A wild ride for value funds

RETURNS ONCE AGAIN ELUSIVE The question is how much longer will investors have to wait?

How much longer will investors have to wait? Over the past few years, investors in SA value funds have needed strong stomachs. Their managers have struggled to find any consistent returns.

While 2013 was a good year for most, from mid-2014 to the end of 2015, the value style went through an underperformance period. Value funds then recorded some large negative returns, even though the JSE moved sideways.

Then came the start of 2016, and a rebound in commodity stocks that sent many value funds soaring. Many value managers carried overweight positions in counters like Glencore, Anglo American, Kumba and Impala Platinum (Implats), which massively outperformed the market last year.

So far in 2017, however, value has fallen out of favour. Many managers have given up some of last year’s gains as commodity stocks have enjoyed more mixed fortunes, and other value opportunities have remained depressed.

Table 1 illustrates how five local value funds have performed since 2013 (Note: 2017 figures are to September 30).

All five funds also sit in the lowest decile of performance for SA equity funds over the last 12 months. Besides the Investec Value Fund, their three- and fiveyear performance is also less than stellar.

Interestingly, their portfolios are starting to look very different to each other.

The Investec Value Fund is still weighted towards mining counters. At end August, just under 65% of its portfolio was held in basic materials stocks, with particularly big positions in Implats, Anglo American, and AngloGold Ashanti.

The Stanlib Value Fund also favours resources, with 39% of its portfolio in this market. It’s also heavily exposed to consumer goods businesses, setting it apart from the other funds.

In contrast, the SIM Value Fund has less than 15% of its assets in basic materials stocks. Its biggest position is offshore (22% of portfolio). Locally, it’s most exposed to the financials sector.

The Cannon Equity Fund is also most exposed to financials (29%). Its most interesting holdings are in Sasfin Holdings and Peregrine.

Cannon has been upping its resources exposure in the last few months. Specifically, it’s been buying Anglo American and Glencore – now the two biggest positions in the fund.

Perpetua is in something of a middle ground, with exposures to financials (27%) and basic materials (21%). Its largest holding is, however, MTN.