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Company Listing: STANLIB Wealth Management Limited »

STANLIB, the country’s largest unit trust company, has sent out a strong signal that it expects the inflation-beating absolute and real return investment trend to continue for some time to come and perhaps gain momentum in current market conditions. The Melrose Arch investment managers have brought a new domestic asset allocation real return unit trust to market to complement its already highly successful single-manager and multi-manager real return options. The STANLIB Dynamic Return Fund has a completely different design, employing quantitative analysis to determine the optimum asset mix while making use of derivatives to protect investment values in the event of market weakness. The investor participates in equity gains while capital is cushioned during downward trending equity markets. The benchmark is CPI., However, the fund is targeting CPI + 6% returns. Mike Galloway, a Director of STANLIB Wealth Management, noted: “The structure has particular appeal for the moderate investor who knows equity exposure is vital to real portfolio long-term growth, but is anxious about market uncertainties. Investors previously scared of investing in equities can be comforted that capital protection methodology is applied to limit downside risk. The biggest risk is being out of equities as demonstrated by the 40%+ move in equities in 2005. Participation in this could make a substantial difference to the amount an investor has on retirement. Investors can now participate in equity markets without the fear of major capital erosion. “In recent months, we have seen major equity investors beginning to take a more defensive stance – reducing equity allocations, moving toward defensive counters or using derivatives to protect value. The investment philosophy of our Dynamic Return Fund is perfectly suited to this marketplace mood.” The economy is well positioned which should result in good corporate earnings but with equities at record highs, a degree of caution is becoming evident, underlining the appeal of the real return category, an established favourite with risk-averse investors. For example, in the quarter ended 30 September 2005, the targeted absolute and real return sector of the unit trust industry delivered sales of R4.265 billion and showed net growth of R2.568 billion after redemptions. Portfolio management has been outsourced by the STANLIB Dynamic Return Fund to an acknowledged leader, Sybrandt du Preez of Sortino Capital Management, one of the original developers of this management style. STANLIB’s Dynamic Return Fund portfolio is invested in equities, property, bonds, and cash in weightings determined by dynamic asset allocations based on quantitative modelling. Variable asset allocation is augmented by a derivative overlay to create a portfolio ‘floor’ for further protection. Equity asset allocation is influenced by a bias toward large-cap stock selection for added stability. Asset allocations move from equity assets towards fixed-interest instruments when the market turns negative. The level of capital protection increases as the equity market performs. The long-term investment objective is capital growth accompanied by a level of capital protection. In the short-term, the focus falls on equity profit when the market rises and protection from loss when it weakens. The intention is to achieve absolute returns 6% above the prevailing CPI with 90% capital protection over any rolling 12-month period. The recommended minimum investment term is three years. Income is distributed twice a year. The minimum lump sum investment is R2000, but smaller investors can gain access to STANLIB’s smart real return newcomer for R200 a month by debit order.