Investing for Long-term Growth | Sanlam Stable Bonus Fund
Skip Ribbon Commands
Skip to main content
Sign In

Stable Bonus Fund Investing for Long-term Growth | Sanlam Stable Bonus Fund

Invest

Advice

Service

Invest Online Back

Call me back

By clicking on CALL ME, you acknowledge that you have read our privacy policy.

Email us

By clicking on SEND, you acknowledge that you have read our privacy policy.

Back

Call me back

By clicking on CALL ME, you acknowledge that you have read our privacy policy.

Email us

By clicking on SEND, you acknowledge that you have read our privacy policy.

Email us

By clicking on SEND, you acknowledge that you have read our privacy policy.

Skip Navigation LinksCampaigns

Smoothing out a Rough Ride

As an investor in the Stable Bonus Fund, you’re in a good position to endure COVID-19’s impact on financial markets.

As we all come to grips with the COVID-19 pandemic and its impact on our lives, we strongly believe that now is not the time to panic, nor make drastic and emotional investment decisions.

No one can predict when the financial markets will recover. However, history has demonstrated that they always do. As an investor in the Sanlam Stable Bonus Fund, you are well-positioned to weather the current storm, while remaining appropriately invested to achieve your long-term savings goals.

Investment Strategy and Recent Developments

The Stable Bonus Fund targets inflation-beating returns over the long term. As such, it invests in different asset classes to:

  • Achieve long-term returns that are higher than inflation; and
  • Reduce the impact that the poor performance of any single asset or asset class can have on your investment.

The COVID-19 pandemic is currently having a negative impact on global financial markets. While this has affected the investment performance of assets in the Stable Bonus Fund, the overall investment strategy of the fund remains appropriate for investors who are looking for long-term growth to achieve their savings goals, as current market valuations should present a good opportunity for investors with longer time horizons.

Smoothing

The smoothing mechanism employed in the fund means that investors are not fully exposed to short-term investment performance, as would be the case with other funds that invest in similar assets.

Investments in the fund grow through bonuses that Sanlam declares. When the chosen investment assets perform well, a portion of the fund’s growth is held back and set aside for more volatile periods. This means that during times of poor investment performance, Sanlam can declare bonuses that would not otherwise have been possible.

Impact on Recent and Upcoming Maturities

This smoothing has provided relief to investors in the fund who have matured their plans recently; and provides some comfort and stability to investors with upcoming maturities.

The graph below shows how R1 000 pm invested in the Stable Bonus Fund (with zero cover) from June 2000 to February 2020 would have grown relative to similar balanced investment funds. The smoothing mechanism has boosted maturities in the last five years when equity markets have been very volatile but overall showed low growth.

Graph

*Source: Based on own analysis of Stable Bonus Fund and ASISA data. Values shown are for retirement portfolios, after investment cost, but before product fees.

As bonuses are declared annually, interim bonus rates apply to the period that runs from the previous bonus declaration date to the claim date. This approach is fair to policyholders who leave the fund (due to a claim) as well as those who remain invested in the fund.

Interim bonuses would normally be equal to the lower of the immediate past annual bonus and the annual bonus rate that is projected to be declared at the next annual bonus declaration.

It is difficult to predict when markets will recover from the pandemic’s impact. Given the ongoing volatility that can be expected and the recent investment performance of the assets in the fund, the interim rate to maturity and death claims from 1 June 2020 has been set to 0%.

The graph below shows the performance of different types of investment funds over the first quarter of 2020. A bonus of 0% means that maturing plans have been shielded from recent losses.

Investment Perfomance Over Q1 2020 (%)

Graph

*Source: Based on own analysis of market-leading investment funds available through Sanlam products.

Fairness between Investors

From time to time, and especially in extreme market conditions, this smoothing process can result in significant surpluses or deficits in the investment portfolio.

In order to ensure equity among different investors, Sanlam manages the declaration of bonuses according to the philosophy set out in the Stable Bonus Fund’s Principles and Practices of Financial Management.

In particular, the approach used when determining bonus rates is as follows:

  • The starting point is the net expected long-term investment return, taking into account the asset composition of the portfolio
  • This return is adjusted to eliminate surpluses or deficits in the portfolio over a suitable period

Particular care needs to be taken to ensure equity between investors who will exit the fund in the short term, including those with upcoming maturities and those who will remain invested. This enables us to avoid large downward adjustments to future bonuses.

For more details on how the fund is managed and bonuses are declared, please refer to the Stable Bonus Fund’s Principles and Practices of Financial Management. Alternatively, information about the investments held in the fund and historic bonus rates can be found in the Stable Bonus Fund Fact Sheet.

We encourage you to speak to your Sanlam financial planner or accredited broker should you have any questions regarding the impact of the COVID-19 pandemic on your savings and investments, or any questions regarding the Stable Bonus Fund.

Speak to your financial planner or request a new one.

Get Advice

Invest

Advice

Service

Invest Online Back

Call me back

Email us

Back

Call me back

Email us

Email us

Sanlam Life Insurance is a licensed financial service provider.
Copyright © Sanlam