The Old Mutual Institutional Short Term Interest Fund offers corporates an investment opportunity for their surplus cash – aiming to deliver superior returns, with high liquidity and low interest rate risk. This investment vehicle is aimed at corporate investors who are looking for a short-term lump sum investment of R20 million or above.
Why invest in this fund?
The fund aims to deliver a regular income and to outperform corporate bank deposits over time, while preserving capital and maintaining a high level of liquidity.
The fund is designed to alleviate three specific risks that corporates currently experience:
1. Credit risk
The fund invests in only the top five South African banks, government and government-guaranteed paper. These instruments have a maturity of three years or less and this gives corporates exposure to a broad range of instruments.
2. Interest rate risk
Interest rate risk is managed by limiting the term to maturity of fixed-rate notes. Fixed-rate notes, in line with normal money market funds, are limited to 13 months. If fixed-rate notes longer than 13 months are purchased, these are swapped for floating-rate notes, which substantially reduces the interest rate risk.
3. Liquidity risk
The fund offers a unique advantage to the corporate treasurer, to get exposure to longer-dated (maximum 3-year maturity), higher-yielding instruments, while still having access to one-day liquidity. (This is achieved by having a minimum of 25% of the fund in 3-month or less instruments.) This gives the corporate treasurer direct access to this unique investment strategy.
The fund has an official Global Credit Rating (GCR) of AA+ and is priced on a daily basis, using a mark-to-market methodology; hence liquidity is available on a T+1 basis.
Futuregrowth Asset Management (Pty) Ltd is the asset manager appointed by Old Mutual Unit Trust Managers (RF) (Pty) Ltd for the Old Mutual Institutional Short Term Interest Fund.