Registered users can save articles to their personal articles list. Login here or sign up here

SA’s most expensive balanced funds

Are investors really getting value for money?

Over the last few years a lot of focus has been placed on investment costs. Investors are asking more questions about how much they are paying their fund managers, and what they are getting in return.

This issue has become even more significant in the current environment of low returns. Investors are appreciating that whatever they are paying their asset manager is effectively reducing their return, and they are recognising that this matters.

In years when South African balanced funds were returning 20%, paying a fund manager a 3% fee might not have seemed excessive. But when the return is only 5% or 6%, that same fee suddenly looks quite different.

An argument is sometimes made that returns are always calculated after fees, so it doesn’t really matter what fee an investor is paying as long as the return they see is acceptable. However, that ignores the critical question of who is benefiting most from the relationship between the asset manager and the client.

Any fund manager’s primary responsibility should be towards the people whose money they are looking after. They have a duty to invest it prudently so that the client sees the most benefit.

It is very hard to argue that they are doing that when they are taking a large chunk of the returns they are generating as fees. Effectively what they are then doing is using their clients’ money to benefit themselves.

To highlight how much of a problem this can be, Moneyweb conducted an analysis with the help of data from Morningstar to identify South Africa’s most expensive multi-asset high-equity funds. This is the most popular category of unit trusts amongst local investors.

The table below lists the 20 managers that currently have total investment charges (TICs) of more than 3%. Their three year returns to the end of June are also given to show what investors have received in return.

SA’s most expensive multi-asset high-equity funds



3 year annualised return

Long Beach Managed Prescient Fund A1



RECM Balanced Fund A



CS BCI Aggressive Prudential FoF A



Absa Prudential FoF



Florin BCI Managed Fund A



Element Balanced SCI Fund A



CS BCI Prudential FoF A



Baobab BCI Prudential Managed Fund A



Autus BCI Balanced Fund A



Instit BCI Managed FoF A



Vital BCI Balanced FoF A



Kanaan BCI Balanced FoF



Contego MET Wealth Creator FoF A



Perpetua MET Balanced Fund A



Warwick MET Balanced FoF A



Anchor BCI Diversified Growth Fund A



Old Mutual Multi-Managers Aggressive Balanced FoF A



Simplisti BCI Managed Protector FoF



Efficient BCI Prudential High FoF A



EFPC BCI Balanced Fund A



Source: Morningstar

This 3% threshold is rather arbitrary. In fact, Morningstar calculates that the average TIC for funds in this category is 2%, and therefore anything above that number could be deemed ‘expensive’. This list is therefore far from exhaustive, and merely highlights the funds charging the most.

Also, not all the funds on this list have three-year return figures, as they do not yet have track records long enough. Costs are also usually calculated on an annualised three-year basis, so it’s important to note that the charges shown for funds that have not been around that long are not necessarily directly comparable, since they are over a shorter period.

Nevertheless, investors looking at these numbers should be asking some serious questions. The average TIC of funds on this list with three year track records is 3.46%. Their average return is 3.64%.

In other words, over the last three years, these asset managers have collectively taken 49% of the returns they have generated in costs. Put another way, investors are only seeing half of what their money has actually earned.

Also worth noting is that the average return of all funds in this category for these three years according to Morningstar is 4.94%. Only three of the above funds have performed better than that. That is a very simple way to tell that investors are simply not getting what they are paying for.

A few in particular stand out. The TIC on the Long Beach fund of over 5% is very high by any measure. It must be noted that this unit trust was the second best performing multi-asset high-equity fund over this period, however it comes in behind a fund with a TIC that is over 50% lower at 2.35%.

Had Long Beach had a TIC at the same level, it would have been able to show an additional 2.73% return. That would have made it comfortably the top-performing fund in this category.

This is significant, because it is surely more beneficial over the long term for an asset manager to build a top track record than to charge high fees. Ultimately, eroding investor returns only diminishes their own value proposition.

Perhaps of even greater concern are the two funds that appear on this list despite producing negative returns over this period. RECM and EFPC must be hard pressed to explain to investors why it has cost them so much to lose money.

Looking at these figures, it is hard not to wonder if the way that asset managers charge for their services is broken. There is no sensible relationship between what investors are paying and what they are getting.

Nothing confirms this point more than looking at the other end of the spectrum. The table below shows the five funds in this category with three-year track records that have TICs of below 1%:

SA’s least expensive multi-asset high-equity funds



3 year annualised return

Prescient Balanced Fund A2



Nedgroup Investments Core Diversified Fund B



Sygnia Skeleton Balanced 70 Fund A



Gryphon Prudential FoF B



NFB Ci Balanced FoF A



Source: Morningstar

All five of these funds outperformed every fund on the above table, bar one. Clearly it doesn’t take a lot to work out where investors should really be looking for value for money.



To comment, you must be registered and logged in.


Don't have an account?
Sign up for FREE

While very bad, they are hiding the Assurance platform types that have an effective charge of +/- 5.5% where 3+ is just platform charges. I’d love to see a scathing article on the effective charges, penalties etc rather than just the balance funds charges which, with those assurance types are typically normal ranged price so gives you the wrong picture.

