The Absa Balanced Fund is a unit trust that aims to increase investment returns over the medium to long term by investing in a diversified range of assets. The fund requires a minimum lump sum contribution of R2,000.00. Additionally, individuals who are unable to contribute a lump sum may contribute R200.00 per month to the fund, allowing for both lump sum and monthly installment contributions.
The Absa Balanced Fund was established on June 1, 1994, and has since expanded to include class A and class C1 investments. Class A was introduced on October 2, 2000, and Class C1 was introduced on March 26, 2013. Over time, the fund has grown to a size of up to R1.66 billion, making it one of the most well-funded funds in South Africa.
Compliant with Regulation 28, the Absa Balanced Fund is suitable for retirement investments. Retirement investment vehicles such as pension, provident, and preservation funds can invest in the balanced fund. Furthermore, the fund is compatible with annuities due to its favorable performance since inception. A living annuity is particularly well-suited for the fund as it offers higher returns compared to fixed deposits or CPI.
Absa Asset Management is responsible for managing the fund and making decisions regarding capital allocation. As the investor will not be directly managing their investment in the fund, a management fee is charged. Class A investments incur a 1.73% management fee, while Class C1 investments have a 0.98% management fee.
To gain deeper insights into the fund, let’s explore its historical performance and composition in the following sections.
The Absa Balanced Fund benchmark is CPI + 5% per annum rolling over 60 months. The fund has consistently outperformed its benchmark, occasionally exceeding expectations.
Since its inception, the Absa Balanced Fund has achieved an average annual growth rate of 10.89%. In comparison, the benchmark had an annual growth rate of 10.51% during the same period, representing a 0.38% higher return for the fund.
Investing in a fund based on its growth potential is always advantageous. By reinvesting annual earnings, investors can capitalize on the power of compound interest and potentially earn even higher returns.
It’s important to note that the Absa Balanced Fund does not always outperform its benchmark and may sometimes underperform. For instance, during the period from 2018 to 2023, the fund recorded an average annual growth of 7%, whereas the benchmark achieved an average annual growth of 9.75%, indicating a 2.75% higher return for the benchmark.
The returns of the Absa Balanced Fund fluctuate in line with the fund’s performance. Consequently, the invested capital experiences short-term fluctuations, which can be offset by maintaining a long-term investment horizon.
The fund experienced significant positive changes in 2005, achieving a 12-month increase of 42.86%. However, it also recorded notable lows of -13% over a 12-month period, which occurred during the 2008 financial crisis and represents the largest decrease ever recorded.
Given the fund’s historical performance, it is not surprising that it exhibits significant fluctuations. Investors with a long-term perspective are less concerned about these fluctuations.
To gain a comprehensive understanding of the fund, let’s examine its portfolio composition and how client capital contributions are allocated.
The Absa Balanced Fund comprises various assets and invests in a diverse range of assets, both locally and internationally. Equities make up the majority of the portfolio, accounting for over 55% of the fund. The fund holds equities from both domestic and international companies.
Bonds are the second largest asset holding in the fund’s investment portfolio, representing 20% of its assets. The fund exclusively invests in local bonds with a fixed rate of return.
Money market instruments constitute 9% of the portfolio, while international real estate makes up nearly 9% of the portfolio.
Here is a clearer representation of how the fund’s assets are allocated in the table below:
| Asset | Portfolio Percentage |
| Equity | 34.84% |
| Property | 2.84% |
| Preference shares | 1.31% |
| Fixed rate bonds | 20.11% |
| Floating rate bonds | 0.00% |
| Money Market | 9.13% |
| International Equity | 22.51% |
| International fixed interest and property | 8.98% |
| International money market. | 0. 29% |
The Absa Balanced Fund ranks among the top-performing funds in its category, offering significant long-term returns. It is best suited for individuals looking to save for retirement and access their funds at a later date. However, those seeking speculative investments should avoid this fund due to its potential volatility in the short run.
This website uses cookies.
