For the year to the end of June 2021, 44.4% of South African equity managers outperformed the S&P South Africa Domestic Shareholder Weighted (DSW) Capped index according to the latest S&P Indices Versus Active (Spiva) study. On a risk-adjusted basis, these managers fared even better, with 57% beating the index.
While only 38.2% of managers outperformed the large-cap S&P South Africa 50 on a total return basis over this period, 65.2% beat this index on a risk-adjusted calculation.
The risk-adjusted return takes the annualised average monthly return of funds, divided by the standard deviation of their monthly returns.
This was a positive performance for active managers over a period when the South African market was much broader than it has been in recent years. This is clear from the longer-term performance of active managers relative to the S&P South Africa 50.
Over five years, just 7.3% of managers outperformed the large-cap index. That percentage stays the same on a risk-adjusted basis.
South African managers running global equity funds also had a stronger year, with 34% of them outperforming the S&P Global 1200 index. On a risk-adjusted basis, just over 50% outperformed.
Longer term, however, only 10.6% outperformed the S&P Global 1200 over five years. Their performance was even weaker on a risk-adjusted basis, with just 8.5% outperforming.
Notably, the average performance of local equity funds on an asset-weighted basis was ahead of the broad market index over all time periods. This reflects the relative strength of the larger funds in the local equity category.
Compared with the large-cap S&P South Africa 50, however, the average asset-weighted performance of South African equity funds was significantly lower than the index over five years, despite outperformance over one year.
The same was true for global equity funds run by local managers.
Patrick Cairns is South Africa Editor at Citywire, which provides insight and information for professional investors globally.
This article was first published on Citywire South Africa here, and republished with permission.