Following the South African Reserve Bank’s announcement on 20 July 2017, in which the repo rate was reduced by 25 basis points, FedGroup will delay adjusting its fixed rate until 14 August 2017. This will allow investors to purchase its Secured Investment, a fixed term investment product, and secure the pre-rate-cut rates for the next five years.
While economists have noted the cut will bring relief to cash-strapped consumers and boost the property market, most investment vehicles linked to the repo rate will need to adjust to ensure sustainability.
“Investors in the FedGroup Secured Investment are currently enjoying an effective fixed rate of return of up to 12.10% per annum over the five-year investment period,” says Sheldon Friedericksen, chief financial officer at FedGroup. “This rate will become 11.31% on 14 August, which still makes it very attractive in the current low-growth market and in relation to our peers.
“Because the FedGroup Secured Investment provides a forward-looking interest rate over a five-year term, it takes repo rate forecasts into account. By adjusting accordingly, we remain in an excellent position to provide our clients with consistent, above average returns.”
FedGroup Secured Investment has a 26-year track record of consistently providing returns while securing investors’ capital sum, and charging the investor zero fees. “As a low-risk vehicle offering excellent returns over the medium-term, the FedGroup Secured Investment has attracted a growing and loyal investor base, ranging from teens, through to retirees, and asset managers using the vehicle to diversify their portfolios.
“On 14 August 2017, we will adjust our fixed rate of return in response to the repo rate cut,” says Friedericksen.
Friedericksen explains that the company has taken the decision to delay responding to the South African Reserve Bank announcement to allow for investors to benefit from current rates until 14 August 2017.
On 14 August 2017, the fixed rate of return over the five-year investment period will be adjusted as follows:
Growth option (interest is reinvested monthly): from 12.10% to 11.31%
Income option (interest is paid out monthly in advance): from 9.5% to 9.0%. The product has a five-year investment term, and the fixed rate of return is guaranteed for that period. All existing investors will continue to benefit from the (up to) 12.10% interest rate.