The global landscape has been turbulent with central banks playing catchup to bring inflation within their target ranges. This has forced monetary policy committees to aggressively raise interest rates to fight the surging inflation. Global growth has also been revised downwards in both developed and emerging market economies, with the International Monetary Fund expecting global growth to slump from 6.1% in 2021 to 3.2% in 2022.
The equity markets and currency have been significantly volatile, we have seen the S&P 500 Index down 18.73% year-to-date while the South African rand has depreciated against the US dollar by around 10.50% since the start of the year. The US 10-year bond yield has weakened by 111.42% from its open of 1.51% in January to the end of August, while the JSE All Bond Index delivered a mere 0.78% over the same period.
Given the uncertainty in financial markets, investors should consider defensive funds that provide returns above cash (bank fixed or call deposits) but with an emphasis on low risk. Below are some guiding principles to consider when selecting a suitable cash offering:
- Have an active liquidity manager that can add value by taking advantage of market inefficiencies
- Funds that are highly liquid come in handy, therefore the securities and holdings in the funds must be easily negotiable and traded to manage duration risk
- Have attractive medium- to long-term performance that is higher than bank fixed/call deposits
- Trust in your manager’s investment philosophy and investment process is key
At Ashburton Investments, we offer clients liquidity solutions that have capital preservation along with minimal volatility. The investment strategy of the below funds goes through a rigorous analysis considering different market cycles and fundamentals in order to deliver competitive risk-adjusted returns to clients. Below are two of our flagship funds that we believe are suitable for investors that are looking for investment options to park their cash while markets settle.
Investors can access these funds for a minimum investment of R5 000 lump sum or R500 monthly debit order and they both can be included in a tax-free savings account.
More information about these funds is available on the Ashburton Investments website or speak to your financial advisor.
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