(AP Photo/Craig Ruttle, File)
(AP Photo/Craig Ruttle, File)

This was the worst quarter for unit trusts since 2008

By Martin Hesse Time of article published Apr 20, 2020

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The first quarter of this year, to March 31, was the worst quarter for unit trust investors since the 2008 global financial crisis. 

After a solid performance last year, the local stock market plunged in March as the coronavirus pandemic paralysed economies across the globe.

The FTSE/JSE All Share Index fell by 22% during the quarter, from 57084 points at the close on December 31, 2019 to 44490 points on March 31, 2020. The low point came on Thursday, March 19, when the index hit 37963 (about 34% off its January highs). It has since made something of a rebound but remains extremely shaky.

All funds with an equity component felt the fury of the coronavirus shock. But other asset classes were not spared. According to Morningstar, listed property fell by a whopping 48.2% during the quarter and bonds by 8.7%.

Offshore markets were similarly battered. However, South African investors in offshore funds denominated in rands had their losses offset somewhat by the sharp fall in the rand against the US dollar - from R14 to the dollar on December 31 to R17.86 on March 31, a difference of 28%.

Over 12 months to the end of March, performance in the South African general equity category ranged from a positive 11.93% to a negative 44.02%, with the arithmetic average of the 165 funds being -21.36%. The five best performers were, according to ProfileData, the IFM Technical Fund (11.93%), 36One BCI Equity Fund (0.15%), Methodical Equity Prescient Fund (-2.12%), Oasis Crescent Equity Fund (-4.60%) and Stonehage Fleming Sanlam Collective Investments Equity Fund (-6.09%).

In the popular multi-asset high equity category, where funds can hold up to 75% of their portfolio in equities (but, as I continually point out, don’t have to hold that much), returns look a little rosier over one year to the end of the first quarter. They range from a positive 14.29% to a negative 29.94%, with the 193 funds averaging -10.34%. The five top performers were the Gryphon Prudential Fund (14.29%), Rezco Managed Plus Fund (10.87%), Rezco Value Trend Fund (9.48%), Ninety One Managed Fund (6.88%) and Olympiad BCI Managed Fund of Funds (5.64%).

Multi-asset income funds, which are designed to provide a stable income at low risk, have provided mixed, but mainly positive returns, with an arithmetic average of 3.8%. Those with preference shares in their portfolios fared worst.

Funds in the short-term interest-bearing category, which hold short-term bonds and cash instruments, produced above-inflation returns (inflation for the period was 4.63%), with an average of 7.4%. However those in the variable-term interest-bearing category, which hold longer-term bonds, were, with a handful of exceptions, in the red, averaging -3.11%.

On a brighter note, investors in rand-denominated offshore equity funds had a good 12 months in rand terms. The MSCI World Index was up 8.23% in rands, and funds in the global equity general category averaged just above that: 8.59%. The five top performers for the period were, according to ProfileData: IP Global Momentum Equity Fund (35.62%), Sygnia FAANG Plus Equity Fund (26.12%), Instit BCI Global Equity Fund (24.81%), Autus Prime Global Equity Feeder Fund (22.5%), and Stonehage Fleming SCI Global Best Ideas Equity Feeder Fund (22%).

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