The Guardian Acuity Money Market fund which is more than four years old has returned 48.44% to its investors. This is an annualised return of 11.37%. The fund invests in government securities, fixed deposits and commercial papers and provides for easy withdrawals with no penalties for withdrawals.
The Money Market Gilt fund which was launched in March 2015 has returned 7.94% since inception for its investors and invests purely in government securities and related products. Both funds are tax free funds for investors.
Guardian Acuity Asset Management is a joint venture between Acuity Partners Ltd and the Ceylon Guardian Investment Trust PLC. Acuity Partners is a joint venture between Hatton National Bank and DFCC Bank. Ceylon Guardian Investment Trust is the fund manager of the Carson Cumberbatch group managing over Rs. 35 billion in both public and private wealth.
Guardian Acuity Money Market Funds offers investors the opportunity to take advantage of the current high interest rates environment.
“The interest rates have elevated and will remain at prevailing levels if the government can attract foreign funds into the planned bond issues. The IMF has approved $ 1.5 billion under its Extended Funding Facility (EFF), which will provide temporary relief for the foreign debt repayments falling due in the next few months. As the IMF funds will come in tranches, the government will be compelled to go for a sovereign debt issues,” says Fund Manager for Guardian Acuity Money Market Fund and the Money Market Gilt Fund Sashika Wickramaratne.
Currently the government has a plan to go for a sovereign debt issue for $ 3.0 billion. with four banks selected as lead managers. The issue should be successful given the global market conditions. In this case the government can safely meet the foreign debt repayment obligations due for the rest of 2016. Also, the pressure on rupee will ease off, given the expected dollar inflows and import tariff increases.
According to Wickramaratne, even though the government could meet the debt repayments with further foreign borrowings and manage the fiscal pressure with recent tax increases, there is a lower probability for rates to trend down if inflation picks up in next couple of months given the recent tax increases and rupee depreciation.
“In this context we are of the view that interest rates will remain at these levels in the next 12 months and have realigned our portfolio by investing in money market instruments of longer tenure, thus locking in funds so that the fund yields remain attractive for current as well as new investors. The current yield of the Money Market Fund is 9.8%, while that of the Money Market Gilt Fund is 8.7%” said Wickramaratne
Guardian Acuity Asset Management Ltd. General Manager Mohandas Thangarajah reiterated the fact that this was the best time for investors to enter the money market fund. “The fund is locked on longer term money market instruments such as Treasury Bills, Fixed Deposits, Securitisations and Commercial Papers. Ordinary investors don’t always have access to some of these instruments and the fund will provide them with access to markets that are not easily accessible but higher yielding.”
He went on to say that with interest rates being elevated presently, clients can either lock in their liquid money in FDs or place them in savings accounts. “In the case of locking in FDs the client loses easy access to their cash and will have to incur penalties in case they wish to pull out. If they wish to take out only part of their money, they face both a penalty and will also be compelled to reinvest the balance at rates prevailing at the time. If that money was in a Money Market Fund, they will have easy access to it, whilst being able to withdraw part of their monies without having to incur any penalties or take the risk of having to reinvest at low rates.” So it is ideal for money people keep for contingencies and security purposes.
*Return information are as of 31 May 2016