The Old Mutual Guaranteed Fund, the country's biggest capital guaranteed, smooth bonus investment product, with assets of about R45 billion under management, has given thousands of members of more than 450 retirement funds a 27 percent return for the past year. The trustees of funds then decide how much to allocate to members. In most cases, the full amount is allocated to members.
The returns will be credited to the retirement funds during August, backdated to June 30.
Over the past 40 years the fund has provided sound average returns of 5.1 percent a year above inflation. Most of the return for the current year has come from the substantial returns in equity markets.
Of the 27 percent return, 10 percent is added to the capital guaranteed amount as a vesting bonus, while 17 percent is added as a non-vesting bonus, which can be removed in the event of substantially adverse investment markets. This has not happened in the 40-year history of the fund.
Tim Cumming, the managing director of Old Mutual Corporate, says Guaranteed Fund clients not only benefit from the great inflation-beating return received over the past year, but also from the prospect of good positive returns (bonuses) in the future, even if the markets do not perform as they have over the past few years.
He says the "safety net" of the smooth bonus mechanism allows for years of good investment returns to be partly accumulated and distributed during periods of poor market performance.
In this way, the Guaranteed Fund provides sound real returns with greatly reduced volatility (or risk).