Balanced funds in 2017
TREND SPOTTING. THREE PASSIVE UNIT TRUSTS AMONG TOP-PERFORMERS
The majority of balanced funds had negative returns in December.
Over the last decade balanced unit trusts have become the most popular option for SA investors. The SA multi-asset high-equity fund category now makes up a quarter of the entire industry.
Over the 12 months of 2017, they produced a mixed bag of results where, according to Morningstar, the top-performing fund reached 21.08% and the worst-performing fund 0.18%. The category mean was 10.06% and the category median 10.11%.
This shows that investors in different funds could have had significantly different experiences over the year. While the average return was a satisfactory 5% or so above inflation, there were a number of funds that delivered performance well above that, and a handful of others that delivered no real return at all. See table 1 and 2.
Notably, three passive unit trusts appear in the top-performers list – the Satrix, Prescient and STANLIB funds. These strategies have become increasingly popular, as they develop longer-term track records.
The Satrix offering did particularly well last year, as it makes
use of smart beta strategies for its equity holding rather than a vanilla market cap index. The quality, momentum and dividend indices it tracks all did very well over the year and investors realised that benefit.
The top-performing fund for the year was the Element Balanced SCI Fund. This has been a good period for the contrarian manager, but just two years ago this unit trust was one of the worst in its category. The fund severely underperformed its peers in 2013, 2014 and 2015. The last two years, however, have seen it deliver some noticeable outperformance. What happened in December? Notably, by far the majority of balanced funds showed negative returns in December. Some fell more than 5%, even though the FTSE/JSE All Share Index was down less than 0.5% for the month. The big losers would have been those with large positions in Steinhoff, but Naspers also slipped.
In addition, the rand strengthened significantly, reducing the value of foreign holdings in local currency terms.
Note: Past performance is not an indicator of future performance, particularly over a short period.