A relatively safe haven
IF IT ISN'T Greece threatening to sink Europe with its debt woes, then it's concerns about Chinese growth and attempts by regulatory authorities to put the brakes on consumer and business spending or an overly buoyant equity market. With so much uncertainty, many professional money managers are suggesting investors err on the side of caution,
One fund that investors may consider for such rocky times is the Coronation Strategic Income Fund, which is a low-risk offering for investors seeking a product offering defensive asset allocation. The fund is able to invest in both South African and international govern­ment and corporate bonds, listed property, preference shares and inflation-linked bonds and has a nine-year trading history.
However, fund manager Mark le Roux cautions clients that 2011 is likely to be an interesting year for the global bond market.
"As quantitative easing programmes start being wound down, we expect supply issues will continue to dominate US and other developed bond markets. And at some stage - though now it's looking more likely to be in 2011 - major central banks will have to start reversing emergency low levels of interest rates as well. It's therefore difficult to see an outcome where global bond yields don't continue rising into 2011 and that will almost certainly also have an impact on SA yields."
Over the past 12 months the fund has performed in the top quartile of its sector peers, sitting at seventh place out of 37 funds with a five-year return of 44%.
One aspect to take into consideration is that the fund is unlikely to outperform the money market funds in a rising interest rate environment. If the economic recovery
continues to take hold, interest rates may start to rise next year. However, this fund potentially provides a strategic place for investors to park their money over the next six to 12 months.