A fund that provides a growing income

To support transformation in SA’s asset management sector, Sowetan Money continues its monthly series on easily accessible and affordable unit trust funds managed by black asset managers. The sixth part of our series focuses on Prescient Investment Management and its fund for investors who need their investments to return a regular income.

Some investments are designed to maximise the income you can safely draw from them.
Image: Jan Kvita 123RF

When you start to use your investments to provide an income as you do in retirement, you want a fund that produces a consistent stream of income without too much of the ups and downs in value that comes with investing in the likes of the share market.

Some fund managers therefore specialise in funds that produce a reliable but growing income.

You can draw an income from a bank account, but if it grows at a low rate, you will soon be depleting your capital and eventually it will no longer provide you with an income.

To avoid this you should look for a fund focussed on providing a growing income. The Prescient Income Provider is one such fund.

Prescient Investment Management is black economically empowered company that was founded more than two decades ago focused on managing interest-bearing and positive return mandates.

Cheree Dyers, CEO at Prescient, says the core of the manager’s investment philosophy is to preserve your capital and to manage investment risks.

Launched in 2005, the Prescient Income Provider Fund is a multi-asset income fund – this means it invest across the different asset classes of with a relatively low maximum exposure of 10% to share markets (equities), a maximum of 25% in listed real estate bond and the rest in bonds and money markets.

The Prescient Income Provider currently has R31.5 billion in assets under management and complies with regulation 28 of the Pension Funds Act, but it is more suited to investors drawing an income  after retirement rather than those saving for retirement.

The fund targets a return target of the inflation rate plus 3% and has ex this target since it launched. For the past 10 years, it’s average return has been 8.66% a year.

The fund is one suitable for conservative investors who are investing for a short to medium term and who want to maximise the income they earn through exposure primarily to the South African money and bond markets, says Henk Kotze, a portfolio manager at Prescient Investment Management.

You can invest in the fund with a lump sum of R10 000 or a monthly investment R1 000.

The latest fund fact sheet for the fund shows that at the end of September, close to 40% of the fund is allocated to cash and money markets and more than 16% is invested offshore. The balance is invested in interest-earning instruments like floating rate bonds, credit linked notes, fixed rate bonds, inflation linked bonds, real estate and preference shares.

Currently the fund has no exposure to the local share market. 

Kotze says the fund has a target of not losing money over any rolling three-month period and has been successful in achieving this target since the fund launched. Its biggest fall from peak to trough was in April 2008 when the fund fell minus 1.16%.

“We are proud of this achievement and believe it sets us apart from our peers. We pride ourselves in managing risk and this track record is testament to that,” he says.

There are no initial fees for investing and the ongoing total investment cost is a low 0.60% a year.

This excludes any fee you may pay your financial advisers if you use one.

Your investment in the fund can be cashed in at any time – typically funds pay out in 24 to 48 hours.

Prescient also has another multi-asset funds that invests in across global markets with a view to delivering good income. It also has a number of other multi-asset funds with higher exposures to equities, and also manages funds that specialise in investments in China.

Earlier this year Prescient was recognised in the quarterly PlexCrown Fund Rating Survey as the leading South African asset manager of actively managed unit trust funds.

The performance of all its qualifying funds gave it a score that saw it jump from 8th among its peer asset managers to 1st position among the managers in PlexCrown’s second quarter of 2019 rankings. Three of its 11 qualifying funds, including the Income Provider Fund, achieved the highest rating of five PlexCrowns.

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