Manager Research

The recent change to Regulation 28 to increase the offshore ex-Africa allocation by 5% to a total of 30% has resulted in Nedgroup Investments changing the asset allocation of their passive multi-asset range of funds.

The magnitude of these changes has been determined by the Nedgroup Core team through intensive back testing of various scenarios. We are happy that the changes have been sufficiently tested and thought out, and as such we retain our positive Tier 1 ratings on all 3 funds.

The changes per fund are detailed below:

Fund Name: Nedgroup Investments Core Guarded Fund

Sector: ASISA Multi-Asset Low Equity

CPI+ Target: 3% over rolling 3-years

Current Fundhouse Rating: Tier 1

The Nedgroup Core Guarded Fund is a passive-multi asset fund that sits within the multi-asset low equity sector. The fund targets CPI+3% over a rolling 3-year time horizon. The fund is designed to operate as a low-cost passive ‘core’ holding within a lower risk client’s portfolio.

The fund has operated since inception with a strategic offshore allocation below the maximum limits as set by regulation 28 (25% offshore ex-Africa). There has thus been no change proposed by Nedgroup to the asset allocation of the fund. Nedgroup feel that they can achieve their return target optimally through the current asset allocation structure, the increased volatility that a higher offshore allocation would introduce into the fund would not be optimal given their moderate return objectives.

Fund Name: Nedgroup Investments Core Diversified Fund

Sector: SA Multi-Asset High Equity

CPI+ Target: 5% over rolling 5-years

Current Fundhouse Rating: Tier 1

The Nedgroup Core Diversified Fund is a passive-multi asset fund that sits within the multi-asset high equity sector. The fund targets CPI+5% over a rolling 5-year time horizon. The fund is designed to operate as a low-cost passive ‘core’ holding within a moderate risk client's portfolio. The fund has operated since inception close to the maximum offshore limits as set by regulation 28. The regulation change has thus triggered a change to the fund’s strategic asset allocation. Nedgroup feel that they can achieve their return target optimally through the new asset allocation structure with marginally increased offshore exposure. The changes are detailed in the table below:

The changes for Core Diversified are to decrease both SA Equity and SA Bond exposure by 0.5% and increase Global Equity and Global Property exposures by the same amount. These changes have the net effect of increasing the offshore exposure by 1% and increasing the growth asset exposure by 0.5%.

Fund Name: Nedgroup Investments Core Accelerated Fund

Sector: SA Multi-Asset High Equity

CPI+ Target: 6% over rolling 7-years

Current Fundhouse Rating: Tier 1

The Nedgroup Core Accelerated Fund is a passive-multi asset fund that sits within the multi-asset high equity sector. The fund targets CPI+6% over a rolling 7-year time horizon. The fund is designed to operate as a low-cost passive 'core' holding within a high-risk client’s portfolio. It is designed to give investors with a long-time horizon, who are saving for retirement, maximum exposure to risk assets within the confines of regulation 28. The fund has operated since inception at the maximum offshore limits as set by regulation 28. The regulation change has triggered a change to the fund’s strategic asset allocation. Nedgroup feel that they can achieve their return target optimally through the new asset allocation structure with materially higher offshore exposure. The changes are detailed in the table below:

The changes for Core Accelerated are a direct swap of SA Equity for Global Equity. There is no net change to growth asset exposure but an increase of the offshore exposure by 2.5% for the fund.