File image: IOL
File image: IOL

Investors in offshore and resources funds do well in 2nd quarter

By Martin Hesse Time of article published Jul 22, 2018

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A sluggish local economy coupled with rand weakness resulted in unit trust investors mostly earning pedestrian returns to the end of the second quarter, although those who invested in the local resources sector and offshore may have reason to smile. 

At this week’s Allan Gray Investment Summit, Kevin Lings, the chief economist at Stanlib, said the South African economy has not shown the resurgence hoped for during the “Ramaphoria” of earlier thise year. He says many analysts lifted their economic growth forecasts to between 2% and 2.5% for the year, but the reality is that it will take much longer to rectify the structural imbalances in the economy.

The United States, on the other hand, is booming, Lings says, and much of this has to do with buoyant business confidence, which has soared to an all-time high since Donald Trump’s election victory. 

But Trump’s recent protectionist actions may be undoing some of the positives. 

Dave Mohr and Izak Odendaal, chief investment strategist and investment strategist, respectively, at Old Mutual Multi-Managers, say political uncertainty is dominating global markets in a way it hasn’t in years.

“A quiet week on the markets was rudely interrupted when Trump announced that an additional $200 billion of Chinese imports would be subject to tariffs. This is over and above the tariffs on $34bn of imports that came into effect earlier this month. China has retaliated dollar for dollar, but it doesn’t import enough to match the new tariffs,” they say.

Investors are becoming increasingly concerned about the tit-for-tat tariff increases, Mohr and Odendaal say, but, to date, all threatened and implemented tariffs apply to only 5% of global trade. The uncertainty is a bigger risk to global growth than the actual tariff increases, they say. “Still, New York-listed S&P 500 companies are expected to report second-quarter earnings 20% up from a year ago in the coming weeks.” 

Here in South Africa, Mohr and Odendaal say, mining and manufacturing production performed better than expected in May, and the second-quarter average for both is above that for the first quarter.

Quarterly returns

The best unit trust returns for the three months to the end of June came from the South African equity resources sub-category (up 15.55% for the quarter, according to ProfileData) and, on the back of the weaker rand, the global equity general and various global multi-asset sub-categories (up between 14.35% and 15.72%).

The worst-performing sub-category over the quarter, reflecting the poor state of the local economy, was South African equity small- and mid-cap (–5.57% for the quarter), followed by South African equity financials (–4.78%), South African interest-bearing variable term (–3%) and South African real estate general (–2.13%).

The best- and worst-performing collective investment schemes over the quarter were, respectively, the Stanlib S&P 500 Info Tech Index Feeder ETF (up 26% over three months) and the Old Mutual Mid and Small Cap Fund (–9.77% over the period).

One-year returns

For the year to the end of June, South African equity resources returned a whopping 31.78%, followed by regional equity general (15.10%) and global equity general (12.82%), according to ProfileData.

The worst-performing sub-categories were worldwide equity unclassified (–9.54%), South African real estate general (–9.41%) and South African equity mid and small cap (–2.23%).

The best- and worst-performing funds for the 12-month period were, respectively, the Satrix Resi ETF (41.96%) and the Investec Value Fund (–20.32%).

In comparison, FTSE/JSE indices delivered the following:

  • All Share: 15.02%;
  • Top 40: 16.75%;
  • Financials: 10.51%;
  • Resources 10: 44.55%;
  • Industrials: 7.52%; and
  • Mid Cap: 3.67%.

Five-year returns

Taking a longer-term investment view, over five years to the end of June, the best performance came from funds invested outside South Africa in the global equity general (13.72% annualised), global equity unclassified (12.95% annualised) and global multi-asset high equity (12.35% annualised) sub-categories. 

The top three funds over this period were:

  1. Sygnia Itrix MSCI US Index ETF (19.78% annualised);
  2. Old Mutual Global Equity Fund (19.22% annualised); and
  3. Prescient China Balanced Feeder Fund (18.89% annualised).

Top managers

South Africa’s top three management companies, according to their PlexCrown ranking (based on the PlexCrown ratings of their qualifying funds), are Allan Gray, PSG and Coronation. The three companies retained the positions they held at the end of the first quarter.

Allan Gray’s rating improved from 4.745 PlexCrowns in the first quarter to 4.982 PlexCrowns in the second quarter, despite the drop in the rating of the Allan Gray-Orbis Global Optimal Fund of Funds (down to two PlexCrowns).

The company had eight qualifying funds, of which six received the maximum rating of five PlexCrowns: the Allan Gray-Orbis Global Equity Feeder Fund, Allan Gray-Orbis Global Fund of Funds, Allan Gray Equity Fund, Allan Gray Bond Fund, Allan Gray Balanced Fund and Allan Gray Stable Fund.

PSG’s rating showed a small decline, quarter-on-quarter, from 4.491 to 4.392 PlexCrowns. It retained its second-place position, according to ProfileData, because of the “stellar performance of PSG’s Flexible Fund, as well as the PSG Equity Fund”. These funds each earned five PlexCrowns. Of its eight qualifying funds, other funds to achieve five PlexCrowns were the Balanced Fund and the Stable Fund.

Coronation Fund Managers had 18 qualifying funds, and retained its third place in the rankings with a marginally improved score: from 3.789 to 3.824 PlexCrowns. Its five-PlexCrown funds are the Optimum Growth Fund, Resources Fund, Bond Fund and Jibar Plus Fund. 

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