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The remarkable turnaround for global equity funds

We take a look at the impact of the value rotation on funds in the Asisa global equity general category.
Image: Supplied

For local investors, global equity funds were the undisputed champions of 2020. Some locally-managed portfolios produced stellar results last year.

Most notably, the IP Global Momentum Equity fund and Anchor BCI Global Equity feeder fund both returned more than 90%. Their high exposure to technology stocks put them in the sweet spot, as these counters were bid up while most of the world’s economies were in lockdown.

For the first four months of this year, however, both of these funds were in negative territory. They are, in fact, two of the three worst performers in the Asisa global equity general category for the year to the end of April.

Source: Morningstar

Swings and roundabouts

The global rotation into cyclical and value stocks has had just as pronounced an effect in the opposite direction as well.

The three top-performing global equity funds for the six months since the start of November last year, were the three worst performers for the 10 months to the end of October 2020.

The average return from the Discovery Global Value Equity feeder fund, PSG Global Equity feeder fund and Absa Global Value feeder fund from the start of January to the end of October last year was -17.6%. For the six months since then, they are up an average of 41.7%.

Rotation

This pronounced shift is apparent across the category. Just a single fund that was top quartile between January and October last year was again in the top quartile from November to April.

That is the Sygnia 4th Industrial Revolution Global Equity fund.

Note: Totals do not add up to 100% due to two funds not having track records for the full period.

Perhaps most notable is that only two funds that were top quartile between January and October outperformed the category average in the following six months. Of the top quartile performers in the first 10 months of last year, 65% were bottom quartile performers from November to April.

There was a similar reversal in the opposite direction. Only one fund that was bottom quartile from January to October last year was again bottom quartile in the six months that followed.

Of the bottom bottom quartile performers in the first 10 months of 2020, 63% were top quartile from November to April.

Longer term

So far, however, this short-term turnaround has had little impact on longer-term relative performance.

The five top performing global equity funds over the past five years were all top quartile performers in 2020. Only one of the top ten was not an above average performer last year.

Conversely, all of the funds in the bottom quartile over the past five years were below average performers in 2020. 80% of them were bottom quartile in both periods.

Patrick Cairns is editor at Citywire, where this article was first published here.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.

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