Sanlam Credit Fund

• Short duration approach means low sensitivity to wider bond market volatility or fears of inflation 
• Team has extensive experience across the credit market with complementary skills throughout the team. French flair and a battle-hardened Brit!
• Sentiment towards Financials remain poor after the Global Financial Crisis. Our extensive knowledge and research identifies significant opportunities in what is more of a ‘utility like’ sector
• Sanlam’s position as a recognised expert in credit means that we have good access to the primary (new issues) market – where demand exceeds supply
• Transparency and scalability of our process – no leverage, CoCos (Contingent Convertible Securities), derivatives, structured products or equities.

October 2021

Interest rate carnage at the very front end of government bond curves as inflation is suddenly everywhere, impacting Fixed Income markets generally, resulting in a negative performance for the Credit Fund for the first time since April 2020. There is no rulebook for how central banks withdraw liquidity after an extended period of low interest rates which is unnerving investors further.

Monetary conditions are tightening, and supply chain bottlenecks are starting to take their toll on the global economies. At the same time, inflationary pressures are proving more persistent than previously expected.

As the major central banks continue to operate a ‘wait-and-see’ approach to raising interest rates,

The markets are beginning to price in that hesitancy believing that ‘policy errors’ are becoming a further risk.

As this monthly report goes to press, we note that the Bank of England’s Monetary Policy Committee meeting concluded that interest rates will remain unchanged but that some modest tightening of monetary policy over the forecast period was likely to be necessary.

The main themes that contributed to the negative month were: the elevated interest rate volatility, the repricing of interest rate expectations higher, and more importantly the risk aversion spreading across corporate bond markets.