How your unit trusts performed in the first quarter

TALK about crises, plural. Just when we were starting to put the Covid-19 pandemic behind us, Russia plunged Europe into devastation not known since World War 2. We have also had to contend with rising inflation, locally and globally, with central banks taking measures to curb it by raising interest rates.

How have these factors played out for investors? Let’s check how the markets, and the most popular unit trust fund categories, fared to the end of March.

Equities

Looking at the local charts for the first three months, the FTSE/JSE All Share Index began the quarter (and the year) at 73 709 points and ended it at 75 497, about 2.4% up. But the journey has been hair-raising: it hit a peak of 77 536 on March 2, then plummeted about 10% to 70 628 on March 15, before recovering to around 75 000.

Over 12 months to the end of March, the Alsi’s performance was robust overall: on March 31 2021 it was breaking records at 66 485, and its rise to 75 497 translates into a 13.6% gain.

South African general equity funds were up 4.6%, on average, for the quarter and 18.6% over 12 months, according to data provided by ProfileData. The best performing sectors were financials and resources: funds specialising in financial stocks were up 16.2% for the quarter and a whopping 44% for the 12 months, while those specialising in resources stocks were up 19.7% and 36.2% respectively. Industrial funds lost ground though, dropping 12.3% over the quarter, which pulled down their 12-month performance to -6.5%.

This drop may be largely attributable to one share, Naspers, which lost more than 13% on the local bourse in March.

Global equities also turned negative this year, after stellar performance through the pandemic. The MSCI World Index dropped 13.4% (in rand terms) in the first three months of 2022, pulling its 12-month performance down to 7.5%. Global equity funds were down 14.3%, on average, with some funds dropping as much as 25%.

The drop in rand terms is partly attributable to the rand-dollar exchange rate: the rand started the quarter at R15.95 to the dollar, strengthening to R14.61 by the end of it.

Bonds

Globally, rising interest rate expectations saw yields rise – with a corresponding drop in prices. The benchmark US 10-year Treasury yield rose to 2.32% at the end of March having started the year at 1.4%. The US twoyear Treasury yield ended the quarter at 2.28% having started at 0.7%.

South African bonds returned 1.8% in the first quarter and 12% over 12 months. Funds investing in short-term bonds returned 1.1%, on average, for the quarter and 5% for the 12 months, according to ProfileData, while those focusing on long-term bonds returned 1.9% and 12.2% respectively.

Listed property

Property funds dipped by 2.1% in the first quarter, but their 12-month performance until March 31 remained a robust 25.5%. These figures are in line with the FTSE/JSE SA Listed Property Index, which lost 1.3% over the quarter while maintaining a 27.1% gain for the 12 months.

Cash

Money market funds under-performed inflation by a considerable margin: on average, they returned 1% over the quarter and 3.9% for the 12 months to the end of March, according to ProfileData. The March inflation figures, released this week, show that year-on-year Consumer Price Index inflation was 5.9%.

Multi-asset funds

Because fund managers have different mandates, objectives and strategies in the popular multi-asset fund categories, returns vary widely. In the high-equity (“balanced fund”) category, returns over 12 months to the end of March varied from -7% to 31.9%, with the average at 11.3%. The average for the quarter was a negative 0.8%. Low-equity funds, which are favoured by retirees needing a more stable return, delivered -0.8% for the quarter and 8.9% for the 12 months, according to ProfileData.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren Buffett

| Reuters