Wednesday, January 26

R100k value after five years in SA top and bottom funds


A recent analysis by Moneyweb showed that investing R100,000 in the country’s largest equity funds in November 2016 would have yielded widely divergent results.

After five years, those same R100,000 would have been worth as much as R236 730 in the CoreShares S&P 500 unit trust or as little as R119 540 in the Old Mutual Investors Fund.

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Read: What R100k Is Worth Today In SA’s Largest Equity Funds Five Years Ago

This may not sound like a lot in absolute terms, but what if that lump sum was 1 million rand? This would equal the difference between R2.4 million and R1.2 million. That gets people’s attention!

This exercise considered only capital unit trusts with more than R10 billion in assets under management according to data from the South African Savings and Investment Association (Asisa) up to the end of June 2021.

But what if you were lucky enough to have invested R100,000 in one of the top 10 best-performing unit trusts, period? Conversely, what if you invested in one of the 10 worst performing funds since 2016?

The value of hindsight

Critics will point to the fact that this exercise is retrospective and does not serve any investor today.

That may be true, but what this analysis does show is that returns over a relatively short time horizon (five years is no time) can be strongly influenced by cyclical behavior within and between sectors.

The rand-dollar exchange rate during the specific period will also be a determining factor; If the rand has weakened over the five years, there will be a boost in the return on foreign assets (and vice versa).

During the five years as of November 30, 2016, the rand is 15.5% weaker against the dollar. Simply put, any money invested in the US should therefore have returned at least a return of this amount. Any less value means that the performance of the underlying assets would have been negative. However, there are a number of rand-denominated global equity funds that have underperformed even currencies.

What the main funds have in common

There are some obvious commonalities among the best performing funds in the past five years.

Most resource or commodity funds performed well, as did any fund focused on top-of-the-line US technology stocks (or even the US market in general, given how dominant they are). this sector has become).

A lump sum of R100,000 in the best performing mutual fund since November 2016, Emperor IP Global Equity Fund, would be worth more than R364,000 today. That’s a remarkable performance, and more than 100 percentage points better than the top performer. big fund (264% vs. 156% for the CoreShares S&P 500).

Like the Emperor fund, there are other high-yield funds that have benefited from stock selection (Emperor is overweight in IT and communications services, which together comprise two-thirds of the fund’s holdings. For the Anchor BCI Global Equity Feeder Fund, the allocation to these two sectors adds up to 54%). Much of the outperformance of the Emperor and Anchor funds has occurred in the past 18 months, that is, since the start of the Covid-19 pandemic.

Read:

The best performing global equity funds available in SA
How This Balanced Fund Got Double Its Benchmark

There are two index trackers (as well as the so-called ‘dynamically managed passive fund’) in the top 10.

Top 10 unit trusts for five years – Lump sum of R100,000 invested

Value after five years Return
Emperor IP Global Equity Fund R364 222 264%
Coronation Resource Fund R341 656 242%
SIM resource pool R336 834 237%
Ninety-one commodity fund R297 985 198%
Nedgroup Investment Mining and Resource Fund R292 890 193%
Anchor BCI Global Equity Feeder Fund R288 393 188%
Sygnia 4th Industrial Revolution Global Equity Fund R282 266 182%
Sygnia Itrix MSCI US Index ETF R260 651 161%
CoreShares S&P 500 ETF R256 022 156%
BlueAlpha BCI Global Equity Fund R247 571 148%

* Class A or R funds (for retail investors) used when there is more than one class

* FundsData data as of November 30, 2021

While there are four commodity / resource funds in the top 10, there are divergent performances among the funds.

A lump sum of R100,000 in the Coronation Resource Fund would be worth nearly R342,000 now, compared to R292,900 in Nedgroup’s Investment Mining and Resource Fund.

The top four resource funds, which are among the top 10 funds overall, outperform the Satrix Resi ETF fund, which has returned 138% over five years. (It’s worth noting that the worst performer among these funds, the Momentum Resources Fund, has returned 100% for the past five years.)

At the other end of the scale, funds focused on local financial stocks have underperformed dramatically in the last five years.

The Satrix FINI ETF returned 13%, showing how poorly both the Sanlam Investment Management Finance Fund (4%) and the Coronation Finance Fund (3%) have performed.

In contrast, the Nedgroup Investments Financials Fund (managed by Denker Capital) returned a 24% return, which is just above inflation (around 23%) for the period. The return on the other financial fund in SA, the Momentum Financials Fund, is 17% over the past five years.

Both this and the markedly different returns from resource funds once again illustrate how critical security selection is in a small investment universe such as the local market. By targeting a specific sector and therefore an even smaller universe, these options could end up having a huge impact.

This also shows the risk of investing in a specific sector, especially as a primary investment strategy.

Lower 10-unit trusts for five years: lump sum of R100,000 invested

Value after five years Return
SIM Financial Fund R104 041 4%
Colourfield BCI 2 Income Fund R103 781 4%
Imalivest Sanlam Collective Investments WW Equity Fund R103 535 4%
Standard Bank Namibia Flexible Property Income Fund R103 071 3%
Harvard House BCI Stock Fund R102 927 3%
First Avenue Sanlam Collective Investments Equity Fund R102 909 3%
Triathlon IP Global Feeder Fund R102 811 3%
Financial Fund of the Coronation R102 653 3%
BCI Multikor moderate fund of funds R102 119 2%
Citadel Worldwide Equity H4 Fund R100 743 1%

* Class A or R funds (for retail investors) used when there is more than one class

* FundsData data as of November 30, 2021

As in the previous exercise, which focused on the largest funds in the country, the difference between a hypothetical lump sum of R100,000 and the value of that investment in a fund today may not seem all that significant.

But suppose the lump sum were R1 million … suddenly, the difference between R3.6 million and R2.6 million – or worse, R1.07 million – is very important.

It is concerning that of the 993 funds available in SA that have a five-year track record, only 101 returned a return that was above the local Top 40 index (various Top 40 passive / tracker funds available in the market returned returns of around 69 -70% in the last five years). One could describe these odds as “not very good.” Of the 101, only 19 were no offshore funds (and this includes six of the seven resource funds available).

Surprisingly, one in 11 funds (9% or 87) has failed to beat inflation (!) During the five-year period.

With a growing number of options in local funds (there are over 1,400 funds, according to FundsData), fund selection is arguably more important than ever. And for the average investor, knowing what investment strategy you are following and exactly what you are investing in is critical. This is probably not something one should just “outsource” and ignore.


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