A rush of investors keen to participate in the strong run of local equities has forced Old Mutual to close its top-performing general equity unit trust fund, the Old Mutual High Yield Opportunities Fund, to new investments with immediate effect.
Announcing its decision to close the fund on Friday, Old Mutual Unit Trusts said the High Yield Opportunities Fund experienced unprecedented inflows last year as the strong local equity market drove investors back into unit trust funds.
The fund attracted record inflows during the fourth quarter of last year, leaving it with assets under management of close to R2-billion.
Anil Thakersee, Old Mutual’s head of investment marketing, said last year’s strong flows came as a result of strong unit-trust performance as well as renewed investor confidence in the local equity market and the South African economy.
The bulk of the inflows were attracted by the Old Mutual Unit Trusts’ core fund offering, which consists of 10 local and offshore funds providing exposure across all asset classes.
The most popular of these core funds, the Old Mutual High Yield Opportunities Fund, rewarded investors with a return of 58%, ending the year as South Africa’s top-performing general equity fund. According to Standard & Poor’s Fund Services, the fund was the best-performing general equity fund over one and three years, and second over five years.
“What makes this general equity unit trust fund particularly attractive is the fact that it aims to achieve a 5% dividend yield every year in addition to strong capital growth at a moderate risk,” said Thakersee. “For investors, this presents a potential 5% a year tax-exempt income and makes this fund an ideal living annuity investment.”
The fund delivered a dividend yield of 4,82% for 2004, just below the 5% benchmark. The income yield for 2003 was 5,7%.
“While we just missed the income yield of 5% for 2004, the fund still delivered a capital return of over 50% in addition to the income yield,” said Thakersee.
Going forward, however, he noted, the fund will struggle to deliver a 5% dividend yield if it continues to receive further inflows. For this reason, the fund had to be capped, protecting existing investors from a yield dilution.
This means that the fund will no longer accept new investors, ad hoc investments or switches into existing accounts.
However, it will continue to accept existing monthly debit-order investments.
Concluded Thakersee: “The Old Mutual High Yield Opportunity Fund has consistently delivered a high level of tax-efficient dividend income as well as good capital growth at a moderate risk. We are confident that the fund will continue to deliver for its existing investors.” — I-Net Bridge