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Investec Diversified Income A Inc 8.0% 7.9% 7.9% 8.3%
STeFI Composite (ALBI 1-3 years pre 01.07.2011) 7.3% 7.4% 7.1% 6.8%
Active return 0.7% 0.5% 0.9% 1.5%
Investec Diversified Income Fund
Performance
Annualised performance in ZAR
Highest and lowest rolling 12 month returns since inception*
Jul-12 12.8% Jan-14 4.1%
Past performance is not a reliable indicator of future results, losses may be made.
Source: Morningstar, dates to 31 May 2019, performance figures above are based on lump sum investment, NAV based, inclusive of all annual management fees but excluding any initial charges, gross
income reinvested, fees are not applicable to market indices, w here funds have an international allocation this is subject to dividend w ithholding tax, in South African Rand.
* Inception date 01 December 2009.
Annualised performance is the average return per year over the period. Individual investor's performance may vary depending on actual investment dates. Highest and Low est returns are those achieved
during any rolling 12 months over the period specified.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1 year 3 years p.a. 5 years p.a. Since Inception p.a.*
Investec Diversified Income A Inc STeFI Composite (ALBI 1-3 years pre 01.07.2011)
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SA Rates team
The investment team is subject to change not necessarily with prior notification. As at 30 April 2019. For further information on investment team, please see the Important Information section.
Ntuthuzelo Magwentshu –
Rates and Forex Dealer
Altaaf Noormahomed –
Rates and Forex Dealer
Trading
Malcolm Charles
Rates
Peter Kent
Rates
Portfolio Management Team
Global Investment Infrastructure Support
Environmental, Social and Governance (ESG) | Risk & Performance | Implementation
Lisa MacLeod - Portfolio Manager, Money Market
Matsidiso Mdakane - Analyst, Credit
Stephen Naidoo - Analyst, Credit
Nicholas Marshall - Analyst, Rates
Thanzi Ramukosi - Analyst, Credit
Malcolm Husselmann - Portfolio Manager, Namibia
Simon Howie - Portfolio Manager, Credit
Adam Furlan - Portfolio Manager, Credit & Rates Chris Steward - Head of Financials
Bashier Omar - Portfolio Manager, Credit
Nkhumeleni Thavhiwa - Analyst, Credit
Vivienne Taberer - Global, LatAm
Werner Gey van Pittius - Global, EEMEA
André Roux - Global, Economics
Sisamkele Kobus - Analyst, Economics & Rates
Nazmeera Moola - SA Economics
Investment Specialists
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Investec Diversified Income Fund
Investment framework – what are we trying to achieve?
Participate and protect
When FI assets
underperform cash, you
return at least cash
When FI assets rally
you participate
Cash%
0.0%
ALBI
Diversified
Income
Cash -
Minimum
income
threshold
Return:
● To return in excess of cash,
that seeks to:
‒ participate in bond upside
‒ protect bond downside
Risk:
● Capital preservation bias, that
seeks to:
‒ avoid quarterly drawdowns
‒ eliminate 6 monthly drawdowns
This is an illustrative graph demonstrating the participation and protect investment methodology of the fund.
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-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Rally Sell off All
Investec Diversified Income A ALBI Total return
Investec Diversified Income Fund
Investment framework – what have we achieved?
Past performance should not be taken as a guide to the future, losses may be made. Data is not audited.
Source: Morningstar and Bloomberg. Returns are based on lump sum investment, NAV based, inclusive of all annual management fees but excluding any initial charges, gross income reinvested, fees are not
applicable to market indices, where funds have an international allocation this is subject to dividend withholding tax, in South African Rand. Data from 30 September 2010 to 31 March 2019. Highest and Lowest
returns are those achieved during any rolling 12 months over the period specified. High: 12.8% Jul-12; Low: 4.1% Jan-14
Participate in the rallies, protect in the sell offs
Average rolling 12m excess returns over cash
Rally Sell off All
Participate Protect Cash plus returns
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Income Capital Diversify
Investec Diversified Income Fund
Investment framework – how has it worked in practice?
Source: Investec Asset Management, gross of fees to 30 April 2019. Note: figures quoted represent contribution to returns
2017 sources of return:
ZAR rallied 16%: Kept offshore low, and diversified
Bonds rallied 1%: Curve steepener worked well
Credit spreads mixed: Overweight IG, Steinhoff early
redemption
Property returned 17%: Neutral
2018 sources of return:
ZAR sold off 11%: Adjusting offshore and USD mix
to protect duration position
Bonds sold off 2%: Continue to like the SA “disinflation”
theme
Property returned -25%: Avoided the RES stable and have been
tactical around a core underweight
Credit spreads tightening: Reducing our overweight IG, still value
2019 ytd sources of return:
ZAR rallied 2%: Exposure to EM has reduced the drag
Bonds rallied 1.6%: Disinflation theme still in play, politics and
global result in extreme choppiness
Property rallied 4%: Reducing strategic underweight with tactical
opportunities, offshore property helping
Credit spreads tightening: Bank spreads continue to tighten, still
value, reducing our overweight IG
7.3
9.6
0.39
1.21
0.49 0.14 0.09
0.95
4.5
5.5
6.5
7.5
8.5
9.5
10.5
%
7.5
9.1
0.73
1.09
0.77 0.36
0.20
0.83
4.5
5.5
6.5
7.5
8.5
9.5
10.5
%
2.4
3.40.08
0.40
0.01
0.08
0.50
0.07
1.5
1.8
2.2
2.5
2.8
3.2
3.5
Cash
hurdle
Bonds
income
IG
income
Bonds
capital
IG capital Property
& RV
FX Total
%
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1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
4.5%
5.5%
6.5%
7.5%
8.5%
9.5%
10.5%
11.5%
12.5%
13.5%
14.5%
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Repo Rate - LHS CPI - RHS
Where is the economy now?
