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2023-03-04 3:48 AM

FNB growth fund of funds review 2023

By Lethabo Ntsoane

The growth fund of funds is a unit trust specifically designed for those who want to invest for a period of 7 years or more. However, this does not preclude those looking to invest for the short term from investing in the fund.

Since there aren’t any capital guarantees with a growth fund investment, short-term investments run a high risk of capital exposure due to the fund’s volatility.

The FNB growth fund is highly volatile due to its aggressive benchmark of CPI + 5%. The fund is intended to protect against 25% downturns or annualised volatility of 12%.

Given the specifications, it is clear that the fund is expected to drop dramatically from time to time. Since its inception, the fund has produced positive returns on investment. 

The fund has returned an average of 6.87% per year. However, the fund fell short of the 3.01% average during the period, while the benchmark achieved 9.88% growth.

FNB Growth Fund of funds has achieved the highest 12-month low of 10.50%. However, the fund is capable of providing investors with above-average returns.

The fund’s highest 12-month high is 33.35%, which is unusually high for a fund managing billions of rands.

The fund invests in a variety of assets and has sufficiently diversified to mitigate risks. FNB growth fund of funds has the highest asset allocation in equities, accounting for 67.97% of the fund’s assets.

Investing in the fund necessitates careful consideration of what the fund offers and how you can use the fund to your advantage. Continue reading to fully grasp the facts of the fund, which is explained in detail below.

FNB Growth Fund of Funds Facts

The FNB growth fund of funds is a unit trust that invests in a number of local and foreign assets. The fund is administered by FNB and has Ashburton Fund Managers as its investment manager. The fund uses a multi-manager system to manage the fund and has 10 management partners in place to steer the fund on the desired path. 

The FNB growth fund of funds has the following manager allocations:

#ManagerAllocation percentage
1Passive46.79%
2Ashburton Fund Managers 19.34%
3Truffle Asset Management 6.53%
4Aylett & Co6.29%
5Coronation Fund Managers 5.34%
6Ninety One 4.83%
7Fairtree4.91%
8Abax Investments 3.59%
9Sesfikile Capital 0.26%
10Stanlib0.19%

The FNB growth fund of funds has a 1 221 631 787 participatory interest, and each unit is sold for R1.29.  The fund’s current valuation is R1.58 billion. With such a large fund to manage, Ashburton Fund Managers devised a strategy for allocating funds to assets. 

The asset allocation is as follows: local equity 50%, international investments 25%, local fixed income 10%, local property 10%, and local cash 5%.

The majority of the fund’s investments are currently in equities. Furthermore, the current real asset allocation differs from the established strategic asset allocation slightly. The following is the current asset allocation:

  • Local equity with 47.55%;
  • International equity with 20.42%;
  • Local fixed income with 15.76%;
  • Local property with 5.18%;
  • Local cash with 3.50%;
  • International cash with 1.76%; and
  • International fixed income with 5.82%.

How the FNB growth fund of funds work

To achieve objectives, the FNB growth fund of funds combines passive and active funds through sophisticated portfolio construction. The fund is managed by a multi-manager comprised of ten firms that manage the fund’s facets. As a result of using the CPI + 5% benchmark, the fund is forced to invest in highly volatile assets.

With respect to its objective and the benchmark it seeks to match, the FNB growth fund of funds is considered a moderate to high-risk investment.

Equities account for 67.97% of the fund’s assets. The fund is Regulation 28 compliant due to its investment in domestic and international equity holdings.

Regulation 28 of the Pension Funds Act 24 of 1956 specifies that investment for pension purposes should not be exposed to 75% or more in equities investment. Equities investment includes both local and foreign equities. In the case of the FNB fund of funds, the equities investment is below 75% of the portfolio. 

When investing in the FNB growth fund of funds, an investment vehicle will have to be chosen. One can choose from a wide range of investment vehicles to invest in the product. For example, a retirement annuity can be used to invest or a TFSA

Investment in the FNB growth fund of funds comes with costs. The most common cost that is billed by the fund is the annual management fee which is levied at 0.99%. Costs associated with managing and operating the fund are levied at 1.21%. Total investment charges are levied at 1.38% while transaction costs are levied at 0.17%.

Advantages of the FNB growth fund of funds

  • The fund is multi-managed and each fund manager manages parts of the fund.
  • Investment into the fund is easy and can be done through a number of investment vehicles.
  • There is no minimum investment criteria, therefore, investors will invest according to their budget.
  • Switching from or to the FNB growth fund of funds is possible.
  • The fund is set to compete with a very ambitious benchmark.

Disadvantages of the FNB growth fund of funds

  • Since its inception, the fund has fallen short of its benchmark.
  • The fund is classified as moderate-to-high risk.
  • Capital contributed to the fund is not guaranteed.

Conclusion

The FNB growth fund of funds is a volatile investment fund that generates favourable returns over the long term. An investment in the fund is suitable for investments such as retirement annuities or living annuities, which don’t require immediate access to cash invested and has a certain waiting period. This helps the investment to grow in the long term as short-term decreases may take place. 

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo

Tags: FNB