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The top-performing worldwide flexible funds

The benefit of unconstrained mandates.

In the current low-return environment, many investors are realising the benefits of diversification. Being exposed to a number of different sources of return gives them the best opportunity to grow their wealth.

Giving your asset manager the freedom to invest across geographies and asset classes is therefore an appealing option. This is exactly what worldwide multi-asset flexible funds offer.

Funds in this category are able to invest anywhere in the world, across equity, bonds, listed property and money markets. They do not have to stay within any minimum or maximum limits.

In other words, they give asset managers complete flexibility to allocate to whichever assets they believe are most appropriate at any time. This allows for aggressive diversification.

These funds have become increasingly popular, with the number of unit trusts in this category having doubled over the last three years. There were 54 worldwide multi-asset flexible funds at the end of June 2015, and there are now 108.

The table below shows the top-performers over the five years to July 31, 2018.

Worldwide multi-asset flexible fund performance to 31 July 2018
Fund Five-year annualised return TIC
Flagship IP Worldwide Flexible FoF A 12.92% 2.81%
Select BCI Worldwide Flexible Fund A 12.55% 2.27%
Imalivest SCI Worldwide Flexible Fund A2 12.41% 1.25%
Platinum BCI Worldwide Flexible Fund A 11.97% 1.84%
Cordatus Worldwide Flexible Prescient Fund A2 11.23% 1.42%
Coronation Optimum Growth Fund A 11.14% 1.60%
Anchor BCI Worldwide Flexible Fund A 10.69% 1.28%
Quantum BCI Worldwide Flexible FoF 9.98% 2.83%
Old Mutual Maximum Return FoF A 9.96% 1.97%
Flagship IP Worldwide Flexible Fund A 9.65% 2.57%
FTSE/JSE All Share Index 10.04%  
MSCI World Index 16.42%  
Category average 8.66%  

Sources: Morningstar and fund fact sheets

It is noticeable that the top seven funds all outperformed the JSE but underperformed the MSCI World Index. As these are not global funds, most do retain exposure to South African assets, so it makes sense that their performance would fall somewhere between the two.

Their strategy should be to benefit from growth in global assets when local returns are weaker, but at the same time be able to capture the performance from the JSE during periods when the South African market outperforms.

The Flagship IP Worldwide Flexible Fund of Funds has been the top performer over this period. It is an interesting portfolio for two reasons.

The first is that it uses predominantly index tracking funds to gain exposure to targeted markets and sectors. The second is that it has taken some significant sector-specific positions rather than using broad market indices.

In particular, it is heavily exposed to US oil and gas exploration, technology, and healthcare. Those three sectors together make up more than half of its holdings.

One question investors might ask is why the fund carries such high charges when it is using mostly low-cost index funds in its portfolio. It’s total investment charge (TIC) is more than double the two cheapest funds on this list.

On the other end of the scale, the Imalivest and Anchor portfolios offer the lowest fees. They are also two of the most exposed to global equities at 93% and 83% respectively.

Investors should appreciate that funds in this category can follow divergent strategies, and it is therefore important to understand the manager’s philosophy and how they execute their mandate. They can’t rely on past performance alone, as it tells very little of the story. What’s vital is knowing how that performance was generated.

In this regard, the fund benchmarks can provide a useful guide of the fund’s strategy. Some use an inflation plus benchmark (generally between CPI + 4% and CPI + 6%), and therefore aim to deliver an absolute return, while others benchmark against an index or composite blend of indices. 

Looking over the longer term, the table below shows the top-performing funds in this category over the past 10 years. Only five funds are listed since there are just 13 worldwide multi-asset flexible funds with track records this long.

Worldwide multi-asset flexible fund performance to 31 July 2018
Fund 10-year annualised return TIC
Foord Flexible FoF A 13.38% 1.09%
Coronation Optimum Growth Fund A 12.44% 1.60%
Select BCI Worldwide Flexible Fund A 12.15% 2.27%
Coronation Market Plus Fund A 11.99% 1.73%
Flagship IP Worldwide Flexible FoF A 11.85% 2.81%
FTSE/JSE All Share Index 10.77%  
MSCI World Index 13.92%  
Category average 9.39%  

Sources: Morningstar and fund fact sheets

Over this period, the Foord Flexible Fund of Funds is the stand-out, even though its more recent performance has been well below its benchmark. This has been due to Foord’s focus on protecting investor capital in an uncertain environment.

It is noticeably conservative in its current positioning, with over 19% of its assets it South African government bonds, and 14% in cash. Over the last 10 years its exposure to South African equities has fallen from around 40% to 13%.

What is also notable is this fund’s low total charge. This is partly due to a low management fee, but it is particularly low at the moment because Foord is one of very few managers that employs a performance fee structure that discounts the fee if the fund underperforms. This has resulted in a reduction to the fee due in the last few years.

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So of all the funds, the MSCI World Index grew 16.42% over 5 years and outperformed all the flexible funds. Over 10 years it was the same. Why on earth do you still need to pay a “financial advisor” or “investment professional”?? Open up a brokerage account at PSG for R40 per month and buy SYGWD straight off the JSE. (If you bank with Investec a brokerage account is free.) Leave the “financial advisors”, you don’t need them for this.

Jnr B – may be so, if an investor understands all the investment jargon references, have a decent understanding of unit trusts, etf’s, script, equities, various fees, entrance and exit procedures, timing effect, asset allocation, market movements, geographical and sectorial positioning, performance guidance’s, etc and also have internet access.
For most retail investors this would undeniably be foreign and incomprehensible.
My recommendation to them will be to make use of a user-friendly, easy accessible, low-cost, direct channel such as Sygnia or Satrix which can be done by telephone or online and which at least offers them some guidance, assistance and answers to investment inquiries.
Disclosure: I am not involved in the financial services industry whatsoever and am an active, self-help, experienced retiree investor.

I am an advisor and my world recommened fund stands at 26% for the year with a yearly target of over 30%. Keep your index fund and call me after the next crash.

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