The Money Market Fund’s goal is to maintain the value of your investment, allowing you to access your money whenever you need it, while generating a sound level of income. We target returns higher than a bank deposit, and performance is measured against the Alexander Forbes Short T er m Fixed In ter est ( STeFI ) 3-month Index .
While this is a very low risk parking place for your money, it is not entirely risk free. Losses can occur if one of the issuers of an instrument we invest in defaults. Returns from this unit trust may not keep up with inflation, which means that the value of your investment may decline in real terms over time.
The 'factsheets' contain all the information and disclosures as required by the Financial Sector Conduct Authority (FSCA) to be included in minimum disclosure documents and general investor reports.
While South Africa’s overnight interest rate was again left unchanged at 8.25% following the May meeting of the Monetary Policy Committee, the market had already moved to reduce one-year bank deposit rates from 9.30% in April to 8.85% at present, or 0.45% lower. This reflects market exuberance wi.
While South Africa’s overnight interest rate was again left unchanged at 8.25% following the May meeting of the Monetary Policy Committee, the market had already moved to reduce one-year bank deposit rates from 9.30% in April to 8.85% at present, or 0.45% lower. This reflects market exuberance with the results of the SA elections and the formation of a government of national unity (GNU), which includes the Democratic Alliance. A more confident SA market and a stronger rand can bleed into lower imported cost inflation and therefore have the potential to ease inflationary pressures from fuel and certain food items. As such, the SA market now prices for two to three interest rate cuts over the next two years.
History doesn’t repeat itself, but it often rhymes. During 2017, market exuberance following Cyril Ramaphosa’s election as president of the African National Congress saw a similar move in interest rates. Ramaphoria, as the period came to be known, saw one-year money market rates decline by 0.45% over the month of December 2017 despite no change in the overnight rate. Casting one’s eye a year forward to the end of December 2018, rate cuts had not sustainably emerged and one-year bank money market rates were in fact higher than they had been pre-Ramaphoria with the rand weaker alongside it.
A lesson to be learned from this experience is that given the interwoven nature of the global economy and consumed goods, the path of short-dated interest rates can struggle to sustainably decline if global inflation misbehaves. In 2018, US inflation deviated from the Federal Reserve’s 2% target and rose to almost 3%. The inflation figure is similar today. In May 2024, US inflation printed at 3.3% and the seven exuberant interest rate cuts priced into markets back in January 2024 have yet to materialise. The US labour market continues to be robust and consumers have been spending record amounts on items like travel.
Another key takeaway from the Ramaphoria period is that political goodwill alone cannot change the path of our country. For this time to be different, we need highly capable leaders to execute their mandates effectively after many years of decline in key government departments. Only the right mix of ingenuity and skill can improve South Africa’s growth prospects and ultimately reduce unemployment. Some political parties have, for example, put forward ideas for revamping Home Affairs and resolving the ongoing tourist visa issues, which frustrate this sector of the economy. Strong leaders in the right roles in such departments could have a tangible impact, as we saw when Edward Kieswetter turned the South African Revenue Service (SARS) around after state capture had eroded its operational ability and institutional integrity. Only time will tell if we will see a similar rebuild take place on a grander scale as the GNU and the newly appointed ministers find their feet.
In the last quarter, the Fund raised its exposure to short-dated Government Treasury Bills as six-month government yields rose to be 0.5% wider than the equivalent bank money market deposits. The Fund’s weighted average yield (gross of fees) declined over the quarter from 9.47% to 9.40% as the Fund began to reinvest deposit maturities at the lower prevailing term interest rates.
Commentary contributed by Thalia Petousis
as at 31 July 2024
Benchmark: The Alexander Forbes Short Term Fixed Interest (STeFI) 3-month Index. From inception to 31 March 2003, the benchmark was the Alexander Forbes 3-Month Deposit Index. From 1 April 2003 to 31 October 2011, the benchmark was the Domestic Fixed Interest Money Market Collective Investment Scheme sector excluding the Allan Gray Money Market Fund. From 1 November 2011 to 19 August 2024, the benchmark was the Alexander Forbes Short Term Fixed Interest (STeFI) Composite Index.
Annualised returns: This is a way of reporting the return earned over a period as a percentage per year. Although the figure stated implies that the same percentage return was delivered every year, the actual return in each year may have been more or less than the reported figure, depending on the unit trust’s volatility. Annualised performance reporting simplifies comparison across different time periods and across different types of investments.
