2015: the sprint­ers, the pedes­tri­ans, the tum­blers

Sel­wyn Pil­lay, the head of San­lam Multi Man­age­ment, pro­vides an in­vest­ment sum­mary of the past cal­en­dar year

CityPress - - Tenders -

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.

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