This year, asset managers have been tested in extraordinary ways. Markets have not been kind to many of them.
To the end of November, 249 of the 1,227 local unit trusts (excluding money market funds) with at least a one-year track record were down over the past 12 months. That is just over a fifth of the market.
Yet, in this environment, there were some funds that delivered extraordinary returns for investors. While it must be noted that these are short term gains, it is nevertheless interesting to appreciate which strategies were most productive over the course of 2020.
Fund manager: Shaun Krom
12-month return to November 30: 91%
The IP Global Momentum Equity fund tops the performance charts for all locally-domiciled funds for the year to the end of November. Its 91% return represents an extraordinary outperformance against an average of 19.8% for global equity funds.
The fund’s unique style that combines quantitative and thematic investing, has also made it the top-performing global equity fund available in South Africa over the past five years. This is despite the 20.8% drawdown it experienced in the fourth quarter of 2018.
Manager Shaun Krom explained the fund’s strategy to Citywire earlier this year:
“We don’t try to match the index or anticipate market movements. Rather we look for companies with more than one tailwind.
“I can tell you exactly how and why there are particular stocks in the fund. And the factors that influence their selection and weighting make the macro market factors irrelevant over the long term, as these are the companies that drive and change the economy.”
Fund manager: Nick Dennis
12-month return to November 30: 84.8%
Second place on the one-year performance rankings is held by another global outperformer: the Anchor BCI Global Equity feeder fund. This unit trust feeds into the Sanlam Anchor Global Equity USD fund, which AA-rated manager Nick Dennis has tilted strongly towards technology stocks.
The most recently reported top-10 holdings, constituting over 52% of the fund, are all tech-related businesses. They include Snap, Zoom, Alibaba, Roku and MercadoLibre.
These stocks have been significant winners this year, and, Dennis expects their dominance to continue. As he told Citywire in October:
“What you’ve already seen this year is this bifurcation in the market between winners and losers, and I think that trend is set to continue over the foreseeable future. I would not bank on mean reversion.”
Fund manager: Robert Walton
12-month return to 30 November 2020: 73.0%
The third top-performer for the year to the end of November is the Naviga BCI Worldwide Flexible fund. Although this portfolio sits in the Asisa worldwide multi-asset flexible category, it is currently fully invested in offshore equity.
Fund manager Robert Walton told Citywire that this is a high-risk fund with a bias towards global technology or Fourth Industrial Revolution-type stocks. Investors should therefore expect a volatile return profile.
Its top 10 holdings show a clear preference for ‘new economy’ counters, including Shopify, NVIDIA, Amazon and Tesla.
This is a relatively new fund, having only been launched in September 2017. It currently has assets under management of just R172 million, according to Morningstar.
Fund managers: Kyle Hulett & Iain Anderson
12-month return to November 30: 58.4%
There is a sizeable performance gap between the top three performers and the fourth fund on the list – the Sygnia Faang Plus Equity fund. However, the focused nature of this portfolio still makes it notable.
It sits in the Asisa global equity general category, but is explicitly focused on the technology and internet services sectors. The latest portfolio information available on Morningstar shows that, at the end of September, the fund had just nine holdings – the largest of which was the Sygnia Itrix 4th Industrial Revolution Global Equity ETF.
The others were Facebook, Alphabet, Apple, Amazon, Alibaba, Twitter, Baidu and Netflix.
Fund managers: Liang Du & Shaun Hu
12-month return to November 30: 38.4%
The performance of the Chinese market has been one of the most notable stories of 2020. The best way for South African investors to have taken advantage of that this year would have been through the Prescient China Balanced feeder fund.
While the fund sits in the Asisa regional multi-asset flexible category, its focus is on mainland Chinese equities. At the end of November, 82.7% of the portfolio was in stocks, with 17.3% in bonds.
It is notable that the fund’s performance hasn’t been reliant on the strength of the Chinese tech giants Alibaba and Tencent, which dominate the MSCI China Index. Neither appears in the top 10 holdings of the portfolio.
