The Absa Balanced Fund, a prominent unit trust, has been a key player in the South African investment landscape since its inception. With a focus on medium to long-term growth, the fund aims to enhance returns through a diversified investment strategy. This article provides an overview of the fund, reflecting its recent performance and key changes as of 2024. We’ll delve into the fund’s structure, performance, asset allocation, and associated costs, ensuring a thorough understanding for potential and current investors.
Fund Overview
- Name: Absa Balanced Fund
- Industry Category: South African Multi Asset – Medium Equity
- Benchmark: CPI + 5% p.a. over a rolling 60-month period
- Launch Date: 1 June 1994
- Fund Size: R1.68 Billion
- JSE Code: ABBF
- Fund Manager: Fernando Durrel, PhD (Mathematics), CFA
- Minimum Investment: R2,000 lump sum or R200 monthly
Historical Context and Fund Evolution
Initially launched on June 1, 1994, the Absa Balanced Fund has evolved significantly. The introduction of Class A on October 2, 2000, and Class C1 on March 26, 2013, reflects the fund’s growth and adaptation to investor needs. Currently, with a robust size of R1.68 billion, it stands as one of South Africa’s most substantial funds.
Investment Strategy and Fund Objectives
The Absa Balanced Fund employs an active asset allocation strategy, investing across a mix of local and international assets. Its primary objectives are steady income growth, capital preservation, and stability. The fund adheres to Regulation 28 of the Pension Funds Act, making it suitable for retirement investments such as pension, provident, and preservation funds.
Fund Features
- Diversification: Offers exposure to multiple asset classes, including equities, bonds, and property.
- Capital Preservation: Focuses on maintaining capital stability while aiming for growth.
- Long-Term Investment: Ideal for medium to long-term financial goals, particularly retirement savings.
Performance Review
Annualized Returns
The Absa Balanced Fund’s performance is benchmarked against CPI + 5% p.a. over a rolling 60-month period. The following table summarizes the annualized total returns of the fund for different periods:
| Term | Class A Return | Benchmark Return | Class C1 Return |
|---|---|---|---|
| Launch | 10.80% | 10.52% | 7.59% |
| 1 Year | 5.75% | 10.51% | 6.55% |
| 3 Year | 9.65% | 11.04% | 10.48% |
| 5 Year | 7.89% | 10.15% | 8.70% |
| 10 Year | 6.34% | 10.13% | 7.15% |
Yearly Performance
| Year Ending | Class A Return | Benchmark Return | Class C1 Return |
|---|---|---|---|
| January 2024 | 5.75% | 10.51% | 6.55% |
| January 2023 | 5.16% | 11.89% | 5.95% |
| January 2022 | 18.55% | 10.73% | 19.45% |
| January 2021 | 2.64% | 8.16% | 3.41% |
| January 2020 | 8.01% | 9.49% | 8.82% |
| January 2019 | -1.47% | 9.00% | -0.73% |
Performance Insights
While the fund has historically delivered strong returns, it occasionally falls short of its benchmark. For instance, from 2018 to 2023, the fund’s average annual growth was 7%, compared to the benchmark’s 9.75%. This indicates variability in performance, with periods of significant highs and lows.
Asset Allocation
The Absa Balanced Fund’s diversified portfolio includes:
- Equity: 29.16%
- Fixed Rate Bonds: 29.03%
- Money Market: 23.33%
- International Equity: 13.93%
- Inflation Linked Bonds: 3.06%
- International Money Market: 1.48%
Top Holdings
- Satrix MSCI World ETF: 8.91%
- Firstrand: 1.89%
- Naspers – N: 1.86%
- Standard Bank: 1.73%
- British American Tobacco PLC: 1.46%
- Prosus NV: 1.01%
- Bidcorp Ltd: 1.01%
- Compagnie Financière: 0.95%
- Anglo American: 0.94%
- Sanlam: 0.84%
Fees and Costs
The fund charges various fees, detailed as follows:
- Class A Management Fee: 1.73%
- Class C1 Management Fee: 0.98%
- Initial Fees: 0% (Absa and Adviser)
- Adviser Fees: 0-3.45% (Class A), 0% (Class C1)
- Total Expense Ratio (TER): 2.05% (Class A), 1.30% (Class C1)
- Transaction Costs (TC): 0.09% (both classes)
- Total Investment Charges: 2.14% (Class A), 1.39% (Class C1)
Advantages
- Regulation 28 Compliance: Suitable for retirement investment.
- Diversified Portfolio: Broad exposure to various asset classes.
- Professional Management: Managed by experienced fund managers.
- Flexible Investment: Low minimum contribution requirements (R200 monthly or R2,000 lump sum).
Disadvantages
- No Capital Guarantees: Investment returns are not guaranteed.
- Volatility: Performance may fluctuate, particularly in the short term.
Conclusion
The Absa Balanced Fund remains a competitive choice for investors seeking steady growth and diversification in their portfolios. Its compliance with Regulation 28 makes it particularly suitable for retirement savings. While the fund offers attractive long-term returns, potential investors should be aware of its volatility and lack of capital guarantees. For those with a long-term perspective, the Absa Balanced Fund provides a robust investment option with a well-managed and diversified approach.