This fund is suitable for investors seeking a cash-plus return and is conservatively managed. The return from investing in SA cash (up 7.0% over the past year) has exceeded our long-term expectation of CPI+2% p.a. based on SA inflation surprising somewhat on the downside, and the South African Reserve Bank remaining hawkish on its interest rate view. The fund in turn has delivered a return comfortably more than the benchmark, given the yield pick-up the manager has obtained through its careful selection of the appropriate credits over time.

Year-to-date, cash (up 5.2%) has lagged SA nominal bonds (up 8.4%) as market expectation has increased that the South African Reserve Bank will now cut interest rates. All else being equal, interest rate cuts will reduce the attractiveness of cash relative to other asset classes. Benign inflation has however resulted in cash outperforming inflationlinked bonds (up 3.5%).

The manager only invests in instruments that are linked to cash rates. The manager is highly selective to the issuers it invests in, and able to choose what it regards as most appropriate on risk-adjusted grounds. More than 90% of the fund is invested with the top five banks, and sensibly diversified across maturities up to 7 years. The manager does not invest in sub-investment grade paper, and all the instruments in the fund are domestic-only. The SOE allocation at under 7% is limited to high quality Landbank paper and shorter-dated Sanral notes, with a low outlook to increase that allocation any time soon.

This is a stand-alone or building block cash-plus type fund that currently has one underlying manager, namely Taquanta. This manager specialises in cash-type investing applying a cautious corporate investing approach, with a strong yield focus. With equities experiencing a negative 2018, cash-type investments gained favour and investors benefitted from the strong returns earned in this asset class.

The PPS Enhanced Yield continued to deliver strong returns in the first quarter of 2019, by delivering a return of 2.0%, compared to the STeFI 3-month benchmark return of 1.7%. Over the 12-month investment horizon the fund outperformed the benchmark by 1.5% (8.4% vs 6.9%). The conservative nature of the underlying manager is apparent from the lack of any SOE exposure and an almost exclusive use of floating rate securities. This maintains a low modified duration which results in a low capital sensitivity to interest rate hikes.