2015: the sprinters, the pedestrians, the tumblers
Selwyn Pillay, the head of Sanlam Multi Management, provides an investment summary of the past calendar year
While one year is not long enough to draw a meaningful conclusion regarding how a fund or asset class is performing over the longer term, it is always interesting to reflect on how our investments fared the year before.
Foreign equity the top asset class
After four exceptional years in which all asset classes delivered positive returns for South African investors, 2015 carried in the first underdog in a while: South African bonds, which tumbled 3.93% over the calendar year. The top-performing asset class for 2015 was foreign equity (32.7%), with foreign bonds trailing only slightly behind at 30.4%. South African pure equity funds delivered 5.13%, with balanced funds outperforming pure equity funds at 7.64%.
Rand is third worst currency against dollar
Like several other commodity-exporting emerging market countries, South Africa and its currency were hit by continued commodity price weakness throughout the year. The expectation and eventual realisation of the US Federal Reserve’s first interest rate hike since 2006 and China’s slowdown contributed further to the weakening of the rand. Over the past year, the rand fell 25.31% to the dollar, 20.94% to the pound and 16.81% to the euro.
How did SA unit trust investors fare?
Looking at the performance in the South African market in greater detail, it’s clear the year was dominated by the global unit trust categories, driven by the falling rand. Within the global grouping, real estate was the top-performing sector over the one-year period to December 2015.
Looking at the South African equity categories, all posted positive returns for the year, except the resources category, with industrials finishing the year as the bestperforming within the category, followed by the real estate sector, which was also the top performer for 2014.
Growth is still outrunning the value style
The value and growth styles take turns to lead the investment pack, with each stage of their cycle normally lasting for two to three years. Since September 2011, however, the MSCI SA Value Index has underperformed the MSCI SA Growth Index – the longest run of underperformance since 1997. Last year saw a continuation of the underperformance of the value style, a feature of the bull market during the time. The growth and momentum factors ended the year on top, maintaining their positions for 2014.
Which were the top-performing funds?
In light of the current depreciation of the rand, predictably, almost all of the top-performing funds for 2015 are global equity funds, with a selection of flexible funds, property funds and one income fund. However, most of these funds delivered very little performance above that gained by currency movements, with most funds delivering between 2% and 3% in dollars.
We look forward to seeing who the long-term winners over the next few years will be. In the meantime, we recommend that investors stick to the type of investment most appropriate for their risk profile and investment goal. This year’s winners are often next year’s losers. In the end, it is endurance that matters.