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Absa Absolute Fund Review 2023

Absa Notes

The Absa Absolute fund is a unit trust with a medium to high risk that invests in various assets, including equities, real estate, and bonds. Established on November 20, 2006, the fund has a long track record of positive returns.

The fund has two classes: Class C1, which debuted on March 7, 2013, and Class A, which debuted in 2006. The fund’s benchmark is CPI + 4% PA over a 36-month rolling period.

Class A is priced at 4.34 ZAR cents per unit, while Class C1 is priced at 5 ZAR cents per unit. The Absa Absolute fund is an R3 billion fund that trades on the Johannesburg stock exchange.

Investment Options and Performance

The fund requires a minimum lump sum of R2,000.00 for investment. Investors who do not want to pay a lump sum can make a monthly contribution of R200.00. Alternatively, investors can invest a lump sum of R2,000.00 and make a monthly contribution of R200.00.

Since its inception, the Absa Absolute fund has delivered solid returns on investment. However, the fund has not outperformed its benchmark, but rather has lagged behind it. Class A has grown at an annual rate of 7.86%, while Class C1 has grown at a rate of 6.61%. The benchmark has grown by 9.68% since the fund’s inception.

When compared to the benchmark, the Class A fund’s growth has underperformed by 1.82%. However, Class A performed significantly better than the sector average during the same period, with a better growth rate of 0.20%. The Absa Absolute fund can be volatile at times, causing investments in the fund to increase or decrease in value. Since its inception, Class A investments have delivered an average annual return of 15.49%. Its lowest year performance is 3.29%, indicating that the fund is not overly volatile.

Asset Allocation

The fund is invested in a number of assets, with the highest percentage of assets being South African-held. South African equities make up 25.73% of the portfolio, followed by FRNs at 23.48%, offshore investments at 21.80%, cash at 11.69%, fixed-rate bonds at 9.78%, inflation-linked bonds at 3.82%, and South African property at 3.70%.

The fund invests heavily in South African equities, with many different stocks in its portfolio and a substantial shareholding in a few companies. The following table shows the top shareholdings that the Absa Absolute fund holds.

Top Shareholding 
FirstRand 1.30%
Standard Bank1.12%
Sanlam1.09%
Kaapagri1.04%
Spar Group Limited1.03%
Absa Group Limited 1%
Oceana0.98%
MTN Group0.91%
Bidvest 0.86%
Mr Price0.83%

Fees and Costs of The Absa Absolute Fund

The Absa Absolute Fund does not charge an initiation or performance fee. On Class A investments, there is an adviser fee of 3.45% of the investment, while there is no adviser fee on Class C1 investments.

The fund charges a 1.73% management fee on Class A investments and a 0.98% fee on Class C1 investments. Total investment fees for Class A investments are 2.04%, while fees for Class C1 investments are 1.29%.

Advantages of Absa Absolute Fund

  • The Absa Absolute Fund provides a moderate risk investment that is available to different types of investors.
  • The minimum required lump sum or monthly contribution is low.
  • The fund managers are well qualified to run the fund.
  • The fund has shown positive results since its inception.
  • The fund offers moderate risk and is not overly volatile.
  • The fund’s investment portfolio is well diversified.

Disadvantages of Absa Absolute Fund

  • Investments in the fund may decrease from time to time.
  • Those seeking high returns on investment may not benefit much from the fund, as it offers moderate risk.

Conclusion

The Absa Absolute Fund has a track record of producing positive returns on investment. Even during the Covid-19 pandemic, the fund was able to avoid risks and provide favorable returns over the medium to long term. This makes investing in the fund appealing to those looking for a less risky investment that can earn returns that outperform the inflation rate.

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