FNB income fund of funds review 2023

Published by
Lethabo Ntsoane

The FNB income fund of funds is the best choice for people who want to participate in a low-risk investment that generates returns that are above average. This absolves the investor of all investing duties, including conducting research and making investment decisions. Given that the fund will be run by several award-winning fund managers, the investor will simply need to evaluate the fund’s performance.

The FNB income fund of funds invests mostly in cash and has 66.62% of the fund’s assets in local currency. The FNB Income Fund of Funds is one of the few FNB-managed funds to prioritise equity investments in just about any form. However, the portfolio is still diverse enough to invest in a number of asset classes. 

The fund is in compliance with Regulation 28 because it invests only 5% of its portfolio in equities, which is a relatively small amount. A fund must invest no more than 75% of its asset value in equity funding in order to accept pension investments, according to Regulation 28 of the Pension Funds Act 24 of 1956.

Pension investments are permitted in the FNB income fund of funds since it complies with the rule. One can invest using investment vehicles like preservation, endowment, retirement annuities, and living annuities. 

The fund has a low rate of volatility, and there is less risk associated with exposure to short-term capital. Due to its minimal fluctuation, this makes the fund a low-risk investment. The fund is not expected to have 2% drawdowns or 2% annualised volatility.

The FNB income fund of funds is a highly specialized product with a special purpose. Continue reading as we go into more information about the fund’s makeup and operation below to help you understand it better. 

FNB income fund of funds summary

Since its debut on July 1, 2016, the FNB income fund of funds has produced excellent returns. The fund’s benchmark is the very conservative CPI + 1%. Due to the benchmark, the fund attempts to generate the majority of its income from local cash and doesn’t invest heavily in shares.

Given that it is only 6 years old, the fund’s current value of R597.51 million is substantial. The fund has 574 311 117 units, which are offered at R1.04 each. Ashburton Fund Managers has been chosen as the investment manager for the FNB income fund of funds.

To meet its objectives, the fund employs a straightforward asset allocation strategy. The fund deploys the investment in accordance with the asset allocation plan as follows: 70% local cash, 15% local fixed income, 5% foreign assets, 5% local equities, and 5% local real estate.

Currently, the fund allocation marginally deviates from the mandate established for the fund. Local cash assets make up 66.62% of the fund’s investments, followed by local fixed income assets (32.26%) and local property at 1.13%. The fund has no overseas investments as of this date.

A multi-manager system is used to handle the fund. With a management allocation of 92.16% of the fund, Ashburton Fund Managers, handle the majority of the fund. Among the other fund managers, Passive, Sesfikile Capital, and Stanlib are responsible for 6.33%, 0.92%, and 0.74% of the total capital, respectively.

There are numerous ways to invest in the FNB income fund of funds. Since the fund complies with Regulation 28, it can be used to make investments relating to pensions. Depending on the sort of investment one wants to make, one can choose an investment vehicle from a variety of possibilities accessible at FNB before investing in the fund.

How the FNB income fund of funds work

The FNB income fund of funds invests mostly in local cash assets and is a low-risk investment vehicle. As a result, the fund is best suited for investors looking for a less volatile investing alternative over the short to medium term. The investment horizon for the fund is set at 1 to 2 years.

An investment instrument must be selected before making an investment in the FNB income fund of funds. With the fund, one can invest for retirement, for a specific goal, or for the foreseeable future. The investor will have to choose which investment vehicle to use when investing.

There are expenses associated with investing in the FNB income fund of funds. The Annual Management Fee, which is levied at 0.62%, is the most common expenditure. The fund’s management and maintenance expenses are charged at a rate of 0.61%.

Transactions can be done from the fund which includes the purchasing and selling of units as well as switching from one unit trust to another. FNB levies a transaction fee of 0.02%. The final expense is the total investment fee, which is charged at 0.63%.

Advantages of the FNB income fund of funds

  • Fees that are associated with the fund are very low.
  • The fund provides low-risk investments to investors.
  • The fund has managed to outperform its benchmark since its inception.
  • There is no minimum deposit required; therefore, investors can invest according to their budget and investment needs.
  • There are multiple managers involved in realizing the objectives of the fund, which provides a diversity of thought.
  • The fund is a good option for those that want to invest for the short to medium term.

Disadvantages of the FNB income fund of funds

  • There is no guarantee in the capital that is made to the fund.
  • Long-term investments may be set back since the fund doesn’t invest in highly volatile asset classes.

Conclusion

Investors in the FNB income fund of funds receive predictable returns, and the fund seeks moderate returns, resulting in reduced exposure for the fund. The investment fund is perfect for a highly cautious investor seeking steady returns over the short- to medium-term. The fund is more appealing as a safer investment option for investors because it is low risk and has outperformed its benchmark since its inception.

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