The Pointbreak Money Market Fund has as its primary objective to provide money market returns with 24-hour liquidity, with capital preservation and liquidity taking precedence over the maximisation of yield.
The Bank of Namibia and the South African Reserve Bank have already cut rates twice this year, during March and April, to take the bank rate to 4.25%, largely to cushion the economic impact caused by the Covid-19 pandemic.
Commercial bank deposit rates have also dropped in line with these moves, with the 12-month Wibar declining by 2.25% and the commercial banks’ call rate dropping by 1.90% to 4.65% since the beginning of February.
Bank deposit rates have continued to edge lower because of market conditions and excess cash liquidity in the banking system. There is a possibility that the bank rate drops again this year.
To date, the Pointbreak Money Market Fund yield has dropped by 0.55% over the comparable three-month period. Forecasting models indicate that the fund’s yield should under current market conditions experience a gradual decrease over the next few months. The fund’s investment strategy and maturity duration of 133 days is expected however to result in the yield falling at a slower pace compared to the bank deposit rates. Investors benefit from the fund’s maturity profile consisting of longer dated, higher yielding money market deposits and securities.
The Pointbreak Money Market Fund has always been competitive and would prefer to remain so, compared to local cash and other money market alternatives. The money market fund yield is influenced by Bank of Namibia’ rate cuts as well as market and economic conditions.
“In light of current economic uncertainties and market conditions the fund has increased the cash reserve to just over 20% of the fund from an average of 15% before the Covid-19 crises. Capital preservation and liquidity will always take precedence over chasing yield. Apart from this slightly more defensive stance, the investment strategy has not changed and is consistently applied,” said Tony Edmunds of Pointbreak Wealth.
The fund only invests with the four major banking groups in Namibia, five major banking groups in South Africa, Namibia Savings Bank (Nampost) and the Sovereign’s of both countries, as well as other large money market funds.
The Pointbreak Money Market Fund is managed by Ashburton Unit Trust Management Company Ltd, which is a member of the FirstRand Namibia Group. The fund remains suitable for investors seeking a low risk investment that earns competitive money market income whilst preserving capital. These returns are distributed as dividends after withholding tax has been deducted. The return is net of fees and costs.
With inflation in Namibia at 1.6% p.a., the fund currently offers a real return of over 3%. For the first time in a long time, the Money Market fund that gives a return of 6.30% p.a. (6.10% nacm) offers a higher return than Treasury Bills (5.20% p.a.). Treasury Bill rates are however fixed for 12 months while money market rates change daily and is expected to reduce over the next few months.
2020-05-18 09:19:44 | 10 days ago