What problem does this fund solve?

Once one has made enough money in life, there comes a point when you need to protect your wealth, or at least a portion of it. In other words, you want to maintain the purchasing power of your wealth.

Everyone’s interpretation of “enough” will be different, but for the genuinely wealthy there will at some point be a portion of their wealth that they need to protect – be it for their own peace of mind,  to preserve spending power or to pass on the next generation.

The primary purpose of the fund’s investment strategy is therefore to protect capital in real (i.e. inflation adjusted) terms. This is a “stay rich” vehicle, not a “get rich” vehicle.

The risks that this fund focuses on managing are:

  • Inflation, i.e. the preservation of the real value (in hard currency terms) of the capital invested.
  • Avoiding any permanent loss of capital.
  • Liquidity.

How do we do this?

The fund will at all times be fairly evenly invested in 4 main asset classes: Cash, Bonds, Equity (growth assets) and Commodities (hard assets). Its assets at all times will offer some protection against certain events, and produce gains from other events. The fund’s exposure to any of the asset classes will be tilted towards undervalued assets (i.e. assets with embedded low expectations), but never in an extreme fashion.

Principles behind our investment process

  • We will not forecast.
  • We will not “reach for yield”.
  • We aim to generate satisfactory returns.
  • The price you pay for an investment is its most important source of return, and one that is 100% under our control.

What returns can shareholders expect?

  1. Over the past 20 years, cash returns have averaged 1,2% BELOW inflation. Cash management will require careful thought, to produce returns in line with inflation.
  2. Bond returns should be around 1% in excess of inflation. Over the past 20 years, bond yields have averaged 0,8% above inflation.
  3. Equities should produce 4-6% real returns – let’s work with 4%.
  4. Over the past 20 years, Gold has returned 8,6%, or 5% above inflation. Oil has returned 5,8%, or 3,2% above inflation. Let’s work with 3% real returns for hard assets.

Allocating 25% of the fund to each asset class should therefore provide a return of 2% above US$ inflation.

The fund will be robust with respect to whatever economic environment prevails, without trying to forecast what it will look like at any point in future.

The profile of returns will be less volatile than pure equity, but with a lower expected return as well. The return will be in excess of inflation over the medium to long term.

What fees will investors pay?

Maximum Annual Advice Fee: 1.15%

More information

To find out more about the Merchant West Worldwide Flexible Fund and to invest in the fund, visit the Merchant West website.

This fund is co-managed by Piet Viljoen as a representative of Merchant West Investments (Pty) Ltd, the investment manager.

Please direct any queries to Merchant West.

Sanlam Collective Investments (RF) Pty Ltd is responsible for the fund.

Statutory Information

Fund Objective

This portfolio will be a worldwide multi-asset flexible porrtolio with specific focus on generating returns in excess of inflation. The primary objective of the portfolio is to seek above average returns with below average risk for investors.


Fund Strategy

The portfolio will invest in a flexible combination of securities in the equity, bond, money and property markets. The portfolio will be managed with assets being shifted between various investment markets to reflect the changing economic and market conditions, in order to maximise returns for investors. The Manager will be permitted to invest on behalf of the Merchant West SCI Worldwide Flexible Fund in offshore investments as legislation permits. The portfolio may include participatory interests of portfolios or other forms of participation in collective investment schemes or other similar schemes registered in South Africa or operated in territories with a regulatory enviroment which is to the satisfaction of the Manager and Trustee and of a sufficient standard to provide investor protection at least equivalent to that in South Africa. The portfolio may also invest in listed and unlisted instruments (derivatives) as allowed by the Act.


Investment Manager

Merchant West Investments (Pty) Limited


Portfolio Manager

Piet Viljoen and Daniel King


Trustee / Custodian

Standard Bank of South Africa Ltd


Manager

Sanlam Collective Investments (RF) (Pty) Ltd


Base Currency

Rand


Benchmark

CPI + 6%