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  I think it is a bit harsh to expect a general equity fund to always match the performance of the top sector. Far lower risk. Allan Gray Equity @ 13.8%p.a. and Coronation Top 20 @ 14.7%p.a. did very we...  

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The top unit trusts over the past 10 years

Where have investors seen the most growth?

CAPE TOWN – Since 2006 the JSE has been through a few distinct periods. Up until 2008 it was roaring upwards on the back of the commodity boom, but that came to a horrible end with the global financial crisis.

The 2008 crash was however swiftly followed by an incredible five year bull market that saw the FTSE/JSE All Share Index achieve its highest close of 55 188 in April 2015. Looking back, though, one can see that was just a peak in a period of high volatility that actually started towards the end of 2014.

That volatility has characterised the market for 18 months now, and from the start of this year may even have carried the JSE into a new phase. Since January the high quality, momentum counters that had driven returns for so long began to struggle, while the value stocks that had been considered dogs for many years started to pick up.

Having gone through all of these different periods, it is an interesting exercise to look at which unit trust funds have come out best. What are the themes that have been most rewarded?

The table below with information from Morningstar lists the top 20 unit trusts in the country for the ten years to the end of April this year:

Performance of South African unit trusts to 30 April 2016

Fund

10 year annualised return

Coronation Industrial Fund

18.67%

SIM Industrial Fund R

18.35%

Prudential Enhanced SA Property Tracker Fund A

16.57%

Investec Property Equity Fund A

16.36%

Stanlib Industrial Fund R

16.30%

Catalyst SA Property Equity Prescient Fund A

16.30%

Stanlib Property Income Fund A

16.18%

36ONE Met Flexible Opportunity Fund A

16.10%

Stanlib Multi Manager Property Fund B1

16.01%

Coronation Property Equity Fund A

15.99%

Investment Solutions Property Equity Fund A

15.87%

Nedgroup Investments Financials Fund R

15.38%

Centaur BCI Flexible Fund A

15.37%

Nedgroup Investments Entrepreneur Fund R

15.29%

Old Mutual SA Quoted Property Fund

15.19%

PSG Flexible Fund

15.18%

Old Mutual Industrial Fund A

15.13%

BlueAlpha BCI All Seasons Fund A

15.09%

Momentum Property Fund A

14.96%

Nedgroup Investments Private Wealth Equity Fund A

14.87%

FTSE/JSE All Share Index

12.83%

Source: Morningstar

Two things stand out – the predominance of industrial equity funds and property funds. Clearly those were the best places to have put one’s money in the past decade.

There are only five industrial sector unit trusts in the country, and four of them appear on the list. The fifth, the Momentum Industrial Fund, ranked 21st, and so missed out by a single place.

While investors would have relished these returns, it’s difficult to argue that they had much to do with the fund managers. The consistent performance across all five funds tends to suggest that the managers of these funds were simply investing in the right place at the right time.

This is further emphasised by the fact that none of them beat the exchange-traded fund (ETF) that tracked the index in the same sector. Over this same period, the Satrix Indi ETF returned 19.16% per annum, and so was in fact the best performing fund in the country.

A similar story played out in property funds over this same period. Listed property was the best performing asset class in South Africa over the past decade, and therefore funds focused on this sector did well. Nine of the funds on the above list are real estate unit trusts.

However, the best of them was once again an index tracker. The Prudential Enhanced SA Property Tracker Fund is designed to deliver the returns of the listed property index, and in doing so it out-performed all its competitors.

The really interesting funds on the list are therefore those that are left. Four of them are multi asset flexible funds – those run by 36ONE, Centaur, PSG and BlueAlpha.

Over the past ten years, it has become very apparent that the best managed flexible funds are consistently able to out-perform the top general equity funds. The simple reason for this is that they can capture the high returns from equity when times are good, but don’t have to remain fully invested when the market turns.

In other words, they are simply better able to manage their risk. This is very significant, but it is often overlooked.

The best equity fund over this period was the Nedgroup Investments Private Wealth Equity Fund, which sneaks in at number 20. So all four of the top flexible funds delivered better returns than it was able to do.

That leaves the last two funds, which are both interestingly from Nedgroup Investments – the Nedgroup Investments Financials Fund, which is managed by Denker Capital within Sanlam, and the Nedgroup Investments Entrepreneur Fund, managed by boutique house Abax.

These have again captured specific sectors of the market, being financials and small caps. This is another indication that if you are able to identify the areas of the market that are going to out-perform, you can capture some good returns.

The caveat though, is that you have to pick carefully. If you are going to select specific sectors, things can go well for you, but they can also go the other way.

To illustrate that point, consider the worst performing local unit trust over the same ten year period: The Old Mutual Gold Fund, delivered returns of just 2.23% per annum.

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Johan Burger

Johan Burger

Brenthurst Wealth
Moneyweb Click an Advisor
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Notable funds missing from this list Coronation T 20 and Allen Grey funds – are these guys serious that they are looking to long term results – to my mind 10 years is long term

I think it is a bit harsh to expect a general equity fund to always match the performance of the top sector. Far lower risk.
Allan Gray Equity @ 13.8%p.a. and Coronation Top 20 @ 14.7%p.a. did very well. Coronation Top 20 are indeed very close to position 20

From Moneyweb’s Unit Trust Tool there are about 1455 Unit Trusts to choose from. You have a 1.37% chance of picking one that will end up on this list. Rather just go for an index tracker and save the fees.

Once again the issue is which one. I totally agree the index tracker is the way to go, but the tracker which outperformed was the Satrix Indi – which means you once again choosing a sector, which is just as risky.

There is no balanced ETF which I am aware of – something that can compete in the balanced space – however one can utilise the Satrix balanced index fund (which is a unit trust), has a balanced mandate and just as low fees.

10 year results, as a word of caution, I would not advise anyone to base investment decisions today on results against a unit trust started 10 years ago.

Great returns but at a high risk with a single driver in the case of industrials being the weakness of the rand. Also 75% of the growth in industrial shares took place over the last 4 years of the 10 year period. During the 2000-2008 period industrial shares were the dogs on the market.
Great to see 4 of my funds that I picked many years ago in the list. PSG, BlueAlpha, Centaur and long term favorite 36-ONE. Well done to those active managers in the flexible space. You really showed you have skills and not luck. May be more people should see that you were holding quite a bit of cash when things did not look too bright. You doing what I expect of an active manager and you EARN your performance fees.

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