Page 161 - Profile's Unit Trusts & Collective Investments - March 2025

Fund Manager Interviews

Please comment on your investment year (January - December 2024) from a fund manager’s
point of view.
Last year was a good year for global credit markets as the iTraxx Crossover 5 Year TR Index, a
proxy for European high-yield credit markets, returned 7.16% in EUR and, thanks to some ZAR
strength, produced 3.73% for the 2024 calendar year in rands.
The BCI Fairtree Global Income Plus Feeder Fund (A) also had a positive year in 2024 as it
ended the year up 4.51%, outperforming the fund benchmark by 0.78%.
Regarding defaults, the calendar year produced only two defaults in the European iTraxx suite
of credit indices: Atos and Intrum. The recovery auction for Atos was set at 3% in October, while
the market level for the expected recovery in the Intrum corporate bonds was around 75%. The
recovery auction was held on 16 January and was set at 76%, a few points above where the
underlying bonds were trading at that juncture. Interestingly, the expectation of an average 40%
recovery was largely met.

In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
We believe that diversification is a fund manager’s primary defence against catastrophic loss of
clients’ capital. As a result, the fund is highly diversified from a sector perspective as well as from a
holdings perspective, with small allocations across a large number of constituents (300+) which
make up the fund.
The holdings of the fund are also highly liquid, which is an important factor when assessing
risks to the fund.
Overall, portfolio risk management is taken into consideration daily in decision-making, and
various risk management measures are in place to mitigate risks that may arise.
Please comment on the year ahead and, if possible, estimate the performance of your fund
over 2 or 3 years. What are your targets and objectives for the year ahead?
Going into 2025, the fund is currently positioned on the defensive side, running a sub-unity
beta, but given the current dislocation in global risk markets, we expect to find good opportunities
to add value over the year.
With that said, we expect to still have a positive return year and believe we are positioned well,
from an exposure perspective, to beat the benchmark. This is essentially what our clients expect us
to do, and beating that benchmark is our primary objective.
Which asset classes do you expect will give the best total rates of return over the next few
years?
We are cautious of attempting to predict market performance, especially in the current market
environment of global policy uncertainty, heightened geopolitical tensions, sticky inflation, and so
forth.
As credit investors, we are cautiously bullish on credit as spreads are tighter than they have
been for some time, but we believe we can still find opportunities to extract excess spread without
commensurate increases in portfolio risk.
The outlook on the inflation front is not as clear-cut as last year, with inflation appearing to
have bottomed out, making views on short rates a little more difficult to put together. This adds
some extra risk to company balance sheets which certainly needs to be considered.
Local and offshore fixed income levels seem fair at the moment as investors jostle with the
opposing forces of increased risk aversion and reflationary pressures.
Offshore investments are heavily influenced by the rand. Please give your view on the rand
over the next 1, 3 and 5 years.
While the BCI Fairtree Global Income Plus Feeder Fund is rand-denominated, the majority of
the underlying assets of the fund are EUR-denominated. The fund also is exposed to USD and GBP
assets, although the FX risk associated with those assets is hedged back to EUR. The fund does not
hedge its EUR/ZAR FX risk, resulting in the fund being a ZAR play.

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