THE VERY DIFFERENT OPPORTUNITIES IN SA BONDS AND EQUITIES

This article appeared on the CityWire* news site on 5 Feb 2021.

*Citywire is a UK-based leading global provider of independent intelligence and insight about asset management

Author: Patrick Cairns


Vunani portfolio manager Rowan Williams-Short sees no reason why the outperformance of local bonds will revert ‘any time soon’.

The total return of any stock or equity index can always be disaggregated into three components: the change in earnings, the change in rating, and the dividend yield.

Over the very long term, the ratings change will contribute almost nothing. It reverts to the mean, and the return becomes a function of the growth in earnings and dividends.

In the short term, however, there can be significant dislocations. Last year, this was noticeably the case.

Rowan Williams-Short, head of fixed interest at Vunani Fund Managers and manager of the Vunani BCI Bond fund and Mi-Plan IP Enhanced Income fund, has disaggregated the returns on the JSE for time periods going back 60 years. 

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