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By Sonia du Plessis*
With investors having to stomach highly volatile markets over the past few years, it’s easy to imagine that pensioners have nowhere to hide from value destruction. This isn’t entirely true, although rapidly rising prices have taken cash and money markets out of the equation because their returns aren’t keeping pace.
There’s never a one-size-fits-all solution, but if you’re retired and have some savings in low-return investments then you might want to consider an income fund.
This option won’t suit everyone, and returns aren’t guaranteed, but there are clear benefits to adding an income fund to your post-retirement investment strategy.
Who benefits most from an income fund?
You shouldn’t be surprised to hear that income funds are best suited to people who depend on earning an income from their investments. In most cases that would be retirees.
Investors in this age group are generally conservative in nature because they don’t want to put their future income at risk. This is also why money market funds have been so popular for more than a decade as South African investors have shied away from volatile or low-performing equities.
What are the benefits of an income fund?
Income funds aim to achieve a better than money market return while maintaining an extremely low risk profile.
The other main benefit of an income fund compared to an investment in the money market is that investors get daily pricing- meaning investors have a liquid investment, whereas money market accounts can have a lock-in period from days to years.
Investors in retirement, are especially sensitive to moves in the value of their investments, which is why they look for less volatile assets. However, with the cost of living rising rapidly, the returns from traditional safe havens like cash and money markets are struggling to beat inflation.
Income funds have a proven track record of outperforming money market returns. Research shows that approximately R1,5trillion is sitting in South African retail bank deposits. This is an enormous amount of money that can grow more in income funds- without taking on that much risk.
Brenthurst Wealth uses a range of income funds, two of the favourites, is the Mi Plan Enhanced Income fund and Ninety One Diversified Income fund. The first mentioned has an incredible track record- being 1st in its fund class over periods from one to ten years:
Brenthurst also uses the Ninety One Diversified Income fund, see the graph below where the Ninety One Diversified Income fund has outperformed the money market for the past 10 years.
If you’re one of the many South Africans with a fair amount of cash in your bank account or money market account because you fear market volatility, then an income fund is a far better option to retain your buying power.
An added advantage of income funds is that the management fees, usually between 0.75% and 1%, are much lower than equity funds.
What is an appropriate investment horizon?
To be clear, I’m not suggesting you shift your entire portfolio to an income fund.
But this option does make sense as a hedge against inflation if you’re risk averse. However, I do suggest that you stay invested in such a fund for at least 12 months to gain a meaningful benefit, and possibly another 12 more months if you can.
However, these funds can also be used by someone needing to park funds in preparation for a big purchase like a house. Holding your funds in a fund like this offers you the inflation hedge as well as liquidity to put your money to use when you need it most.
Unlike buying bonds directly, when the timing of your purchases or sales impacts your returns, income funds don’t have the same constraints. The fund manager is actively buying and selling bonds of various durations to maintain a balance within the fund to provide you with optimal returns.
How much income fund exposure do I need?
If you’re very risk averse, you might find the nature of income funds really appealing. However, placing 100% of your investments into income funds is not advisable.
For post-retirement investors, we would advise clients to keep at least 50% – 60% of their funds in equities. And as a general rule of thumb, we aim for a 10% – 30% allocation to income funds if you’re in retirement.
The reason that we suggest maintaining equity exposure is because it is the driver of investment returns, which you’ll need to beat inflation in the long run.
We all know that markets can be uncertain. If you can’t stomach that uncertainty but want to earn -money market-beating returns, then income funds really are your friend.
- Sonia du Plessis, CFP®, is Head of Brenthurst Wealth Stellenbosch.
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
