Value of R100k after five years in SA’s top, bottom funds

Only one in nine funds outperformed the index …
This analysis shows how critical stock selection is in a small investment universe such as the local market. Image: AdobeStock

A recent Moneyweb analysis showed that investing R100 000 in the country’s largest equity funds in November 2016 would have yielded vastly divergent results.

After five years, that same R100 000 would’ve been worth as much as R236 730 in the CoreShares S&P 500 unit trust or as little as R119 540 in the Old Mutual Investors Fund.

Read: What R100k in SA’s biggest equity funds five years ago is worth today

This may not seem like much in absolute terms, but what if that lump sum was R1 million? This would equate to the difference between R2.4 million and R1.2 million. That gets people’s attention!

The original exercise considered only equity unit trusts with more than R10 billion in assets under management as per Association for Savings and Investment South Africa (Asisa) data to end of June 2021. But what if we considered all the funds?

But what if you were lucky enough to have invested R100 000 in one of the 10 top-performing unit trusts, full stop? Conversely, what if you happened to invest in one of the 10 worst-performing funds since 2016?

The value of retrospection

Critics will point to the fact that this exercise is backward-looking and of no use to any investor now.

That may be true, but what this analysis does prove is that returns over a relatively short time horizon (five years is not a long time) can be heavily influenced by cyclicality within and between sectors.

The rand-dollar exchange rate over the specific period will also be a determining factor; if the rand has weakened over the five years, there will be a boost to the performance of overseas assets (and vice versa).

Over the five years from November 30, 2016, the rand is 15.5% weaker against the dollar. Put simply, any money invested in the US therefore ought to have at least yielded a return of this amount. Anything less means the return in the underlying asset(s) would’ve been negative. Yet there are multiple rand-denominated global equity funds that have vastly underperformed even the hard currency return.

What the top funds have in common

There are some obvious commonalities among the best-performing funds over the last five years.

Most resources or commodity funds performed well, as did any funds focused on US blue chip technology stocks (or even the US market in general, given how dominant this sector has become).

A R100 000 lump sum in the top-performing unit trust since November 2016 – Emperor IP Global Equity Fund – would be worth over R364 000 today. That is a remarkable return, and more than 100 percentage points better than the best-performing large fund (264% vs 156% for the CoreShares S&P 500).

Like Emperor’s fund, there are others in the top-performers that have benefitted from stock selection (Emperor is overweight IT and communication services, which together comprise two-thirds of the fund’s holdings. For the Anchor BCI Global Equity Feeder Fund, the allocation to these two sectors totals 54%.) Much of the Emperor and Anchor funds’ outperformance has come over the last 18 months, i.e. since the onset of the Covid-19 pandemic.

Read:

There are two index trackers (as well as a so-called ‘dynamically-managed passive fund’) in the top 10.

Top 10 unit trusts over five years – R100 000 lump sum invested

Value after five years Return
Emperor IP Global Equity Fund R364 222 264%
Coronation Resources Fund R341 656 242%
SIM Resources Fund R336 834 237%
Ninety One Commodity Fund R297 985 198%
Nedgroup Investments Mining & Resource Fund R292 890 193%
Anchor BCI Global Equity Feeder Fund R288 393 188%
Sygnia 4th Industrial Revolution Global Equity Fund R282 266 182%
Sygnia Itrix MSCI US Index ETF R260 651 161%
CoreShares S&P 500 ETF R256 022 156%
BlueAlpha BCI Global Equity Fund R247 571 148%

* Class A or R funds (for retail investors) used when more than one class exists

* Data from FundsData as at November 30, 2021

While there are four resources/commodity funds in the top 10, there are divergent performances between the funds.

A R100 000 lump sum in the Coronation Resources Fund would be worth nearly R342 000 now, versus R292 900 in the Nedgroup Investments Mining & Resource Fund.

The top four resources funds – which are all in the top 10 funds overall – all beat the Satrix Resi ETF fund, which has delivered a return of 138% over five years. (It is worth noting that the poorest performer among these funds, the Momentum Resources Fund, has delivered a return of 100% over the last five years.)

At the other end of the scale, funds focused on local financial stocks have drastically underperformed over the last five years.

The Satrix FINI ETF delivered a return of 13%, which shows just how poorly both the Sanlam Investment Management Financial Fund (4%) and Coronation Financial Fund (3%) have performed.

By contrast, the Nedgroup Investments Financials Fund (managed by Denker Capital) delivered a return of 24%, which is just above inflation (at about 23%) in the period. The return on the other financials fund in SA, the Momentum Financials Fund, is 17% over the last five years.

Both this and the starkly different performances of resources funds once again illustrates how critical stock selection is in a small investment universe such as the local market. When focusing on a specific sector and therefore an even smaller universe, these choices could end up having an outsized impact.

This also shows the risk in investing in a specific sector, especially as a primary investment strategy.

Bottom 10 unit trusts over five years – R100 000 lump sum invested Value after five years Return
First Avenue SCI Focused Quality Equity Fund R107 054 7%
Marriott Property Equity Fund R106 815 7%
Allan Gray-Orbis Global Optimal Fund of Funds R104 374 4%
SIM Financial Fund R104 041 4%
Colourfield BCI Income Fund 2 R103 781 4%
Standard Bank Namibia Flexible Property Income Fund R103 071 3%
Harvard House BCI Equity Fund R102 927 3%
First Avenue Sanlam Collective Investments Equity Fund R102 909 3%
Triathlon IP Global Feeder Fund R102 811 3%
Coronation Financial Fund R102 653 3%

* Class A or R funds (for retail investors) used when more than one class exists

* Data from FundsData as at November 30, 2021

As in the previous exercise which focused the country’s largest funds, the difference between a hypothetical R100 000 lump sum and the value of that investment in a fund today may not seem that material.

But suppose that lump sum was R1 million … suddenly the difference between R3.6 million and R2.6 million – or, worse, R1.07 million – is very material indeed.

Of concern is that of the 993 funds available in SA that have a track record of five years, only 101 delivered a return that was above the local Top 40 index (various Top 40 tracker/passive funds available in the market delivered returns of about 69-70% over the last five years). One might describe these odds as ‘not great’. Of the 101, only 19 were not offshore funds (and this includes six of the seven available resources funds).

Shockingly, one in 11 funds (9%, or 87) has not outperformed inflation (!) over the five-year period.

With an ever-increasing amount of choice in local funds – there are over 1 400 funds, according to FundsData – fund selection is arguably more important than ever. And for the average investor, knowing what investment strategy is being followed and exactly what you’re invested in is crucial. This is probably not something one should simply ‘outsource’ and ignore.

Update: An earlier version of this article included the BCI Multikor Moderate Fund of Funds and the Imalivest Sanlam Collective Investments WW Equity Fund in the five-year performance table due to a data error. These two funds have been in existence for less than five years and therefore should not have a TRI figure.

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Ouch. People need to stop giving their hard earned cash to “professionals” fund managers (leaches).
If you take that money and you bought crypto- you could have made millions of rands…

You where so close, then you lost it at the end.

End of comments.

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