To view the current and historic yields for the Allan Gray Money Market Fund, go to the Performance tab on our Latest prices, factsheets and performance page.
as at 31 July 2024
Maximum drawdown (%) Highest annual return (%) Lowest annual return (%)To achieve the Money Market Fund’s goal, we invest in selected money market instruments issued by government, corporates and banks. We select investments based on our analysis of interest rates, inflation and Reserve Bank policy. We typically hold investments until they mature and we take a conservative approach to credit risk.
as at 31 July 2024
All the Money Market Fund’s expenses, including the investment management fee, are deducted before performance figures are calculated. There are no separate or additional costs. The total investment charge is broken down below:
Investment management fee 1
Benchmark performance 4
Out- or underperformance 5
Other expenses 2
Total expense ratio (TER) 3
Total investment charge
1 Investment management fees are charged for the investment manager’s investment research and decision-making.
2 This includes audit fees, taxes and other administration costs.
3 This is a measure of the actual costs that have been deducted from the unit trust over the past three years to 30 June 2024 (annualised).
4 The fee charged for benchmark performance.
5 The portion of the investment management fee that is charged for performance above the benchmark performance.
A fixed fee of 0.25% excluding VAT is charged on an ongoing basis.
Note: There may be slight discrepancies in the totals due to rounding.
The Allan Gray Money Market Fund is not a bank deposit account. The unit trust aims to maintain a constant price of 100 cents per unit. The total return an investor receives is made up of interest received and any gain or loss made on instruments held by the unit trust. While capital losses are unlikely, they can occur if, for example, one of the issuers of an instrument defaults. In this event investors may lose some of their capital. To maintain a constant price of 100 cents per unit, investors’ unit holdings will be reduced to the extent of such losses. The yield is calculated according to ASISA standards. Excessive withdrawals from the unit trust may place it under liquidity pressure; if this happens withdrawals may be ring-fenced and managed over a period of time. Collective Investment Schemes in Securities (unit trusts) are generally medium- to long-term investments. Past performance is not necessarily a guide to future performance. The Management Company does not provide any guarantee regarding the capital or the performance of its unit trusts. Unit trusts may be closed to new investments at any time in order for them to be managed according to their mandates. Unit trusts are traded at ruling prices and can engage in borrowing and scrip lending.
Performance figures are provided by Allan Gray and are for lump sum investments with income distributions reinvested. Actual investor performance may differ as a result of the investment date, the date of reinvestment and dividend withholding tax. Movements in exchange rates may also be the cause of the value of underlying international investments going up or down. Unit trust prices are calculated on a net asset value basis, which is the total market value of all assets in the unit trust including any income accruals and less any permissible deductions from the unit trust, divided by the number of units in issue. Forward pricing is used and unit trust valuations take place at approximately 16:00 each business day. Purchase and redemption requests must be received by 11:00 each business day to receive that day’s price. Unit trust prices are available daily on our prices page. Permissible deductions may include management fees, brokerage, Securities Transfer Tax (STT), auditor’s fees, bank charges and trustee fees. A schedule of fees, charges and maximum commissions is available on request from the Management Company.
The annual management fees charged by both Allan Gray and Orbis (if applicable) are included in the Total investment charge. The total expense ratio (TER) is the annualised percentage of the Fund’s average assets under management that has been used to pay the Fund’s actual expenses over the past three years. The TER includes the annual management fees that have been charged (both the fee at benchmark and any performance component charged), VAT and other expenses like audit and trustee fees. Transaction costs (including brokerage, Securities Transfer Tax [STT], STRATE and Investor Protection Levy and VAT thereon) are shown separately. Transaction costs are a necessary cost in administering the financial product and impacts financial product returns. They should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of financial product, the investment decisions of the investment manager and the TER. Since Fund returns are quoted after the deduction of these expenses, the TER and transaction costs should not be deducted again from published returns. As unit trust expenses vary, the current TER cannot be used as an indication of future TERs. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. Instead, when investing, the investment objective of the Fund should be aligned with the investor’s objective and compared against the performance of the Fund. The TER and other funds’ TERs should then be used to evaluate whether the Fund performance offers value for money. The sum of the TER and transaction costs is shown as the total investment charge.
You can obtain additional information about your proposed investment from Allan Gray free of charge. Simply email info@allangray.co.za or call our Client Service Centre on 0860 000 654.
