The Absa Absolute Fund is a diversified unit trust designed for investors seeking moderate risk with the potential for steady returns. Established on November 20, 2006, the fund invests across various asset classes, including equities, real estate, and bonds. This article provides an in-depth look at the fund’s performance, asset allocation, fees, and overall advantages and disadvantages.
Fund Details
- Fund Launch Date: November 20, 2006
- Class A Launch Date: November 20, 2006
- Class C1 Launch Date: March 7, 2013
- Industry Category: South African Multi Asset – Low Equity
- Benchmark: CPI + 4% p.a. over a rolling 36-month period
- Fund Size: R2.63 billion
- JSE Code: ABAF
- Fund Managers: Eben Mare (B.Sc. (Hons), M.Sc., Ph.D. in Applied Mathematics) and Kanyisa Ntontela (BCom (Hons))
Investment Options and Performance
Minimum Investment Requirements
The Absa Absolute Fund offers flexibility in investment amounts:
- Lump Sum Investment: Minimum of R2,000
- Monthly Contribution: Minimum of R200
- Combination Option: Invest a lump sum of R2,000 with a monthly contribution of R200
Historical Performance
Since its inception, the Absa Absolute Fund has delivered varying returns. Here’s a detailed performance overview:
- Class A Annualized Returns:
- Launch to February 2024: 7.79%
- 1-Year: 5.13%
- 3-Year: 6.47%
- 5-Year: 5.77%
- 10-Year: 5.88%
- Class C1 Annualized Returns:
- Launch to February 2024: 6.67%
- 1-Year: 5.92%
- 3-Year: 7.28%
- 5-Year: 6.57%
- 10-Year: 6.69%
Benchmark Comparison
The fund’s benchmark, CPI + 4%, has consistently outperformed the fund:
- Benchmark Annualized Returns: 9.68% (since inception)
Yearly Returns
- 2023:
- Class A: 5.13%
- Class C1: 5.92%
- Benchmark: 9.00%
Asset Allocation
The Absa Absolute Fund maintains a diverse asset portfolio, focusing primarily on South African investments. Here’s the current asset allocation:
- South African Equity: 19.62%
- South African Property: 5.17%
- Floating Rate Notes (FRNs): 14.97%
- Fixed Rate Bonds: 12.31%
- Inflation-Linked Bonds: 8.07%
- Money Market and Cash: 23.07%
- Offshore Investments: 16.80%
Top Shareholdings
The fund’s top shareholdings include:
| Shareholding | Percentage |
|---|---|
| Kaap Agri Limited | 1.28% |
| MR PRICE GROUP LTD | 0.97% |
| Rhodes Food Group Pty Ltd | 0.96% |
| Spar | 0.93% |
| Sanlam | 0.91% |
| Absa Group Ltd | 0.84% |
| Anglo | 0.81% |
| Pepkor Holdings Ltd | 0.71% |
| Coronation Manager F | 0.70% |
| Old Mutual Ltd | 0.60% |
Fees and Costs
Fee Structure
The Absa Absolute Fund has a transparent fee structure:
- Initial Fees:
- Absa: 0%
- Adviser: 0-3.45% (Class A only)
- Annual Fees:
- Management Fee: 1.73% (Class A), 0.98% (Class C1)
- Adviser Fee: 0-1.15% (Class C1 only)
- Performance Fee: None
Total Expense Ratio (TER) and Transaction Costs
- Class A:
- TER: 1.77%
- Transaction Costs (TC): 0.26%
- Total Investment Charges: 2.03%
- Class C1:
- TER: 1.02%
- Transaction Costs (TC): 0.26%
- Total Investment Charges: 1.28%
Fund Objectives and Strategy
The primary objective of the Absa Absolute Fund is to provide a consistent return above inflation over the medium term while protecting capital over the long term. The fund aims to minimize capital loss risk over any 12-month period.
Investment Strategy
The fund employs a diversified investment strategy across various asset classes, focusing on lower-risk assets to maintain a moderate risk profile. It primarily invests in South African markets and adheres to the guidelines set out in Regulation 28 of the Pension Funds Act, making it suitable for retirement fund investments.
Fund Features
- Medium to Long-Term Investment: Ideal for those with a moderate investment horizon.
- Diversification: Exposure to multiple asset classes for balanced risk.
- Income and Capital Appreciation: Provides income and potential for capital growth.
- Suitable for Various Investors: Ideal for both pre and post-retirement investments.
Fund-Specific Risks
- Interest Rate Risk: Value of fixed-income investments may decrease with rising interest rates.
- Multi-Asset Risk: Exposure to various markets could lead to financial losses.
- Property Risk: Investments in real estate securities may mirror the risks of direct real estate investments.
Performance Review
Volatility and Returns
The Absa Absolute Fund has demonstrated consistent returns, with some volatility. The highest one-year performance recorded was 15.49% (December 31, 2012), while the lowest was -3.29% (March 31, 2020).
Conclusion
The Absa Absolute Fund remains a viable option for investors seeking moderate risk with the potential for stable returns. While it has not consistently outperformed its benchmark, it has provided positive returns over the medium term. The fund’s diversified asset allocation and moderate fees make it suitable for a range of investors.
For those looking for a balanced investment that aims to outperform inflation while maintaining capital protection, the Absa Absolute Fund offers a solid choice.
For more information or to invest in the Absa Absolute Fund visit Absa Investment Management