Market Updates

Sanlam High Income Real Return Fund – Fund Closure

June 25, 2021 – Written by James Baxter

Very little movement in investment markets over the last two weeks; inflation is a worry, inflation isn’t a worry, being the main debated topic against a backdrop of global economies getting back to a new normal. There is no doubt that somethings have changed for ever. We think we are well placed either way, so the good news is we don’t feel we have to speculate on either outcome.

As signposted last month the Sanlam High Income Real Return fund is closing this week and Nick Gait highlights the fund we are reinvesting in. It is another Sanlam fund which we have had in our sights as a replacement for quite some time and it is managed by a completely different team to the team who left Tideway just over a year ago.  Like many fund management businesses Sanlam operates a franchise model, attracting investment talent and providing them with support and most importantly marketing power to grow the fund sizes. This is working well for the fixed income team with the Hybrid fund rapidly approaching £200m. In the Real Return/Multi Asset space Sanlam already had a very competitive offering and we will be investing in a fund already at c£450m.

We are, of course, good customers of Sanlam Asset Management, which means we get preferential treatment in terms of the access Nick gets to the investment teams to enable him to keep a track of what they are up to and, most importantly, preferential pricing. We have been able to negotiate access to the restricted founder share class in the case of this new (for us) fund which means our clients will pay a 33% lower annual management fee at 0.5% p.a. versus the 0.75% p.a. investors would pay if they bought it at the UK’s largest discount fund platform, Hargreaves Lansdown.

The whole area of defensive or ‘absolute return’ fund investing is a difficult area and as can be seen in Nick’s charts below, it’s very hard to avoid some price volatility in extreme circumstances like we saw in 2020. The trick we think is not to spend too much of a fund’s returns hedging out risks that never happen, which drags down returns below our target levels. With this new fund we are not only buying in to a great track record, but also a talented manager who seems to get the balance of risk and reward about right as Nick explains here.

Sanlam Multi Strategy Fund – Managed by Mike Pingerra

Investment Update, 11/06/2021