Marriott – Core Income Fund   

Invest for income in turbulent times

The Marriott Core Income Fund's objective is to provide a high and reliable income stream to investors through the interest rate cycles. By consistently applying our income focused investment style, the Fund has a proven track record of delivering on its mandate and is ideal for moderately conservative investors with a 24-month time horizon.

Core Income Fund investors can expect:

1. A high and reliable level of income
2. Consistent inflation-beating returns
3. Downside capital protection

Proven Track Record

1. High and Reliable Income

The Core Income Fund has consistently delivered a higher level of income than the average of both the Interest Bearing – Money Market and the Multi-Asset Income Sectors, as indicated below. This high and reliable level of income is useful for retirees wanting to draw an income stream, or for investors wanting to accumulate capital (through income reinvestment) in a more predictable manner.

Core Income Fund – Income Produced on R1,000,000 invested (as at 28 Feb 2021)
Fund/Sector Average 1 year 3 years 5 years
Core Income Fund Class A R63 520 R223 940 R387 010
Core Income Fund Class C (LISPs)* R66 410 R232 640 R401 260
SA Multi-Asset – Income Sector R57 680 R197 550 R340 150
SA Interest Bearing – Money Market Sector R47 820 R189 870 R335 150

Source: Profile Data

2. Consistent Inflation-Beating Returns

The Core Income Fund (Class A) has delivered a total return of 8.1% for the last 12 months and an impressive 4.9% p.a. real return over the last 5 years. The below highlights the track record relative to inflation and other Income Funds in the market:

Total Returns (as at 28 February 2021) 1 year* 3 years* 5 years*
Core Income Fund Class A 8.1% 8.2% 8.4%
Core Income Fund Class C (LISPs)* 8.4% 8.5% 8.8%
SA Multi-Asset – Income Sector 5.7% 7.0% 7.3%
SA Interest Bearing – Money Market Sector 5.1% 6.5% 6.9%
Inflation 3.2% 4.0% 4.4%
Real Returns +4.9% +4.2% +4.0%

*Annualised    Source: Profile Data

3. Downside Capital Protection
core graph 1

The Core Income Fund has a track record of protecting investor's capital. The chart shows the Fund's 24-month rolling return since 2010 and highlights the downside capital protection. The lowest 24-month annual return was just below 5% p.a.

Why Invest in the Marriott Core Income Fund?

Investors looking for a high level of income, consistent returns and capital protection generally invest in income type funds. However, given the market uncertainty, lower interest rates and higher risk associated with corporate debt, it is important to understand what your chosen income fund invests in and how the portfolio is managed to ensure a decent outcome. Below we highlight why you should consider investing in the Marriott Core Income Fund

1. Actively managed with a flexible mandate
2. Taking advantage of High-Yielding South African Bonds
3. Better return outlook than Money Market Funds

1. Actively managed with a flexible mandate

A primary benefit of the Core Income Fund is its flexible mandate. The Fund manages its exposure to cash, investment grade corporate debt, preference shares, property and bonds through the interest rate cycles to ensure it delivers a high and reliable income stream to investors.

Reflecting on 2020, it certainly was a defining year for the Fund as we were forced to deal with the impacts of the COVID-19 pandemic, a Moody's junk sovereign credit rating and short-term rates moving down to 50-year lows. In the midst of all the chaos the bond market presented a great opportunity – the chance to invest in a relatively low risk investment at a very attractive yield. Towards the end of March 2020 the R186 (a fixed-rate government bond maturing in 2026) reached a yield as high as 12%. In other words, the government was guaranteeing investors a 12% return per year for the next 7 years. Compare that to the yield on money in the bank today of just above 3%, and one can comprehend the magnitude of the opportunity. During that period of volatility, we invested approximately 40% of the Fund's portfolio into the R186 Government bond locking in a yield of approximately 10% p.a. for investors.

core graph 2

The Fund's current modified duration target is between 2 and 3, slightly higher than its average duration in recent years, as investors are currently adequately compensated for the additional term risk thanks to the steepness in the yield curve. The Fund intends to have a duration closer to 2 (slightly more conservative) when there is a higher likelihood of bond yields increasing, and to have a duration closer to 3 (slightly less conservative) when there is a higher likelihood of bond yields decreasing.

core graph

Note: Modified Duration helps investors in Income Funds understand how much term risk a fund has taken on. A higher figure means the fund has invested more into longer dated instruments that are generally higher yielding and come with more price volatility. The actual calculated number is an indication of how sensitive the Fund's price is to a 1% change in yields. The current figure of 2.5 shows that if yields decreased by 1% the fund's price would increase by 2.5%. The opposite is true if yields increased by 1% then the fund's price would decrease by 2.5%.

