Better than a bank?

For many South Africans, choosing what to do with their money has always felt binary: keep it safe in a bank account earning minimal interest, or venture into the stock market and brace for the ups and downs. But a middle ground is gaining attention among investors who want better returns without the anxiety.

The Sygnia Enhanced Income Fund offers something that sounds almost too good to be true in today’s uncertain economic climate: a current gross interest yield of around 9.5% per year, with far less volatility than traditional equity or bond investments. It’s part of what fund managers call a “cash-plus” strategy – essentially a turbocharged savings account that works harder for your money. “We’re seeing more people realise they don’t have to settle for the measly returns of a standard savings account,” explains Anrich de Jager, one of the fund’s portfolio managers. “But they also don’t want the stomach-churning experience of watching their investments swing wildly with the stock market.”

The magic formula

So how does the fund deliver higher returns while keeping things stable? The answer lies in something called floating-rate notes. Instead of simply depositing money with a bank, the fund lends to carefully selected banks and large companies. These borrowers pay more interest than your typical savings account offers, and here’s the clever part: when interest rates change, the yields on floating notes adjust automatically.

This matters because traditional bonds – where you lend money at a fixed rate – can lose value when interest rates rise. The Sygnia Enhanced Income Fund manages this problem by primarily holding floating rate notes. If rates go up, so do the fund’s yield.

Think of it as having a safety net built into the investment itself.

Not all borrowers are equal

Of course, lending money always carries some risk, which is why the fund’s managers are particular about who they work with. Portfolio Manager Nikita Hadskins describes their approach as “protect capital first, enhance yield second.”

The team only buys the instruments of high-quality borrowers and spreads investments across many different banks and companies. Every potential investment undergoes rigorous checks. This diversification means that even if one issuer runs into trouble, the impact on the fund is limited.

“We apply the same scrutiny whether we’re looking at a major bank or a corporate issuer,” Hadskins notes. “It’s this discipline that allows us to offer attractive returns while keeping risk under control.”

Perfect timing

The current South African interest rate environment makes this approach particularly appealing. With the South African Reserve Bank maintaining rates at elevated levels, the fund is well positioned to capture attractive returns. This is a genuine alternative for savers frustrated by inflation eroding their purchasing power even as their bank accounts barely budge.

The fund bridges an important gap: It’s more liquid than having your money locked away for years in a fixed deposit, but it offers significantly better returns than a standard savings account. For people building an emergency fund, saving for a large purchase or simply wanting a stable place to grow their wealth, this option doesn’t require choosing between safety or returns.

As De Jager puts it: “In uncertain times, investors need solutions that deliver consistent results. That’s exactly what we’ve designed this fund to do – provide attractive income without the drama of volatile markets.”

In a financial landscape where complexity often obscures value, the Sygnia Enhanced Income Fund offers something refreshingly straightforward: better returns, managed risk and the peace of mind that comes from knowing your money is working harder without working riskier.

For more information on the Sygnia Enhanced Income Fund, visit www.sygnia.co.za/fund/sygnia-enhanced-income-fund/.