To maximise income while securing steady capital growth. This is achieved by investing in a diversified portfolio of high-yield bonds in the South African market.

The surprise resumption of load-shedding in December, and the possibility of it extending well into 2020, exacerbated the weak growth outlook, leading many analysts to expect a recession. Despite the subdued inflation environment - November CPI fell to 3.6% y/y - the SARB’s latest model is forecasting one 25bp interest rate cut in Q3 2020. The central bank has been emphasizing the importance of anchoring inflation expectations at or below the 4.5% midpoint of the SARB’s 3-6% inflation target band, rather than boosting growth, thereby putting more pressure on the government to enact reforms and a fiscally responsible 2020 budget.

SA bonds managed to hold their ground in December. This was due to the fresh risk-on sentiment on the part of investors looking for attractive real yields, as local bonds offered among some of the highest real yields in the world (at around 4.5% for longer-dated tenors). In December, the BEASSA All Bond Index posted 1.9%, inflation-linked bonds (the Composite ILB Index) delivered 1.0%, and cash as measured by the STeFI Composite Index returned 0.6%.

The fund returned 9.7% over the past 12 months, compared to 10.3% delivered by the All Bond Index over the same period.