Its largest holdings are insurance firm Ping An, beverage producers Kweichow Moutai and Wuliangye Yibin, and China Merchants Bank.
Fund manager: Meryl Pick
12-month return to November 30: 35.7%
The Old Mutual Gold fund is an anomaly in the South African unit trust market. It is the only remaining fund focused on what was once the country’s defining industry.
It has such a narrow appeal, and presents such a volatile return profile, that the Old Mutual Investment Group came close to shutting it down last year. However, appeals by committed investors convinced the firm to keep it running.
After topping the performance charts last year with a return of 68.8%, the fund had just about doubled in value again towards the middle of 2020. Most of those gains have, however, been given back, as the volatility inherent in the strategy has once again come to the fore.
Fund manager: David Hansford
12-month return to November 30: 27.4%
Looking beyond the idiosyncratic returns of the Old Mutual Gold fund, the top-performing South African portfolio for the past 12 months has been the Long Beach Flexible Prescient fund. This is, however, a portfolio with more than just an impressive short-term track record.
It has the incredible distinction of producing a positive return in every calendar year for the past decade. Its worst annual performance was the 0.9% gain it made in 2018. In six of the last 10 years, it has grown by at least double digits.
While it is a multi-asset flexible fund, it is predominantly an equity strategy. At the end of November, 86.9% of the portfolio was in equities – split almost evenly between local and offshore – and 12.2% was in listed property.
This year it has benefited from a clear rand hedge bias. Its top four holdings – which together constitute over 45% of the fund – are PayPal, Capital & Counties Properties, Richemont and Naspers.
Fund manager: Ross Beckley
12-month return to November 30: 23.0%
The High Street High Equity Prescient fund has a unique approach. It aims to offer a Regulation 28-compliant portfolio with minimal exposure to South Africa.
“We don’t oscillate between deciding whether to be bearish or bullish on South Africa,” fund manager Ross Beckley told Citywire in October. “We leave that up to the investor.
“Currently, the fund will only invest in rand hedge instruments or, at a bare minimum, counters with a material offshore component.”
Its latest fact sheet shows that, despite being a multi-asset fund, the portfolio has almost zero exposure to bonds. Its focus is on listed equity and property counters that offer exposure to markets outside of South Africa.
In the current environment, this approach has resulted in it being the top-performing South African multi-asset high equity fund over the past 12 months.
Fund managers: Cy Jacobs & Evan Walker
12-month return to November 30: 17.1%
In a 12-month period when the FTSE/JSE All Share Index was up 6.0%, the 36ONE BCI Equity fund delivered almost triple that at 17.1%. This made it the top-performing South African general equity fund over the year.
The average return for South African equity funds over this period was just 0.5%.
Following a theme amongst funds that have done particularly well over the past 12 months, 36ONE has been bearish on South African-focused assets.
“The fund has a massive underweight position in everything South Africa-focused,” co-portfolio manager Cy Jacobs told Citywire in September. “We have very little bank exposure. Industrials have also been decimated, so we never held the Imperials or the Bidvests.”
Instead, the portfolio has carried a large exposure to Naspers and Prosus, as well as gold, platinum and diversified miners. At the end of October, Sibanye Stillwater, Impala Platinum, Anglo American, BHP Group, Northam Platinum and Gold Fields were all in its top 10 holdings.
Fund manager: James Turp
12-month return to November 30: 11.7%
Given the performance of South African fixed income assets over the past year, it is worth highlighting the fund that made the most of this opportunity. The Absa bond fund was the top-performing local interest bearing portfolio for the 12 months to the end of November, delivering a return of 11.7%.
This performance has been a continuation of a noteworthy long-term track record. According to Morningstar, the fund ranks as a top quartile performer in its category over every period from one year to 10 years.
This year, manager James Turp has found opportunities in both the government and corporate bond space. Morningstar data shows that at the end of October, the portfolio’s net exposure was 48.3% to government bonds, 33.7% to corporate credit, and 18.0% to cash.
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.