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A global addition to our Core range

By Jannie Leach, Head of Core Investments

On the back of growing success, Nedgroup Investments has added a global fund to further complement the Core range. The newly launched Nedgroup Investments Core Global Fund is a multi-asset (balanced) portfolio that aims to provide low-cost exposure to a range of global asset classes. This fund is used for the offshore exposure within the Nedgroup Investments Core Diversified and Nedgroup Investments Core Guarded funds and has been designed to provide sensible offshore exposure for a Regulation 28-compliant mandate. The annual management fee of 0.35% pa is significantly lower than any other global multi-asset fund currently available in the South African market.

The Nedgroup Investments Core Global Fund can be accessed via two FSB approved funds, namely a US dollar denominated fund domiciled in Ireland or a rand denominated feeder fund domiciled in South Africa.

Significant savings versus available alternatives

The low annual management fee of 0.35% leads to an estimated Total Expense Ratio (TER) of 0.55% for the US dollar fund and 0.60% for the feeder fund. This is nearly 1.2% lower than the average TER of the most popular peers used by South African investors whose TERs range between 1.42% and 1.94% (1.57% to 2.12% for feeder funds). Because the fund offers investors low-cost access to a range of global asset classes, it can be used on a stand-alone basis or combined with traditional actively managed global multi-asset portfolios in a Core-Active™ strategy (see graph below).

tax free investments 2016 - nedgroup investments - tax free dividend funds

Global multi-asset exposure

The Nedgroup Investments Core Global Fund follows a long term strategic asset allocation that boasts a highly diversified portfolio that provides low cost exposure to the following global asset classes: equity, property, bonds, credit, inflation-linkers and cash.

tax free investments 2016 - nedgroup investments - tax free dividend funds

Well-considered and efficient implementation

As the fund provides exposure across different global regions, asset classes, and currencies, in order to manage such a global multi-asset portfolio, it needs to be structured efficiently to take into consideration the challenges of implementing across different time zones and markets.

The portfolio has been structured as follows (see graphic below). The time zone differences between the investment regions lead to a ‘cash drag’ within a global portfolio, i.e. new inflows into the portfolio are not immediately invested which leads to having too much cash in the portfolio. The impact of a cash drag is minimised by using liquidity holdings (ETFs) to invest/divest at the appropriate time.

The underlying index funds and ETFs have been selected based on their ability to provide effective market coverage with low tracking errors while being as cost and tax-efficient as possible.

Core Global Portfolio

Introducing BlackRock Asset Management

The Nedgroup Investments Core Global Fund is managed by BlackRock - the world’s largest independent asset management firm with over $4.7 trillion in AUM1. They have pioneered and led the index fund market since the 1970s and currently manage around $3 trillion in index funds and ETFs spanning over 650 benchmarks. Their global trading platform delivers the benefit of scale directly to investors with their large asset base providing an internal marketplace where purchases and sales are offset daily on behalf of investors. The fund is implemented along BlackRock’s Total Performance Investment philosophy of constructing a solution that maximises the total return of a portfolio by considering the performance, cost and tax implications of different underlying building blocks.

 

1 As at 30 June 2015

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