Very little inflation with growth question marks…should allow SARB to cut
Source: Investec Asset Management as at May 2019 Source: Investec Asset Management as at May 2019
GDP forecastsInflation and repo rate forecasts
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
agriculture mining
manufacturing utilities
construction internal trade
transport & communication finance
govt personal services
total
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Moody’s and Eskom are our challenges
Can we deliver…
Source: Investec Asset Management
● GDP weakness is credit negative
● Debt profile looking terrible
● Budget deficit worsening
● Delivery the risk
● Still no CRO in place
● Government bailout needed
● Will SONA give a credible plan
● Delivery is now essential
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Elections – what we were expecting (hoping for)?
The CR trifecta
Now for delivery and accountability
ANC above 57%
ANC majority in Gauteng
EFF around 10%
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The world seems a crazy place…
Making sense of recent volatility
Source: World Inequality Report 2018 Source: Investec Asset Management and UBS, January 2019
This should support emerging markets
Declining central bank support
But the FED is stepping back And can China step-up the pace
China Debt/GDP
Sector debt (% of GDP)
0
50
100
150
200
250
300
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Bank Corporate Government Household
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Credit philosophy
Why is IG credit a pillar for any SA Fixed income portfolio?
Our IG philosophy leans heavily on the “Credit Spread Puzzle”:
The extra spread you earn more than compensates you for any
potential loss
Manage the return profile by:
● Avoiding single name events through bottom up analysis
● Building a diversified portfolio of names
● Avoiding overpaying through top down asset allocation
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SA credit has had a good year
Spread tightening evidences significant demand for quality in an undersupplied market
Source: Investec Asset Management / RMB. January 2019
● Fundamentals: Constrained macro outlook
suppress issuance volumes. 2019 volumes
anchored by Bank and Corporate
refinancing requirements, possible upside
surprise from SOEs
● Technical: banking regulation continues to
support listed debt as an attractive
alternative to bank funding on a through the
cycle basis
● Valuations: Tightening credit spreads facing
resistance in fundamentally weak macro
environment. Prefer value offering of longer
dated banks & fundamentally sound
corporates. SOE’s reform may present
opportunity
● Our established origination capability
unlocks IG opportunity in the unlisted space
Listed Credit Spreads
0
50
100
150
200
250
Jan-05
Oct-07
Aug-10
May-13
Mar-16
Jan-19
bp Consolidated spreads (loating rate)
10-y average
+/-Std dev
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Low 4% 0% 45% 1% 3%
Neutral 13% 24% 58% 5% 12%
High 39% 40% 71% 8% 19%
Current 22.5% 14.6% 58.6% 3.1% 6.6% 0.8%
0%
25%
50%
75%
100%
Cash Bonds Credit Property FX Alternative
Overweight Underweight Current
Investec Diversified Income Fund
Balancing encouraging valuations with imported volatility
* Excludes NCDs
Source: Investec Asset Management as at 31 May 2019
● Local disinflation theme, valuations are
encouraging
● Medium term USD tightening theme –
volatility to stay, active in FX
● Reducing property underweight
● Maintaining allocation to high quality credit
names
Duration Exposure
Nominal 0.77 USD 3.5%
ILBs 0.12 EUR 1.0%
Years 0.89 GBP 0.0%
AUD 0.0%
JPY 0.0%
CAD 0.0%
EM 2.1%
FX 6.6%
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Investec Asset Management
Looking ahead
Invest with us to Participate & Protect
● There is no inflation
● Global central banks are cutting
● SARB will follow
● SA governance is on the mend
● There is income on the table
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Important information
All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do
not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a
thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security.
Collective investment scheme funds are generally medium to long term investments and the manager, Investec Fund Managers SA (RF) (Pty) Ltd, gives no guarantee with
respect to the capital or the return of the fund. Past performance is not necessarily a guide to future performance. The value of participatory interests (units) may go down as
well as up. Funds are traded at ruling prices and can engage in borrowing and scrip lending. The fund may borrow up to 10% of its market value to bridge insufficient liquidity.
A schedule of charges, fees and advisor fees is available on request from the manager which is registered under the Collective Investment Schemes Control Act. Additional
advisor fees may be paid and if so, are subject to the relevant FAIS disclosure requirements. Performance shown is that of the fund and individual investor performance may
differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. There are different fee classes of units on the
fund and the information presented is for the most expensive class. Fluctuations or movements in exchange rates may cause the value of underlying international investments
to go up or down. Where the fund invests in the units of foreign collective investment schemes, these may levy additional charges which are included in the relevant TER.
Additional information on the funds may be obtained, free of charge, at www.investecassetmanagement.com. Investec Asset Management (Pty) Ltd (“Investec”) is an
authorised financial services provider and a member of the Association for Savings and Investment SA (ASISA).
Investment Team: There is no assurance that the persons referenced herein will continue to be involved with investing for this Fund, or that other persons not identified herein
will become involved with investing assets for the Manager or assets of the Fund at any time without notice.
Investment Process: Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any
present or future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for
illustrative purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. Portfolio data is
expected to change and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available
in the future at the levels presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability
of Manager to construct the illustrative portfolio and implement its investment strategy or investment objective.
In the event that specific funds are mentioned please refer to the relevant minimum disclosure document in order to obtain all the necessary information in regard to that fund.
This presentation is the copyright of Investec and its contents may not be re-used without Investec’s prior permission.
