SA’s global equity funds
OFFSHORE RETURNS: BIG GUNS DELIVER
Allan Gray Orbis and Old Mutual the only two outperforming MSCI World Index.
Over the past 20 years, SA investors and financial advisors have come to regard offshore exposure as critical to any portfolio.
A reason for looking offshore is to diversify rather than just for weakening-rand protection.
For many SA investors, their primary focus has been international equities. Over the last decade, the amount held in rand-denominated global equity funds has grown from under R20 billion to R100 billion and the number of funds has grown from 33 to 60.
Table 1 shows top-performing SA multi-asset flexible funds over five years to April 30 2017. Over the past five years, the rand fell from under R8 to the dollar to its current R13 levels. This 40% slide provided a significant boost when looking at international returns in rands.
Equally significant is that while all of these funds delivered returns ahead of the local market, only two outperformed the MSCI World Index. This reflects how difficult it is for managers to beat this benchmark.
The Old Mutual Global Equity Fund has easily been the standout performer in this category. This portfolio is far more diversified than any of its peers. Only two stocks carry a weight of over 1% in the fund and the top 10 holdings make up just 9.1% of the portfolio. By contrast, the top 10 holdings in the Allan Gray Orbis Global Equity Feeder Fund represent 31.2% of the fund’s value. Its largest holding alone has a 5.6% weighting.
Apart from Oasis, this list comprises big, established asset managers. This might suggest they have some advantage when it comes to investing offshore. A number of boutique houses have, however, launched global equity funds in recent years and, over shorter time frames, some have been quite successful.
Only 16 funds with track records going back this far survived.
Over this longer period, international equities still outperformed the JSE, but by a much narrower margin, despite the rand being close to R7 to the dollar in April 2007. The impact of the rand’s depreciation hasn’t been as significant over this time. All five funds also appear on the top10 list over five years. Again, Allan Gray Orbis and Old Mutual stand out as the only two out-performing the MSCI World Index.