Now while i won’t disagree with passive being great vs cost, I wouldn’t exactly place everything on passive either and since moving from one of those assurance houses instead I am doing 1/2 and 1/2.. taking advantage of the above avg. Ie passive funds generally (bad generalization but mostly true) perform about benchmark I’ve noticed while great active ones still do better.. for how long who knows (passive types have not been around enough the market was great, yea Zuma been killing SA that long)

Great article. I have highlighted before that funds with BCI and MET in the name, are generally just advisory firms setting up their own fund solutions in order to charge an additional fee to their clients – are these funds really best for their clients considering the high costs!

I also quite like the fact that Sygnia’s true cost of 0.65% is reflected, not the marketing speak of 0.4%.

majority of funds in the Nedgroup core, and satellite allocation to active managers – you cant go wrong.

Well, the TIC is the Total Investment Cost, which with all funds is more than the fee (the 0.40%) they intend to charge.

Please publish the full spreadsheet of results!!!

There is a very good reason why the TER and Total Investment Charge for the RECM Balanced Fund currently appears so high. For a period of about 18 months leading up to 30 November 2015, this fund was very small in size – roughly R1 million. As a consequence, the normal fees and costs of running a fund were significant relative to the size of the fund.

The fund was then opened up to investors from 1 December 2015 and the fund size has increased significantly since then, which means that the actual fees have now come back to more normal levels.

As these calculations are done over rolling periods, we would expect the TER and TIC levels reported on the Minimum Disclosure Documents to reduce every quarter going forwards.

Warm regards
Linda Eedes

Dear Linda, that is even more shocking.

Your fact sheet states your fund started in 2011.

If you only had R1m under management up until recently why do you use that as a reliable performance measure. Also, since your funds increased under management, your funds have lost investors about 10% over a 3 year period.

As a largish fund, why do you have R1m funds? or do you take the track record of the funds that you set up that have not failed?

re:cm managed Nedbank Managed downwards to a 30% loss. Hey Linda tell us how you did that?

Dear Truffle has since done zilch to improve the unit price.

Hi again

The Balanced Fund has been in existence technically since 2011, managed with same mandate as Nedgroup Managed Fund but not open to retail investors as we had an exclusivity agreement with Nedgroup to manage a reg 28 mandate for them. When that agreement with Nedgroup ended in late 2015, we opened the Balanced Fund to allow investors who wished to remain invested in the same value portfolio to switch into that Fund.

Since it had the same mandate as Nedgroup, the returns were almost identical to Nedgroup Managed Fund. We felt showing the full track record (going back to 2011) would be a more honest representation given the drawdowns in the Nedgroup Managed Fund in 2014/2015. If we’d shown the returns since Dec 2015, they would be great since the Fund has performed very well since then. But we didn’t feel that was ethical, and also want to show that even taking into consideration that challenging time, we will still ultimately deliver good returns for our investors through the full cycle. We are not quite there yet, but are heading in the right direction, and the value cycle is still in very early stages of playing out.


Great insights. How about highlighting the most expensive funds including life insurance funds? Sygnia Fund of Hedge Funds had a 7.5% TER in August 2016 but they no longer disclose it so not sure if it is higher or lower.

thank you, very good article.

would be interesting to see the charges on each companies most popular retirement annuity, all inclusive of costs (platform fee etc).

“In other words, over the last three years, these asset managers have collectively taken 49% of the returns they have generated in costs”

TIC is cost split between asset manager, other fund providers (audit, bank charges, trustee, etc), transaction costs (fees going to stock brokers, etc), and the government (VAT).

While the asset manager typically gets the lion’s share and all these costs come off client returns, it’s not quite accurate to say that asset managers took 49% of returns…

U forgot Nedbank Managed Fund……………now all LOCAL due to the highly intelligent &&&&s that work there.

It has lost about 30% from earlier highs with NO prospect in sight of ever improving.

Nedbank management still intimates about HOPE for the future to investors.

Patrick suggest that you do a radio interview with Nick Andrew on the concept of HOPE in investment theory.

Do advise when it will be broadcast.


Most people investing with active managers use an advisor (fees of up to 1% plus VAT) and have more than one fund thus invest via a LISP (fee around 10.5% plus VAT. Their total investment fees are much higher than just the fund’s TER, likely adding another 1% to 1.5%.

Hoorah! Finally a financial article that talks about the effect of fees as a percentage of investment return. I have long maintained that ASISA should make it compulsory that funds must indicate on all literature what the effect of Total Investment Cost are in relation to the total investment return and do so for the various periods they quote investment returns.
To mention that the average investment cost is i.e. 2% but not declaring that is equal to i.e. 33% of the investment return is misleading to the average investor.
Well done Patrick.

3%! and this excludes advisor fees, platform fees etc. You have to be out of your mind to pay this. I won’t pay more than 0.3% for a fund. This is daylight robbery. You will never ever get rich investing with these ripoff artists. Advisors love putting clients into balanced funds because its a middle of the road option that will keep them out of trouble. I’ll never invest in expensive balanced funds. Studies show that the two most important factors that determine long term investment success are fees & asset allocation. Get these two correct and you’re way ahead of the pack.

Load All 16 Comments
No more Comments, leave a reply.


ZAR / Euro



Follow us:

Search Articles:Advanced Search
Click a Company: