The Fund aims to generate income, net of all fees, equivalent to the Bank of England UK Base Rates plus 1-2% from a corporate bond portfolio with low to medium volatility.
 

The fund:

  • Adopts a bottom-up approach investing in high quality issuers with an investment grade profile and cash plus return

  • A short duration investment with minimal interest rate sensitivity

  • Uses no derivatives, contingent convertibles, equities, leverage or structured products

Meet the Sanlam Fixed Interest Team

Peter Doherty
Peter Doherty
Head of Fixed Income
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Guillaume Desqueyroux
Guillaume Desqueyroux
Fund Manager
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Darren Reece
Darren Reece
Fund Manager
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Thomas Wells
Thomas Wells
Fund Manager
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Chris Turdean
Chris Turdean
Investment Analyst
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Why invest in the 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.

We aim to deliver a consistent level of income for our investors with a low or medium level of volatility.

Whilst the fund is in the IA’s Sterling Strategic Bond sector, we believe it would work equally well as a core allocation to financial and non-financial credit, given the fund’s average IG credit rating.

Our investment approach is built around three core components, namely:

  • Predictable, secure income from a fully diversified credit portfolio
  • A short duration stance – that is, low sensitivity to changes in risk-free rates, which helps minimise the risk of large drawdowns
  • Earnings visibility of the underlying credit holdings

The above three elements are blended with rigorous credit analysis and our extensive knowledge of the primary (new issues) market, which adds a further source of return potential and diversification for the fund. When taken together, they enable us to create what is, in effect, an ‘all weather’ long-only credit portfolio.

Environmental, Social and Governance

Whilst the fund is not marketed as an “ESG” or “sustainable” bond fund, it is managed with ESG considerations as we believe this enables us to maintain our performance whilst improving the average integrity of our portfolio companies.

As part of our ESG strategy we:

  1. Watch list certain industries which screen negatively but where we have flexibility to allocate on a comparative basis
  2. Allocate capital to firms that are doing the right things by ensuring their business are sustainable
  3. Engage regularly with firms in our universe, which enables a deeper and more valuable understanding of our investment environment
  4. Operate on a transparent basis, recognising the impact that our choices can have on society, the environment and communities.

The Fund's strategy of intensive credit fundamental analysis, alongside imaginative security selection, driven by a short duration emphasis should alleviate some of the headwinds that Fixed Income investors may face

Guillaume Desqueyroux, Fund Manager

Fund Commentary

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.

Explore the details
The Sanlam Credit Fund aims to generate income, net of all expenses, equivalent to the Bank of England’s UK Base Rate plus 1-2%, with low to medium volatility.

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Fund Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. A table with five years’ performance is available in the fund factsheets.

The fund will invest in debt securities. The government or company issuer of a bond might not be able to repay either the interest or the original loan amount and therefore default on the debt. This would affect the credit rating of the bond and, in turn, the value of the fund. Investment in bonds and other debt instruments (including related derivatives) is subject to interest rate risk. If long-term interest rates rise, the value of your shares is likely to fall. The fund may invest in in derivatives for the purpose of hedging, efficient portfolio management and/or investment purpose. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. The Fund may engage in transactions in financial derivative instruments for Share Class hedging purposes only. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. 

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