Change of investment policy: The use of in-house funds

For a number of years, we have purposefully excluded the use of funds from the wider Nedbank Group (in-house funds) within our clients’ portfolios. The reason being that by purposefully excluding in-house funds from our selection process, we avoided any perceived conflict of interest.

However, following a recent internal review, we have taken the decision to amend this approach and allow the use of in-house funds where we deem this to be in the best interests of our clients.

The rationale is simple: we believe that using in-house funds can afford us access to exceptional expertise with the best terms, and importantly, provide greater choice and better client outcomes.

So how do we balance a potential conflict of interest with providing you with the very best our group connections can offer? Simply put, our Investment Committee applies a higher threshold to the use of in-house funds. To form part of the portfolios, in-house funds must demonstrably be better than 3rd party counterparts and that satisfy a series of criteria which show that using them are in the best interests of our clients.

We remain committed to our whole-of-market approach to investment research, and we will only consider the in-house funds that meets our extended threshold.

A good example of this is the first in-house fund we’re introducing to our clients’ portfolios: the Nedgroup Investments Global Strategic Bond Strategy Fund.

Our first in-house fund investment – the Nedgroup Investments Global Strategic Bond Fund

Since 2022 we have become increasingly excited about fixed income. Fixed income once again offers attractive yields coupled with the opportunity of capital gain should interest rates begin to drop.

As the economic backdrop is broadly favourable for fixed income, we have increased these positions within portfolios and added local currency emerging market debt. And to help us maximise the opportunities in this space, we want to invest further in a strategic bond fund, one that can invest in any type of bond.

An analysis of the strategic bond fund universe leads us to believe that the best team to manage the required exposure is the one behind the relatively newly formed Nedgroup Strategic Bond Fund (which now replaces the Pimco and Wellington funds). This is because of:

• Their combined experience and track record.
• The team’s performance in previous management roles when compared to their peers.
• Their low-risk approach to bond investing, focusing predominantly on core fixed income.
• The exceptional pricing terms offered.

Investment into the Global Strategic Bond Fund gives an exciting opportunity to benefit from two of the very best managers in the core fixed income space, at a cost substantially lower than the majority of equivalent funds employing a similar strategy.

The fee for this fund is 22bps, which compares favourably to the two funds it is replacing (42bps and 49bps), and to the average institutional annual management charge in the market for a similar strategy, which is around 44bps.

If you wish us to continue to exclude Nedgroup Investment Funds from your portfolio, we offer the ability to opt out. If this is the case, or if you have any questions, please do get in touch with your Private Banker.

However, we firmly believe that the updated approach delivers the best opportunity for clients, as we continue to evolve and improve our investment offering.

Rebecca Cretney – Investment Councillor