2. Taking advantage of High-Yielding South African Bonds

With short-term cash rates in South Africa at 50 year lows, the short end of the yield curve has a poor outlook for returns going forward. Investors will be well served in the Core Income Fund as the Fund has increased its exposure to higher yielding SA Government Bonds which, in our opinion, represents one of the most attractive investment opportunities locally from a risk/return perspective. The points below explain why we think this:

  • The real yields after deducting inflation on SA government bonds are amongst the highest in the world (below left).
  • The South African yield curve is the steepest it has been in over 30 years, meaning longer dated bonds are offering investors significantly higher yields relative to shorter dated bonds. This has occurred as long-term bond yields have priced in junk status and fiscal deterioration, whilst short-term bond yields have fallen in line with interest rates. The steepness in the curve means investors can expect positive price appreciation by 'rolling down the yield curve' over time towards their maturity dates. The graph (below right) shows the current SA Yield Curve highlighting the steepness in the curve.
SA government bonds
modified duration
  • The R186 (maturing in 2026) and R2030 (maturing in 2029) Government bonds, to which the Fund is exposed, are currently offering yields that are 3% to 5% higher than cash rates. The expected gross annual returns of theR186 and R2030 over the next two years, assuming no change in yields and 'rolling down the yield curve, is between 9% and 11%.

Note: Government Bonds
We are of the view that South Africa's weaker fiscal position, worsening debt metrics and possible further credit rating downgrades are currently priced in. We remain skeptical as to whether the South African government will be able to cut back on spending and hence our assumption is for South Africa's fiscal position to continue to deteriorate further. Given this we are actively managing our government bond exposure (average term 4.5years) to minimise the risks. We do not believe that the South African government will default on their debt obligation over this period due to the following:

  • + 90% of government debt is Rand-denominated.
  • + 12years is the average term for government debt.
  • The constitution states that Parliament can't allocate revenue before it has considered national interest, debt and obligations.
  • The government can still approach the IMF for additional funding which will come with conditions to improve the fiscal position.
3. Better return outlook than Money Market Funds

Over the last few years, investors were able to achieve reasonable returns from Money Market Funds without taking on volatility. However, given a 3% decline in interest rates and an expectation for rates to remain lower for an extended period – the outlook for Money Market Funds has changed significantly. Based on the portfolio’s current asset allocation, we expect the Core Income Fund to produce more than money market rates and significantly higher than inflation. This makes the Marriott Core Income Fund an ideal solution for moderate conservative investors looking for a high level of income with a 24-month time horizon.

The below shows the range of income funds offered by Marriott highlighting where the Core Income Fund fits in. It is important to note that the higher the expected return is, the longer the investment term becomes and the more short-term volatility an investor should expect. It is our view that given the steepness in the yield curve, taking on duration makes a lot of sense and it is for this reason we believe the Core Income Fund will serve "Income Fund" investors best over the next 24 months.


Considering the Core Income Fund's track record, flexible mandate and the steepness in the yield curve we continue to believe that the portfolio will deliver a relatively high and reliable income & inflation-beating returns whilst protecting capital over a 24-month period. This makes the Fund an ideal income solution for moderately conservative investors with a 24-month time horizon.

returns outlook
  Money Market Fund Income Fund Marriott Core Income Fund
Investment Term › 3 months 12 months 24 months
Modified Duration 0.25 years 1-2 years 2-3 years
Risk Conservative Conservative Moderately Conservative

*Annualised    Source: Profile Data

How to access the Core Income Fund?

Fund/CPI Direct Marriott Unit Trusts Direct Marriott Solutions Via a LISP
Living Annuity Income Solution
Core Income Fund n/a n/a
High Income Fund of Funds*

*The Marriott High Income Fund of Funds invests into the Core Income Fund and has the same outlook.

Use our secure Online Investing portal.

What fees do Marriott charge?

Please note that Marriott does not charge any performance fees across its fund range.

Fund/CPI Marriott Annual Management Fee (excl. VAT)
Core Income Fund Class A 1.00%
Core Income Fund Class C (LISPs) 0.75%


Collective investment schemes are generally medium to long-term investments. The value of participatory interests or the investment may go down as well as up. Past performance is not necessarily a guide to future performance. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. If required, the manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Forward pricing is used. The ruling price of the day is calculated at approximately 15h00 SA time each day. Purchase and repurchase requests must be received by the manager by 15h00 SA time each business day. Prices are published on a daily basis on the Marriott website, Unit trusts are calculated on a net asset value basis. Net asset value is the value of all assets in the portfolio including any income accrual and less any permissible deductions from the portfolio. Marriott does not provide any guarantees with respect to the capital or the return of the portfolio. A schedule of fees and charges and maximum commissions is available on request from Marriott. Where initial fees are applicable, these fees are deducted from the investment consideration and the balance invested in units at the net asset value. Commissions and incentives may be paid and if so, would be included in the overall costs. Different classes of units apply to the fund and are subject to different fees and charges. Declaration of income accruals are monthly. Performance figures are based on lump sum investment. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Past performance is not indicative of future performance. This portfolio may be closed to new investors in order to manage it more efficiently in accordance with its mandate. The TER shows the percentage of the average Net Asset Value of the portfolio that was incurred as charges, levies and fees relating to the management of the portfolio. A higher TER ratio does not necessarily imply poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TERs. Transaction Costs are a necessary cost in administering the Financial Product and impacts Financial Product returns. It should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of Financial Product, the investment decisions of the investment manager and the TER. Marriott Unit Trust Management Company (RF) (Pty) Ltd is a member of the Old Mutual Investment Group. Old Mutual is a member of the Association for Savings and Investment South Africa (ASISA).

Please note that where the term ‘yield/yields’ is used, these are historic yields