SOUTH AFRICAN-BASED ASSET MANAGERS AMONG THE BEST FOR GENERATING RETURNS IN OFFSHORE MARKETS
have a large number of funds, so it is no mean achievement for a fund managed from South Africa to achieve above-average performance.
The competition for your rand-denominated investments in offshore markets is increasing.
Over the past two years, almost 40 rand-denominated funds that invest in foreign markets have been launched and almost 30 rand-denominated worldwide funds have been launched. Worldwide funds invest in foreign and local financial markets in line with the managers’ expectations of how these markets will perform.
OFFSHORE EXPERTISE
Of the FSB-registered offshore global equity funds, the leading fund over the 10 years to the end of September was the Orbis Global Equity Fund, with an annual average return of 12.92 percent.
The top rand-denominated global equity fund over the same period was the Allan Gray-Orbis Global Equity Feeder Fund, which invests in the Orbis Global Equity Fund. Orbis is a sister company of Allan Gray and its funds are domiciled in Bermuda and managed by a team in London and elsewhere in the world.
Many local managers have set up their own offshore funds and offer South Africans the option of investing in these in either a foreign currency or in rands by way of what is known as a feeder fund.
Some South African managers have teams that acquaint themselves with the global markets from within this country, while others use teams in other parts of the world, typically London.
Other managers have partnerships with managers based in other countries, for example:
• Prudential Portfolio Managers uses M&G Investments, the United Kingdom and European manager in the South African manager’s parent group, Prudential plc.
• Stanlib uses three offshore managers, Fidelity Worldwide Investments, Columbia Threadneedle Investments and Brandwine Global Investments, to manage its foreign and offshore cash, equity and asset allocation and bond portfolios respectively.
• Last year, Absa Active Asset Management partnered with UK-based investment heavyweight Schroders International to manage its Global Core Equity Fund and Global Recovery Fund. The global equity fund is also available as a rand-denominated feeder fund.
• South African manager Nedgroup Investments won the Raging Bull Award for the top offshore manager of 2015. Its offshore funds and rand-denominated feeder funds are run by offshore managers that it selects. For example, its foreign-currency-denominated Global Flexible Fund is managed by First Pacific Advisors in the US.
If you invest in a feeder fund that invests in an offshore fund, you can compare the performance of the underlying offshore fund to that of other FSB-registered offshore funds.
GROWING PASSIVE MARKET
After many years of a limited range of low-cost rand-denominated funds that track global indices (passively managed index-tracking funds), there will soon be two additions.
Deutsche Bank has a range of five exchange traded funds (ETFs): three track broad global indices and two track leading indices in the US and Japan respectively. Old Mutual and Satrix each has a fund that tracks the broad global market.
The db x-tracker MSCI USA Index ETF was the top-performing r and- denominated c ol l e c t ive scheme over the 10 years to the end of September, with an annual return of 27.85 percent.
Recently, Coreshares announced that it will list an ETF that tracks a major global index, the S&P500, on the JSE in early November. The S&P500 tracks the 500 largest shares (measured by the value of the shares listed) on equity markets around the world. The cost of the ETF will be 0.45 percent a year.
Coreshares will also launch a global property ETF that will track the S&P Global Property 40 Index, which tracks the 40 largest listed property stocks globally.