This year has been a very good one for local fund managers. Of the 1,207 South African trust units listed on Morningstar, only six have returned negative for the year through the end of November.
This universe excludes money market funds.
Join heated discussions with the Moneyweb community and get full access to our market indicators and data tools while supporting quality journalism.
R63/month or R630/year
You can cancel anytime.
It has also been a year of significant setbacks. Of the top 10 performing funds so far this year, only two returned positive in 2020.
While last year’s performance charts were dominated by global equity funds, and growth funds in particular, 2021 has been a year for local value managers, property managers, and those managers prepared and able to pursue opportunities. in the small and mid-cap sectors of the JSE. In large part, these were strategies that struggled last year.
Highlighting the performance of any unit trust over a period as short as 11 months is, of course, tricky. However, it’s worth examining what drove your returns.
It’s not about drawing conclusions about your potential future performance, but simply appreciating which approaches the market rewarded this year.
The Blue Quadrant Worldwide Flexible Prescient fund underwent a notable change in 2021.
Last year, it was one of the small minority of local funds that posted negative annual returns. It was down 0.9% in a year in which 84% of South African unit trusts (excluding money market funds) made a profit.
However, for the year to the end of November 2021, it showed a return of 126.7%. This is more than double the profit of the next best South African fund during this period.
As coach Leandro Gastaldi explained to Citywire South Africa earlier this year, this reversal was largely driven by the performance of the portfolio’s energy stocks. These have been a thriving hunting ground for their deep value approach, as these bombed counters have rallied in the post-Covid recovery.
The best performing South African equity fund this year has been an index tracker.
The 1nvest Sector Neutral Value Index fund rose 54.1% during the first 11 months of 2021. The fund offers exposure to stocks that display the highest value characteristics on the JSE and benefited from the rise in value this year.
His latest data sheet shows that he currently has a good number of mining accountants like Sibanye-Stillwater, AngloGold Ashanti, Gold Fields, and Royal Bafokeng Platinum. However, his biggest exposure is a 17% weighting on Richemont.
Another fund manager who has embarked on the value revival has been Flagship’s Niall Brown. The Flagship IP Flexible Value fund he manages has topped the performance rankings among South African flexible funds, with a 51.1% return for the year through the end of November.
This fund was another of last year’s fighters, having lost 2.6% in 2020. As Brown told Citywire South Africa earlier this year, he found cheap stocks that just “kept getting cheaper.”
This year, however, his patience paid off. Holding stocks like Nampak, York Timbers, Caxton, and Stellar Capital has meant the fund has benefited as breadth returned to the JSE.
|Counterpoint SCI Global Property Income Fund
Fund Managers: Richard Henwood and Ian Anderson
Local real estate funds have been an obvious turnaround this year, but there have also been big shifts in global real estate portfolios.
The Counterpoint SCI Global Property Income fund is both the best performing global fund and the best performing real estate fund in South Africa for the year through the end of November. After falling 17.4% in 2020, it gained 42.9% during the 11 months to the end of November.
Managers Ian Anderson and Richard Henwood have positioned the fund primarily in the residential, retail and logistics sectors, and have benefited from the reopening of business.
The best performing active equity fund in South Africa this year is the strategy managed by value veteran John Biccard.
The Ninety One Value fund is another one of those unit trusts that struggled last year, losing 7% in 2020. However, it gained 41% for the year through the end of November.
Citywire’s A-rated Biccard has been a big fork of gold miners, but the fund’s biggest exposure right now is Royal Bafokeng Platinum. Murray & Roberts is the second largest, at 9%.
Biccard also believes that a higher inflation environment will continue to benefit value stocks. As the wrote for Citywire South Africa earlier this year:
“Value stocks are cheap, they are uncorrelated with other factors, and if the world is heading for a sustained reflation even if moderate, then value stocks will definitely do well and provide much-needed diversification.”
Counterpoint Property Specialist Ian Anderson manages not only the best-performing global real estate fund of 2021 so far, but also the best-performing local property portfolio of the year.
The Nedgroup Investments-owned fund he manages has risen 39% over the 11 months to the end of November, after a 29.6% drop last year.
Anderson has built a portfolio that looks distinctly different from the index, with the largest positions in Fairvest, Tower, and Dipula. The top three stocks in the industry, Nepi-Rockcastle, Growthpoint and Redefine, aren’t even in the fund’s top 10.
|1nvest S & P500 Info Tech Index Feeder Fund
Fund Managers: Citywire A-rated Ryan Basdeo and Rademeyer Entertainment
The second index fund to stand out this year is another investment strategy. It is also one of the few portfolios that has performed well in both 2020 and 2021.
After a 48.3% gain in 2020, the subordinate fund 1nvest S & P500 Info Tech Index gained 38.9% for the year through the end of November.
The fund is embedded in the iShares S&P 500 Information Technology Sector Ucits ETF, and has provided exposure to information technology stocks in the US Its largest holdings are Apple, Microsoft, Nvidia, Visa and PayPal.
However, it is a very concentrated portfolio at the moment. Almost 40% of the fund is currently held in only its two largest positions.
In the current environment, it might come as a surprise that South Africa’s best performing multi-asset high-end fund so far this year has a large portion of its portfolio in cash and very little in local bonds.
Many local multi-asset portfolios have benefited from high South African bond yields over the past year and avoided the meager cash yields available. However, Aylet Balanced Prescient Fund Manager Walter Aylett, told Citywire South Africa earlier this year that he does not believe that local bond yields are high enough to justify the risk, and that the threat of a market correction makes cash optionality attractive.
He has preferred to seek returns from cheap local stocks and international sectors such as energy that have been showing value.
The result has been a profitability of 35.1% for the year until the end of November.
Patrick Cairns is a South African editor at Citywire, providing knowledge and information for processional investors globally.
This article first appeared on Citywire South Africa hereand republished with permission.