The old test of time

Eq­ui­ties still tops

Finweek English Edition - - Privatebuy -

SHORT TERM UNIT trust fund per­for­mance means noth­ing – ex­cept that it can give you an idea of emerg­ing trends. No real sur­prises in the lat­est Morn­ingstar per­for­mance fig­ures for the month to end-Oc­to­ber – it’s dom­i­nated by for­eign cur­rency funds. But what is sur­pris­ing is the rapid in­crease in gains. The one-month ta­ble is headed by the Absa US Dol­lar In­come unit trust: a re­mark­able gain of 21,5% in just one month.

But drop back a month to the onemonth pe­riod ended Septem­ber. The same fund had a re­turn of 7,6%, which was still good, as it was ranked fifth in the ta­ble at that stage. But it shows what re­mark­able re­turns can be achieved when the rand hits a wob­ble and the US dol­lar strength­ens.

It’s ap­peal­ing but, as I’ve warned be­fore, it’s very danger­ous for in­ex­pe­ri­enced in­vestors to try and play cur­ren­cies. How­ever, there’s ab­so­lutely noth­ing wrong with hav­ing some money in a for­eign in­come fund if you hold a longer-term view.

In­ci­den­tally, the man­agers of the Absa US Dol­lar In­come fund are do­ing some­thing right. There are a few US dol­lar funds, but the Absa fund also heads the ta­ble over six months.

Back to one-month per­for­mance, and for­eign cur­rency and global bond funds lead the ta­ble, in the first and sev­enth place re­spec­tively. Eighth is the Flag­ship World Wide Flex­i­ble fund-of-funds. I’m not sure what as­sets are in the fund, but it’s also prob­a­bly a lot of for­eign cur­rency and bonds. First sign of a fund that might have a sprin­kling of eq­ui­ties – and that I’m not sure about ei­ther – is the Al­lan Gray Or­bis Global fund-of-funds.

At the bot­tom of the ta­ble the RMB Re­sources fund is fight­ing (and just los­ing to) the Fortress REIT for last place (out of a to­tal of 575 funds). Re­turns are a neg­a­tive 25,6% and 26,1% re­spec­tively.

What a sign of how the mighty have fallen. Min­ing and re­sources funds hog most of the space in the 25 worst per­form­ing unit trusts for the month. Not that long ago those funds were dom­i­nat­ing the top of the ta­ble.

The col­lapse of prop­erty mar­kets in much of the de­vel­oped world is also clear from the Oa­sis Cres­cent In­ter­na­tional Prop­erty Eq­uity fund-of-funds (third last, with a neg­a­tive 25% for the month) and the Mar­riott Global Real Es­tate Fund (neg­a­tive 20,7%).

A sim­i­lar pat­tern can be seen over six months, with cur­rency (largely US dol­lar) funds at the top and re­sources, and a few small cap funds, at the bot­tom.

But those shorter time pe­ri­ods just show trends. To find the con­sis­tent longterm per­form­ers we need to look at the five-year ta­ble. As all in­vestors know, past per­for­mance is no re­li­able in­di­ca­tor of what a fund may do in the fu­ture. But past per­for­mance is of­ten all we’ve got. Chances are, if you want a fund that will give you de­cent re­turns (again, over the long term) and no nasty shocks, you’ll find it among the top per­form­ing funds over five years.

Now that’s a fine col­lec­tion of eq­uity funds, show­ing that – cer­tainly as far as I know – eq­ui­ties al­ways out­per­form other as­set classes over the long term. It’s also a healthy mix­ture of funds – mainly large cap, but also with some smaller cap and min­ing and re­sources. It’s also in­ter­est­ing to note two of the value funds in the top 10.

What also stands out is that all the solid, older as­set man­ager names are there. Ob­vi­ous, maybe, as some of the bou­tiques haven’t been around for 10 years. But the big names do tend to come to the sur­face.

And at the bot­tom? There’s a fair sprin­kling of for­eign cur­rency and bond funds. It shows how times change. And it’s only five years…

SHAUN HAR­RIS shaunh@fin­

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