Changes to the Momentum MoM SuperNation Cash Portfolio

investments
Changes to the
Momentum MoM
SuperNation Cash Portfolio
Dear clients, consultants and partners,
Momentum Manager of Managers (Pty) Ltd s continued
focus is to ensure the company s investment portfolios
adhere to its philosophy of creating robust and targeted
outcomes and to provide diversified investment
opportunities. The Momentum MoM SuperNation Cash
Portfolio is used as the money market component of
the Momentum MoM SuperNation Portfolio and,
selectively, in the Momentum MoM Factor Series of
portfolios as part of the company s allocation to
responsible investment. The purpose of this document
is to provide some insight into the changes in the
context of Manager of Managers portfolios.
While reviewing the Momentum MoM SuperNation
Cash Portfolio, Manager of Managers decided that it
was necessary to enhance the yield within the portfolio
to allow investment managers to be less constrained
from a duration point of view and to align the credit
exposure to the revised Regulation 28 limits. In addition
to this, the portfolio must have sufficient responsible
investment exposure and deliver competitive returns in
the money-market peer space. By identifying diversified
strategies within this market, Manager of Managers
could also provide better risk diversification within
this portfolio.
The portfolio was previously managed by Cadiz,
a specialist money-market investment manager, which
addressed socially responsible investments (SRI) or
empowerment objectives. It was actively managed and
the underlying investments were allocated to
money-market instruments, including cash and
near-cash instruments, issued by infrastructure
providers. While Cadiz achieved its investment objective
over time, it lagged relative to other traditional
money-market managers. Manager of Managers
therefore embarked on an investigation to find
strategies, which in combination, would provide a
robust solution that
could over the longer
term outperform
relative to traditional
money market
portfolios, while
providing the
responsible
investment
characteristics
required in this
portfolio
Jana van Rooijen
Portfolio Manager
Manager of Managers looked at different strategies within
the responsible money-market space and combining
investment managers that provide differentiation from a
qualitative point of view. The two strategies identified are
investment managers that invest in traditional
money-market instruments and those that invest in
longer-dated instruments while eliminating interest
rate risk.
Manager of Managers decided to replace Cadiz with the
Atlantic Impact Fund, which has a traditional moneymarket instrument strategy, and Prescient s SRI Credit
QuantPlus Fund, which has a longer-dated instrument
strategy. Atlantic s portfolio strategy is aimed at providing
investors with an investment vehicle that combines the
benefits of liquidity with a positive societal effect. The
portfolio s strategy is to be a traditional money market
portfolio with a maximum 15% unlisted exposure.
Prescient takes advantage of SRI investment opportunities
in the money and bond markets. It defines SRI as projects
that support economic development in underdeveloped
areas and contribute towards equitable access to
economic resources.
In summary, the portfolio now comprises these two active
cash mandates, ie Prescient (60%) and Atlantic (40%),
which offer differentiated alpha sources in the portfolio.
manager of managers
In current market conditions where interest rates have
been at all-time lows, rising levels of inflation have
resulted in negative real returns. A turn slowly underway
in the interest rate cycle from current low levels (with the
recent increase of 0.5% starting this potential turn)
means that the opportunity set for this strategy is
becoming increasingly encouraging. The differentiation in
strategies would therefore ensure consistent returns not
only in the current market conditions but in all market
conditions.
Manager of Managers is comfortable with the role this
mandate, together with others, will play in creating the
robustness the company is delivering for clients.
Jana van Rooijen
Portfolio Manager
Momentum Manager of Managers (Pty) Ltd
2nd floor 6 Merchant Place Cnr of Fredman Drive and Gwen Lane Sandton PO Box 330 Gallo Manor 2052
Telephone +27 (0)86 153 8732 Facsimile +27 (0)86 573 7384 [email protected] www.momentum.co.za/managerofmanagers
Momentum Manager of Managers (Pty) Ltd, registration number 2004/023064/07,
VAT number 4910215708, is an authorised financial services provider, FSP licence number 19840.
The company is also registered as an administrator in terms of Section 13B of the Pension Funds Act, registration number 24/401.
Page 2 of 2
manager of managers