BCI Income Plus Fund

Fund update

Louis Antelme

17 August 2020

Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

Unit AUMUnit manages in excess of R13.8 billion

BCI Income Plus R 8 320 million

Fairtree Flexible Income Plus R 3 350 million

Cisca Fund 3 R 599 million

Cisca Fund 4 R 513 million

Cisca Fund 5 R 357 million

Cisca Fund 6 R 142 million

Cisca Fund 7 R 102 million

Cisca Fund 8 R 90 million

Hedge Fund Product R 418 million

Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

• Target STeFi +3.00% after fees.

• All credit instruments Floating Rate Notes (FRN’s).

• FX risk hedged using futures – Euribor / Libor+ translates to Jibar+

• No Interest rate risk (MD)

• Current spread to 3m Jibar around 3.35%

• Low correlation to other asset classes.

BCI Income Plus Fund (R8.3bn)

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BCI Income Plus FundAsset Allocation 31 July 2020

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LOCAL ZAR 74.14% OFFSHORE 25.86%

Cash 2.22% EUR 16.69%

Margin Accounts 1.41% Cash 0.64%

Floating Rate Notes

Floating Rate Notes 0-1 year 0.20%

0-1 year 18.03% 1-3 year 2.64%

1-3 year 26.20% 3-7 year 7.21%

3-7 year 23.68%

BCI Fairtree Global Feeder 6.00%

Fixed Rate Notes USD 9.18%

0-1 year 1.30% Cash 0.15%

3-7 year 1.20%

12+ year 0.10% Floating Rate Notes

1-3 year 1.42%

3-7 year 7.60%

BCI Income Plus FundLargest 10 Instruments, Reference entities and Sectors 31 July 2020.

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Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

• Default risk – reality – well diversified (172 instruments).

• FX – no risk – all hedged.

• No Interest Rate risk (MD)

• Liquidity – manageable – WAT 2.64 years, quarterly coupons.

• Spread Widening.

BCI Income PlusRisks

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Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

Spreads – were they too tight?Itraxx Xover Index – 75 European Sub Investment Grade names.

11 Source : Bloomberg 7 August 2015 – 13 August 2020

Spreads – were they too tight?Itraxx Xover Index – 75 European Sub Investment Grade names.

12 Source : Bloomberg 1 January 2003 – 13 August 2020

Global Credit EventsGlobal Credit Event under CDS

13

Source : Markit 2005 – 13 August 2020

• 15 Credit events under CDS.

• 3 Sovereign, 2 European, the rest US HY.

• Wide dispersion of auction recoveries 0.125% to 100%

• Average auction recovery 18.28 cents.

Credit EventsYear to date to 29 July 2020

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Spreads - its all relativeGerman 10 year bonds

15 Source : Bloomberg 1 January 1989- 13 August 2020

Spreads – its all relativeUS 10 year bond yields

16 Source : Bloomberg 1 January 1961– 13 August 2020

SA – just another risky creditRepublic of South Africa 5 year CDS vs Itraxx Crossover CDS Index

17 Source : Bloomberg 31 December 2019 -13 August 2020

SA – just another risky creditRepublic of South Africa 2026 bond spread to 3m Jibar vs Itraxx Crossover Index

18 Source : Bloomberg 31 December 2019 – 14 August 2020

European Credit as an Asset ClassSince March 2007

Source : Bloomberg March 2007 – 31 July 202019

Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

Inception January 2007

Income Plus Mandates : 13.5 Years of Relative Performance (9.44% pa)

Source : Morningstar, Bloomberg Jan 2007 – 31 July 202021

Fairtree IP TOP40TR ALBI STeFI

340.37 334.68 284.65 259.85

Income Plus Mandates : 13.5 Years of Relative PerformanceCalendar year since 1 January 2007

Source : Morningstar, Bloomberg 1 January 2007 – 31 July 202022

Year Income Plus ALBITR TOP40TR STeFi

2007 15.14% 4.25% 18.97% 9.40%

2008 7.30% 16.97% -23.58% 11.70%

2009 8.86% -0.99% 31.73% 9.13%

2010 9.64% 15.01% 17.22% 6.93%

2011 8.29% 8.78% 2.20% 5.71%

2012 9.48% 15.99% 26.12% 5.55%

2013 9.76% 0.64% 22.77% 5.18%

2014 8.09% 10.15% 9.17% 5.90%

2015 10.32% -3.93% 7.52% 6.46%

2016 8.99% 15.45% -1.60% 7.36%

2017 10.43% 10.26% 23.07% 7.52%

2018 9.95% 7.69% -8.31% 7.29%

2019 10.24% 10.32% 12.41% 7.29%

2020 1.97% 0.97% 2.81% 3.62%

Income Plus Mandates : 13.5 Years of Correlation

Inception 1 January 2007

Source : Morningstar, Bloomberg 1 January 2007 – 31 July 202023

INCOME

PLUSTOP40TR ALBITR STeFi

INCOME PLUS 1.00 0.20 -0.04 0.00

TOP40TR 0.09 1.00 0.10 -0.16

ALBITR 1.00 0.01

STeFi 1.00

Mean

Annual

STD

Deviation

Sharpe

Ratio

INCOME PLUS 9.44% 1.97% 1.00

TOP40TR 9.30% 16.56% 0.11

ALBITR 8.01% 7.94% 0.09

STeFi 7.28% 0.49%

BCI Income Plus Fund

Calendar year since 1 January 2015

Source : Morningstar, Bloomberg 1 January 2007 – 31 July 202024

BCI INCOME

PLUSALBITR TOP40TR STeFi

2015 10.32% -3.93% 7.52% 6.46%

2016 8.99% 15.45% -1.60% 7.36%

2017 10.43% 10.26% 23.07% 7.52%

2018 9.95% 7.69% -8.31% 7.29%

2019 10.24% 10.32% 12.41% 7.29%

2020 1.97% 0.97% 2.81% 3.62%

Performance in perspectiveMTD and YTD to 13 August

Source : Bloomberg, internal 3 August 2019 – 13 August 202025

13 August 2020 BCI INCOME

PLUS TOP40 TR ALBI TR STEFI

Month to Date 0.71% 3.34% 0.38% 0.17%

Year to Date 2.70% 6.24% 1.35% 3.79%

Year on Year 6.59% 11.05% 5.03% 6.57%

Partial attribution YTDBroad based widening of spreads

Source : Bloomberg, internal 31 December 2019 – 13 August 202026

InstrumentAverage

Weight

YTD

Performance

YTD

Contribution

Current Implied

Spread (As marked)

Fairtree Global 5.34% -5.71% -0.30% 338bps

FRC322 3.39% -10.00% -0.34% 448 bps

AGL03 2.79% -6.80% -0.19% 375bps

Landbank 1.63% -8.08% -0.13% 470 -700bps

SBT206 1.65% -6.11% -0.10% 380 bps

SOLB01 1.03% -7.55% -0.08% 550 bps

Multi Asset Income Fund rankings1 Year Performance 5.88%

Source : Morningstar 31 July 202027

Multi Asset Income Fund rankings2 Year Performance 7.97%

Source : Morningstar 31 July 202028

Multi Asset Income Fund rankings3 Year Performance 8.94%

Source : Morningstar 31 July 202029

Multi Asset Income Fund rankings5 Year Performance 9.25%

Source : Morningstar 31July 202030

Agenda

Business unit

Targets and Objectives

Portfolio Risk

Credit Markets

Performance

Conclusion

Stable Alpha generation over an extended period

Volatility is to be expected in all risk markets from time to time

Current volatility has not changed the investment thesis or process.

Thank you

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Disclaimer

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