- It reinvested maturing deposits at higher rates and reaped good yields
- The Fund is relatively low risk and caters for the low risk investor
On a 12-month basis, the Fund returned 4.97 percent, an outperformance of 441 basis points over the benchmark which returned 0.56 percent for the same period, Bifm said in a quarterly report.
According to the report, the Pula Money Market Fund invests in Call and Fixed deposits and Treasury Bills. The fund manager says it actively manages the portfolio by seeking yield assets without compromising the risk and maturity profile of the fund.
During the last quarter of 2021, Bifm noted that liquidity in the banking sector tightened considerably as the central bank continued to issue bonds monthly, mopping up excess liquidity in the market. The asset manager says this presented the Fund with multiple opportunities as banks (Tier I and Tier II alike) started competing fiercely for deposits and quoting higher rates to attract depositors.
“The fund therefore took advantage of this and reinvested maturing deposits at higher rates and as a result, the fund’s yield rose over the quarter,” Bifm says, noting that its expectations are that the liquidity strain is likely to continue owing to deposit scarcity, particularly as the current macro environment puts a strain on corporates and individuals’ saving ability.
On the monetary policy front, at the last meeting of the year held on 2nd December 2021, the Monetary Policy Committee (MPC) opted to maintain the Bank Rate at 3.75 percent. The central bank noted that although overall risks to its inflation outlook are tilted to the upside, they are moderated by a high possibility of weak domestic demand. The bank expects a dampening effect on productivity due to supply-chain bottlenecks and capacity constraints in implementing the Economic Recovery Transformation Plan initiatives.
The Bank of Botswana maintains expectations for inflation to trim down and return to the 3-6 percent objective range by the end of Q3 2022. In managing the fund amidst peaked interest for cash from the banking sector, Bifm says it will be looking to focus on credit quality in order to deliver positive performance at relatively low levels of risk. “This will be done through our credit exposure limits per counter as approved by the Credit Committee,” it says.
Bifm says the Fund aims to provide return and liquidity through allocation mainly to short-term investments. “The Fund is relatively low risk and caters for the low risk investor. It is suitable for investors who want relatively high yields but need their funds to remain liquid.”
