31 March 2020

With Moody’s downgrading South Africa to sub-investment grade as expected on Friday, the likelihood of increased government borrowing has been further aggravated by the lockdown which was imposed as result of COVID-19 and the associated slowdown in the economy. What was less expected, was Moody’s decision to retain South Africa on ‘negative outlook’. This may have further negative implications for South Africa into the future.

The purpose of this commentary is to address any concerns investors may have regarding the impact on the Gryphon Dividend Income Fund.

We confirm that the Gryphon Dividend Income Fund continues to provide a tax-efficient income stream in the form of dividends despite the volatility associated with the downgrade. As such, the ‘pick-up’ in yield over competing products ensures that the fund remains a compelling alternative for both the conservative investor as well as investors looking for a ‘parking place’ for discretionary cash.

An overview of the Gryphon Dividend Income Fund:

The Gryphon Dividend Income Fund is a unique product that provides investors with a dividend income stream while simultaneously holding the underlying security in deposits at the top five South African banks, i.e. ABSA, FirstRand, Investec, Nedbank and Standard Bank.

While financial conditions are volatile currently, it is worth noting that Gryphon Asset Management has been integrally involved in products of this nature since 2002. Our intellectual property was instrumental in the establishment of what became the ABSA Dividend Income Fund. This product operated successfully until 2009, without interruption throughout the market dislocation of the Great Financial Crisis, which spanned the years 2006 to 2009, reaching a size of over R16bn at its peak.

Throughout this period the fund continued to generate dividends for its investors, providing them with an enhanced yield over equivalent cash investments. We have no reason to believe that the fund will not continue to operate in its current form and provide dividends to investors without disruption.

The Gryphon Dividend Income Fund has always operated within the ambit of the law and as such remains compliant with all regulatory requirements imposed on products of this nature.

Gryphon Asset Management’s mantra has always been, first security, then liquidity and then yield. Once again, today’s markets prove this fundamental philosophy to be a prerequisite that our investors and prospective investors can depend on with confidence and equanimity.

The fund fact sheet can be found here; and an earlier article, The Winter is Coming, Jon Snow, found here.