Fund Focus: Dollar diversification made simple

By 1nvest

“The rand is going to …”. The second part of that sentence varies a great deal, but if you’re a South African, you probably hear the first part a lot. From the news to the braai conversation to meetings between client and financial advisor, it seems ever-present. For good reason. Dealing with rand uncertainty is something every financial plan needs to do well.

No matter how you complete that sentence (“The rand is going to …”), one of the most important responses is to inject exposure to the US dollar into your portfolio. But how? It may sound intimidating.

In fact, whatever your personal strategy, there are products that make implementation easy. A single exchange traded fund (ETF) can give you seam-free access to highly liquid, highly rated US government debt.

Our 1nvest ICE US Treasury Short Bond Index Feeder ETF is designed to do just that. By purchasing the Johannesburg Stock Exchange (JSE) listed product, you become the proud owner of US government bonds, bills and notes – without using your single discretionary allowance or your foreign capital allowance. Our feeder ETF achieves this by tracking the ICE US Treasury Short Bond Index.

There are other benefits, too. When US interest rates were near zero, this ETF mimicked the rand-dollar exchange rate with impressive accuracy. However, now that US rates have risen, investors gain the added benefit of that yield. Currently, that is 4% to 5%.

This interest rate differential also puts added pressure on the rand. All else being equal, that is an added benefit of introducing dollar exposure to a portfolio.

Of course, attempting to time movements in the rand’s value, in US dollar terms, is risky business – especially in times of political uncertainty. The 1nvest ICE US Treasury Short Bond Index Feeder ETF is designed for investors who appreciate the value of time in the market rather than timing the market. 

If this diversification by dollars could benefit you, read more about our 1nvest ICE US Treasury Short Bond Index Feeder ETF.

1nvest Fund Managers (Pty) Ltd is an authorised Financial Services Provider in terms of the FAIS Act. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up. Past performance, forecasts and commentary is not necessarily a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request the Manager. STANLIB Collective Investments (RF) (Pty) Ltd is a registered Manager in terms of CISCA. 

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