, uh, an easier environment. And as we've seen the returns of the fund over the last say, 12 to 18 months have have continuously improved as we've seen those increases in interest

Speaker 0:
rates. So there are. Are there any specific considerations that advisors would need to take into account when they consider this fund for their for the clients portfolios.

Speaker 1:
Absolutely. So it is a R 28 fund. Um, and it's governed by those those r 28 limits. Um,

Speaker 1:
so you know, the fund can have offshore in the in in it. And I do have, uh, currently have about 8% of the fund offshore, and and, um, you know, part of that's hedged back into rand. So it's not about necessarily about that currency exposure.

Speaker 1:
Um, but that that is that could be a consideration if you're trying to aggregate that amongst a number of different, Um uh, R 28 funds. Although the fact that the R 28 limits for offshore have increased so much makes that less of a constraint. You know, a few years ago when the limits are much lower, then you were quite most people were quite tight up against their limits. But now, um, we're in an environment where that's less of a, um, less of a consideration.

Speaker 1:
Um, when we think about the kind of timeline for, uh, you know, for this fund,

Speaker 1:
you know it can, and over the long term, you'd be want to be producing two to a real 2 to 3% which is an attractive return at at a low, Um, a low volatility. Um, but you don't necessarily have to be in this fund for a long period of time,

Speaker 1:
um, you know, to, you know, to, um, to achieve that So probably 12 to 18 months is a reasonable time frame. As I say, it's not a money market, necessarily. It's not just about parking cash. You want a little bit better return than, um, parking cash in A in a money market fund. But, um, if you've got a little bit of a a longer time, arise.

Speaker 1:
And you know you can get significantly higher returns than you would get in a in a money market fund.

Speaker 0:
So then, on the risk spectrum, where would you place this fund? Exactly? Uh, so

Speaker 1:
it's a low risk fund. Um, low. It depends on how you define risk, of course, as well. If you talk about volatility, it's a low. It's a low volatility fund.

Speaker 1:
Um, it'll be on depending on what your spectrum looks like. It'll be on the on the on the lower end of the, um of the spectrum. It does compare well against maybe even slightly higher risk funds in terms of performance. Because, um, you know, our interest rates in South Africa tend to be quite high versus where inflation is and that and we are living in a in a world where, um our economy is not doing particularly well, So fixed income gives you kind of certainty of returns and

Speaker 1:
the level of returns that may be commensurate with a higher risk profile. Um, but it is a low risk, uh, profile fund. Most of the fund is invested in government bonds, and, uh, the Big Four, um, Big Four banks paper. Uh, so from a credit perspective, it's It's, um it's, um, low risk as well.

Speaker 0:
JB. Thank you very much for taking us through your, um, your

Speaker 1:
thank you.