The old test of time
Equities still tops
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 firstname.lastname@example.org