2016’s top performers
Smart index products significantly outperformed the FTSE/JSE All Share Index last year.
in 2016 there was a resurgence in the resources sector on the JSE after underperformance over the previous few years and an increase in commodity prices. This performance was also reflected in the index-tracking funds, where resource funds fared relatively well for the year.
The top-performing exchangetraded fund (ETF) of the last year was NewFunds S&P Givi Resi, which had a return of 34.89% for the year (including the reinvestment of dividends).
This is according to etfSA.co.za’s Performance Survey for the period ended 30 December 2016, which measures total investment returns for all 71 JSE-listed ETFs/ETNs (exchangetraded notes) and 24 index-tracking unit trusts for periods of one month to 10 years. (See top table on the right.)
The past year was a disruption from the previous five years as the major indices failed to produce strong investment returns, says Mike Brown, managing director of etfSA.co.za.
The FTSE/JSE All Share Index (Alsi) delivered a total return performance (with dividends reinvested) of 2.4%. The Top40 Index recorded a negative return of 1.83% for 2016 and industrial shares fared even worse.
The best performing main sectors last year were resources (the FTSE/JSE RESI 10 Index rose by 27.7%) and SA fixed interest bonds (up by 14.4%), says Brown.
According to Brown the bestperforming index-tracker funds in 2016 were products which focused not on market capitalisation and high liquidity, but Smart Beta ETFs, which use other risk factors like value, dividends, volatility and fundamental indexation to search for pockets of value.
With Smart Beta ETFs, the compilers of indices look to factor or risk criteria to select shares that provide access to a particular type or style of investment, says Brown. This can be fundamental or intrinsic analysis or counters which offer specific value, or investments based on a selective criteria, such as high dividend payments, low or high volatility, etc.
The investment performance of smart index products in 2016 shows investment returns of over 20% to 34% for the year, compared with a total return of 2.4% for the Alsi.
The best-performing smart index products for 2016 are shown in the middle table alongside.
According to Brown the bestperforming index-tracking ETFs and passive unit trusts over the three and five year periods show a significant outperformance relative to the Alsi. The top sectors were offshore investments, which benefit from the JSE listing of totally foreign-based inward investment ETFs/ETNs, listed property indices and selected JSE Sectors, like industrials and financials, rather than the broad approach of an All Share or Top40 Index.