FNB launches five new Smart Beta informed unit trusts

By Janice Roberts

FNB is expanding its investment offering by launching five new unit trusts called the FNB Horizon Series. These unit trusts have been designed to make it exceptionally simple for customers to choose which fund will suit them best.

The unit trust industry is characterised by a vast array of funds with more than 1 300 to choose from, but customers no longer need to have extensive knowledge of the investment realm in order to benefit from unit trusts.

In an effort to simplify the selection process, FNB has created a range of five unique funds, namely: the FNB Income Fund, FNB Stable Fund, FNB Moderate Fund, FNB Growth Fund and the FNB Growth Plus Fund – Collectively known as the Horizon Series.

The philosophy behind these funds is to target the most optimal asset allocation for a specific time horizon (meaning you get optimal returns for your specified time horizon). The more conservative FNB Income Fund has a time frame of one to two years – the allocation is predominantly cash and bonds, with much less equity. The Growth and the Growth Plus offerings are long-term, from seven years and longer – with more offshore, equity and property exposure.

Pieter Du Toit, CEO of FNB Investments says their objective is to introduce a simple and accessible investment offering that gives consumers access to sophisticated products with great returns, while being easy to understand.

“The funds utilise superior construction and testing methodology which is a first for FNB and the first of its kind in South Africa. The Series utilises a combination of passive, active and multi-management to achieve the best outcome per time horizon. Using passive components with the added optimisation of smart beta allows us to provide excellent returns at a lower price. At the same time, utilising all the major asset classes like property, cash, bonds and offshore to create much lower volatility levels.”

The FNB Horizon Series funds have been constructed using some of the most advanced investment technologies available today. They combine the best sources of excess return by blending smart index trackers and active funds (single and multi-managed) to achieve the best and most robust investment outcomes.

The funds are market responsive – they take into account changes in market conditions and asset class relationships and dynamically allocate between the asset classes in order to optimise the risk-adjusted return profile.

They have been designed with a specific focus on risk control – the design process was based on explicitly maximising the potential returns while keeping the risks (variability of returns as well as the potential decline in portfolio value within a particular investment period) within predefined limits.

Powerful stress-testing methodologies are being utilised to ensure that the performance is robust throughout the business cycle and in different market conditions, including events of market stress.

Creating a good and robust investment product is not simple – it involves lots of expertise, research and hard work. The FNB Horizon Series have been constructed and are managed by utilising some of the leading edge investment management technologies in use today.

Du Toit says they have dedicated a great deal of time to ensure that the funds are simple and easy to understand when compared to what is already on offer in the market. He says clients simply need to determine their investment term, while the combined experts of the FirstRand Group make the calls in order to provide the most optimal asset selection.

“We already have a good idea of what consumers are looking for; hence the Horizon Series is a dynamic offering that directly addresses a broad range of customer needs. With the current rate of inflation in South Africa tipping close to 7%, it is becoming more and more critical that customers ensure that they are investing in products that are designed to beat inflation. Unit trusts are a great example of such an investment tool.”

Over the years, FNB has built a diverse range of investment products, comprising of share investing and cash options. In line with the tax-free savings initiative introduced by the South African Government, the Bank also has a tax-free fund account to allow consumers the opportunity to invest in funds without the usual tax burden.

“Financial institutions have a big role to play in improving the culture of investing in the country and the gap in this market is visible in South Africa’s low National Savings Rate. By making investment products a lot simpler and more accessible, financial institutions will play a more effective role in contributing towards improving the culture of investing,” says Du Toit.

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