Orapa – Every South African with any interest in money knows the name Allan Gray. The company is currently the biggest local unit trust manager, with over R150bn invested in their six domestic funds alone.
But it is true of all big businesses that they were once much smaller businesses. Allan Gray registered his company as a sole proprietorship in 1973, and the firm he founded only launched its first retail unit trust – the Allan Gray Equity Fund – in 1998.
The success they have enjoyed since then is no doubt both an example and an inspiration to anyone who starts their own fund management business in South Africa. Quite simply, Allan Gray has proved that consistent good performance will get be noticed.
These days there are of course dozens of smaller fund managers and it’s probably not as easy to make an impression as it was 15 years ago. But nevertheless, there are a few who stand out from the rest.
And that begs the question: is there a fund manager out there that may one day challenge Allan Gray’s dominance?
Here are five potential candidates:
The team at 36ONE currently runs two unit trust funds – the 36ONE MET Equity Fund and the 36ONE MET Flexible Opportunity Fund. Since the start of 2012, the Equity Fund (which used to be the Target Return Fund) has grown its assets under management from R51m to R1 381m.
That is an astounding figure, but since the fund was moved into the South African general equity category, it has been consistently at or very near the top of that particular pile. It has returned 36.81% in the last year alone.
The growth in the size of the Flexible Opportunity Fund has been slightly more modest in percentage terms, but actually better in absolute terms. From R540m in assets under management at the start of 2012, there is now R2 493m in the fund.
Over both the last three years and five years, the fund is second in its category, with annualised returns of 24.74% and 25.45% respectively. To put that in perspective, no equity fund can match that performance over five years, and only one comes in better over the last three.
The other South African general equity fund that has really been making waves in recent years is the Mazi Capital MET Equity Fund. Over the last three years it is the best fund in its category with an annualised return of 25.21%. That is more than 2.0% better than any of its peers.
This performance has been rewarded with some significant inflows. From R235m in assets under management at the start of 2012, the fund now manages R1 654m.
The Equity Fund is currently the only unit trust offered by Mazi, but it will be interesting to see if and how they chose grow their portfolio of products in the future.
Fairtree currently manages two domestic unit trust funds – the Fairtree Equity Prescient Fund and the Fairtree Flexible Balanced Prescient Fund. The former has grown its assets under management from just R16m at the start of 2012 to R957m.
The fund was only formed in November 2011 so it doesn’t yet have a long-term track record, but over the last year it is the fifth best performing general equity fund in the country. It has returned 31.50% in that time.
The Flexible Balanced Fund only launched in June this year, but has already attracted R28m in assets.
The ClucasGray Future Titans Prescient Fund is the top-performing South African multi-asset flexible fund over the last year, delivering a return of 34.45%. It is, however, predominantly a small cap fund and if one compares it to the funds in the South African equity small cap category, it would come out tops there as well.
The fund has grown its assets under management from R81m at the start of last year to R255m. In absolute volumes this may not match with those above, but it’s nevertheless a growth of over 300%.
ClucasGray has however not yet been as successful with its general equity fund – the ClucasGray Equity Prescient Fund. Launched in 2011, this fund manages just R51m in assets, but given the success of the Future Titans Fund it might be worthwhile keeping an eye on it.
It is interesting to note that besides being amongst South Africa’s most exciting small asset management firms, there is something else that ties the four above companies together. On top of their unit trust offerings, all four are also hedge fund managers.
How much this influences their management of unit trusts may be a matter for speculation, but it does suggest that they might enjoy the benefit of a slightly different perspective on the market to long-only unit trust managers.
The Rezco Value Trend Fund currently manages R922m in assets. That is significant growth from the R144m at the start of last year. Since the end of June alone, the fund has added over R300m.
This is reward for consistently excellent performance. Over the last three years the fund has delivered an annualised return of 23.16%.
The second fund in the Rezco stable, the Rezco Prudential Fund has shown even higher percentage growth in assets under management. Since the start of 2012 it has grown from just R4m to R242m, which is growth of over 6 000%.
Again, these inflows are well-earned. Over the last year it has been the best South African multi-asset high equity fund with a return of 28.45%. Over the last three years it is also within the top five of its class.
Of course all five of these companies have a long, long way to go before they can claim the same sort of success that we have seen from Allan Gray. But there is no question that the potential is there.
The real test, however, is their longevity. Only if they can sustain these kinds of numbers for the next fifteen to twenty years will they be able to claim to be in the same category as the current giant of South Africa’s unit trust landscape.
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