The FNB Growth Fund of Funds is an investment vehicle tailored for those seeking to grow their wealth over a long-term horizon. While it is primarily designed for investors with a time frame of seven years or more, it remains accessible to those with shorter investment horizons. However, the fund’s high volatility necessitates a cautious approach for short-term investors due to potential capital exposure.
Understanding the FNB Growth Fund of Funds
The FNB Growth Fund of Funds is a unit trust that provides diversified exposure across various asset classes, including equities, bonds, property, and international investments. Managed by FNB, with Ashburton Fund Managers as the investment manager, this fund operates under a multi-manager system. This approach involves collaboration with ten management partners, each contributing to the fund’s overall strategy and performance.
Key Features and Risk Profile
The FNB Growth Fund is characterized by its aggressive benchmark of CPI + 5%, positioning it as a high-risk investment. The fund’s strategy aims to protect against downturns of up to 25% and maintain an annualized volatility of 12%. Despite these measures, investors should be prepared for periods of significant fluctuation in fund value, as evidenced by historical performance.
Since its inception, the FNB Growth Fund has delivered an average annual return of 6.87%. While this is commendable, it falls short of its benchmark, which achieved a growth rate of 9.88% during the same period. The fund’s highest 12-month performance was an impressive 33.35%, though it also experienced a 12-month low of -10.50%.
2024 Update: Horizon Series and Strategic Changes
As of 2024, the FNB Growth Fund of Funds is part of the Horizon Series, a collection of funds designed to simplify investing by offering solutions tailored to various investment horizons. This series includes five different funds, each optimized to maximize returns over a specified period.
Investment Strategy and Objectives
The FNB Growth Fund employs a multi-asset strategy, combining passive and active investments. This approach leverages robust portfolio construction methodologies while adhering to regulatory constraints and risk management principles. The fund’s objective is to achieve returns that exceed inflation by 5% over a seven-year rolling period, making it suitable for long-term investors seeking growth.
Asset Allocation and Manager Contributions
The FNB Growth Fund’s asset allocation is diversified across local and international equities, fixed income, property, and cash. As of June 2024, the strategic asset allocation is as follows:
- Local Equity: 45.00%
- International Equity: 33.00%
- Local Fixed Income: 14.00%
- Local Property: 5.00%
- Local Cash: 3.00%
This allocation reflects the fund’s commitment to diversification, aiming to balance risk and return across different asset classes.
Manager Allocations
The fund’s management is divided among several prominent investment managers, each contributing to the overall strategy. As of 2024, the manager allocations are:
- Index-Tracking: 46.22%
- Ashburton Fund Managers – Active: 17.77%
- Truffle Asset Management: 6.96%
- Ninety One: 5.07%
- Fairtree: 4.93%
- Coronation Fund Managers: 4.58%
- Aylett & Co: 4.32%
- Sesfikile Capital: 3.08%
- Abax Investments: 3.07%
- Stanlib: 1.46%
Performance and Fees: A Detailed Look
Investors considering the FNB Growth Fund should be aware of the associated costs. The fee structure as of 2024 is as follows:
- Annual Management Fee: 0.99%
- Total Expense Ratio (TER): 1.18% (1-Year), 1.19% (3-Year)
- Transaction Costs: 0.13% (1-Year), 0.15% (3-Year)
- Total Investment Charges: 1.31% (1-Year), 1.34% (3-Year)
These fees are inclusive of VAT and are calculated over a rolling three-year period. No performance fees are charged, ensuring that investors retain a more significant portion of their returns.
Regulatory Compliance and Investment Vehicles
The FNB Growth Fund is fully compliant with Regulation 28 of the Pension Funds Act, which limits equity exposure to 75% for pension funds. This regulation ensures that the fund remains a viable option for retirement investments, such as retirement annuities or living annuities.
Investors can access the FNB Growth Fund through various investment vehicles, including tax-free savings accounts (TFSAs), retirement annuities, and direct unit trust investments. This flexibility allows investors to choose the most suitable option based on their financial goals and tax considerations.
Pros and Cons of the FNB Growth Fund of Funds
Advantages
- Multi-Manager Approach: The fund benefits from the expertise of multiple managers, each contributing to different aspects of the investment strategy.
- Flexible Investment Options: Investors can choose from a range of investment vehicles, making it accessible to various investor types.
- No Minimum Investment Requirement: This allows investors to start with any amount, making the fund accessible to a broad audience.
- Switching Flexibility: Investors can easily switch in or out of the fund, providing flexibility in managing their investment portfolio.
- Ambitious Benchmark: The fund aims to outperform inflation by 5%, offering the potential for significant long-term returns.
Disadvantages
- High Volatility: The fund is classified as moderate-to-high risk, making it unsuitable for risk-averse investors.
- Capital Risk: There are no guarantees on capital, which means investors may experience losses, especially in the short term.
- Benchmark Underperformance: Historically, the fund has underperformed its benchmark, which may concern some investors.
Conclusion: Is the FNB Growth Fund of Funds Right for You?
The FNB Growth Fund of Funds is a robust investment option for those with a long-term perspective. It offers the potential for significant returns, particularly for investors who can withstand periods of market volatility. The fund’s diversified approach, combined with the expertise of multiple managers, makes it a compelling choice for those looking to grow their wealth over time.
However, the fund’s high volatility and capital risk mean it may not be suitable for all investors. Those with a lower risk tolerance or a shorter investment horizon should carefully consider whether this fund aligns with their financial goals.
For long-term investors, particularly those saving for retirement or other distant financial goals, the FNB Growth Fund of Funds provides a well-structured, diversified investment option. By understanding the fund’s objectives, risk profile, and performance, investors can make informed decisions that align with their financial objectives.