This year’s top performing funds

NARROW FOCUS: INDIA, AFRICA, EMERGING MARKETS After a long period of underperformance, emerging and frontier markets are once again in favour.

Since mid-2014 SA investors have had to get used to the idea of lower returns. Over the last three years, the average multi-asset high-equity unit trust has delivered annualised performance of around 8.5% - not significantly better than one could have earned in the money market.

However, 2017 has seen very interesting performances from certain regions. These probably aren’t places into which most investors would place large parts of their portfolios, but it shows there’s some life in the world.

Table 1 lists some top-performing local unit trusts for the year to date:

All of these funds are invested offshore and have a fairly narrow focus – India, Africa and emerging markets.

Broadly, this reflects the global shift towards emerging and frontier markets over the last ten to 24 months. After a long period of underperformance, these regions are again in favour.

The Sanlam India Opportunities Fund benefited hugely from the positive sentiment shown towards the Indian market since Nahendra Modi took over as Prime Minister in 2014. It’s delivered a five-year annualised return of 19.51% - exceptional in the current environment.

The Denker unit trust is a relatively new fund so it doesn’t have a track record to analyse, but the Coronation Global Emerging Markets offering has a very interesting performance history. As the table below shows, it’s had two exceptional years in the last five, with three years of almost no growth in between:

This isn’t unusual for an emerging markets fund, as returns can be extremely volatile. This is even more pronounced in funds investing in frontier markets, like the two African equity funds on the list above.

Despite the year it’s had so far, the ALUWANI fund’s three-year return is negative; over five years it’s shown an annualised performance of just 7.44%. As the table below shows, investors have had a wild ride over this period:

Despite the 2017 surge, the fund is still well below its mid2014 highs. This is due to the sharp drop last year that wiped out most of those past gains. This is a big reason why it’s so difficult for investors to put money into these kinds of funds. Their performance is so volatile that you need a strong constitution to bear it.

For many people, however, emerging and frontier markets’ long-term growth potential is too strong to ignore. They’re therefore willing to allocate a portion of their portfolio to these kinds of funds.