The FNB Moderate Fund of Funds applies a robust investment strategy to achieve the set objectives. The objective of the fund is to diversify across various asset classes. The fund has a moderate risk because of the investment strategy that has been put forward.
FNB Moderate Fund of Funds invests in a number of asset classes locally and abroad. The fund’s highest holdings are in local and international equities. Equities account for 53% of the fund, which increases the risk of the fund and makes the fund deemed a moderate risk investment.
Since the equities investment both locally and abroad is 53%, pension investments can be made in the fund. This is because Regulation 28 of the Pension Funds Act 24 of 1956 states that pension investments must invest in funds that have an equity exposure of 75% or less. This includes both local and foreign equities.
Therefore, the fund can accommodate different types of retirement investments. Investments that can be invested in the FNB Moderate Fund of Funds include but are not limited to living annuities, endowments, retirement annuities, and preservation funds. The retirement product must come from FNB to qualify for investment in the FNB Moderate Fund of Funds.
Performance-wise, the fund has performed below the set benchmark since its inception. The fund has trailed its benchmark by 1.58% on average since its inception. The fund has, however, managed to record a 6.55% average since its inception, with the earnings beating the South African inflation rate of 6.20%.
The fund aims for long-term capital growth, and the current number has only shown potential, not what the fund is capable of earning in a 10-year run. Before investing in the fund, it is best to understand the numbers behind the fund. The numbers are explained below, including how the fund works.
FNB Moderate Fund of Funds summary
The FNB Moderate Fund of Funds is a unit trust that is managed by Ashburton Fund Managers. The fund was established on July 1, 2016, and has been producing positive returns since its formation. Today, the fund has over R1.85 billion in management and the investment is managed by a number of investment companies.
The investment firms that manage the funds invested in the FNB Moderate Fund of Funds include:
- Passive, which manages 37.92% of the fund;
- Ashburton Fund Managers-Active managing 34.23% of the fund;
- Truffle Asset Management, which manages 5.26% of the fund;
- Aylett & Co, which manages 4.52%;
- The Coronation Fund Managers, which manage 4.42% of the fund;
- Ninety One which manages 3.77% of the fund;
- Fairtree, which manages 3.64% of the fund;
- Abax Investments, which manages 3% of the fund;
- Sesfikile Capital, which manages 0.20%; and
- Stanlib manages 0.16% of the fund.
With so many fund managers in place, the fund has a diverse investment mind in place.
The fund is set out to match or outperform CPI + 3.5% and, as such, Ashburton has a strategic asset allocation in place. The theorized strategic asset allocation as set by Ashburton Fund Managers is as follows:
- Local equity of 35%,
- Local fixed income of 25%,
- International 20%,
- Local cash is 10%, and
- Local property 10%
Currently, the investment in assets looks slightly different from the strategic asset allocation in place. The current asset allocation is as follows:
| # | Asset | Asset allocation in percentage |
| 1 | Local equities | 36.55% |
| 2 | Local fixed income | 30.85% |
| 3 | International equities | 16.48% |
| 4 | Local cash | 5.54% |
| 5 | Local property | 5.16% |
| 6 | International cash | 3.79% |
| 7 | International fixed income | 1.51% |
How does the FNB Moderate Fund of Funds work?
The FNB Moderate Fund of Funds invests in multiple assets and it is designed to optimise returns and volatility over a 5-year investment period. As such, the fund is suitable for those that want to invest for the medium to long term. Those that want to invest for retirement can use the fund to do so since it is compliant with regulation 28 of the Pension Funds Act.
When investing in the FNB Moderate Fund of Funds, an investment vehicle has to be chosen first. This can be a tax-free savings account, a retirement annuity, a living annuity, and more. The contributions into the fund will depend on the individual’s investment desired income, which the investor will work with FNB to determine.
Investment in the FNB moderate fund comes with charges. This is because the fund is managed by independent contractors and in-house fund managers. These firms will have to be compensated for their efforts and expertise that have been put in place to ensure that the fund operates like a well-oiled machine.
The annual management fee for the FNB Moderate Fund of Funds is set at 0.91%. Costs associated with managing and operating the investment fund are also billed. The cost of managing and operating the investment fund is set at 1.07%. Transaction costs that include buying and selling of the unit trusts are set at 0.12%. Lastly, the investment charges associated with the fund are charged at 1.19%.
Advantages of the FNB Moderate Fund of Funds
- There is a minimum investment required, therefore, each investor will invest according to his or her will.
- Fees associated with the fund are relatively low when compared to fees that are charged for funds under the FNB fund spectrum.
- Those that want to invest for the long term are likely to earn above-average returns on their investments.
- The fund uses a multiple-manager system to make investments.
- The overall fund size is large and yet achieves positive results for each unit.
- There are many ways to use the fund. Pension investments are acceptable since the fund is Regulation 28 compliant.
- The fund has been able to outperform the South African inflation rate.
Disadvantages of the FNB moderate fund of funds
- There is no guarantee of investment.
- The fund is volatile, and short-term investors are likely to put their capital at risk.
Conclusion
The FNB Moderate Fund of Funds is suitable for those that want to invest for the long term and want to invest most of their money in equities. An investment in a moderate fund of funds can be bad for a short-term investor since the fund is volatile.