Fixed income asset prices are primarily linked to inflation expectations and the reaction of the monetary authorities to these changes. The CGF fixed interest team uses a range of qualitative and quantitative tools to determine market valuations relative to our own inflation expectations. This is then compared to market expectations. Secondary drivers like changes to net new bond issuance and offshore bond markets are also considered. This allows the team to make a decision on modified duration and yield curve tilts. This is expressed explicitly through the trading of RSA Treasury bonds along the yield curve.
In addition to this, the fund aims to invest in instruments with an emphasis on socially responsible investing. Our philosophy is distinctive as we place emphasis on reconstruction and development. The emphasis is on institutions and projects that contribute to the development of South Africa through programmes that have a meaningful social impact, and are committed to development, community participation and support.
Investment in non-government debt is typically done on a switch basis, which renders this investment duration and yield curve neutral. Detailed credit analysis is done by a team of credit analysts who assist in determining the appropriate price given the level of risk.
Independent compliance is ensured by OMIGSA’s Risk and Compliance Units, who have top level oversight of all portfolio risk and compliance breaches. Comprehensive risk management reports are sent to the portfolio manager on a weekly basis. In addition our portfolio management system, Decalog, performs pre-trade compliance checks on each order.