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Saturday, September 1, 2007
Future plan

Consumer inflation, as measured by the CPIX model, remained outside the SA Reserve Bank’s 3%-6% band for the third month in a row, startling the market, which quickly predicted yet another interest rate rise was in the offing.

For the July month CPIX was reported at 6,5% year on year. It’s a four-year peak. The broader inflation rate (CPI) remained at 7% - defined as CPIX plus mortgage bond interest rates.
Comments Nathan Adriaanse, Marketing Manager for Lion of Africa Fund Managers, with the prospect of higher interest rates it is crucial for investors to take the effects of inflation into account when implementing an effective savings plan.
“Take a scenario in which you have R1 million to invest today for your retirement in twenty years’ time. With the rate of inflation averaging, say, 6% per annum over the next twenty years, by the end of that time your original investment, aside from any profits or dividends, would have a purchasing power of only R311 800.”
It is therefore important for you to ensure that your savings:
o Offset the negative effects of inflation by providing you with adequate returns;
o Provide these returns at a rate that equals, but preferably exceeds the rate of inflation;
o Preserve your future purchasing power by not eroding the value of your initial investment;
o Continue to grow over time offering you real returns; and,
o Take the appropriate risk into account to ensure the security of your investment.

Mr Adriaanse says it was with these principles in mind that Lion of Africa Fund Managers teamed up with Trident Capital to launch the Lion of Africa Real Return CPI + 5 Fund in March 2007.
The Real Return CPI + 5 Fund offers investors a relatively safe haven in a volatile market place and its goal is to deliver an average annual return of 5% above inflation over any rolling three-year period. The fund has a sufficiently diversified structure that will ensure a low variability of returns.
“The Real Return CPI + 5 Fund has been designed to be the cornerstone of an investment portfolio,” says Lion of Africa Fund Managers Chairman Fred Robertson.
“Our vision is to make this fund as accessible as possible to all investors who wish to enjoy the rewards of investing in an inflation beating fund. Its structure allows investors to plan their future with some certainty, and provide adequately for themselves and their family over the longer term.”
Lion of Africa Fund Managers has appointed Trident Capital as fund managers for the fund. Trident Capital is a specialist asset management company that focuses on its core expertise, which includes real return mandates. The fund is jointly managed by Kimon Boyiatjis and Sidney McKinnon, who collectively have in excess of 30 years of experience within the industry and a solid track record of performance.

The following table demonstrates the loss of purchasing power over a 20 year period using various inflation rates.


 

Copyright © Insurance Times and Investments® Vol:20.8 1st September, 2007
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