South African unit trusts experience more subdued returns in 2014

Listed Property, Financials, and Industrials top the charts while Resource funds are the sole losers for the year.

David O'Leary 28 January, 2015 | 12:07PM

All things considered, South African unit trusts could have fared much worse this year. Between the collapse in the price for oil, a depreciating rand, a rapidly slowing domestic economy, geopolitical turmoil, continued labour unrest, and the African Bank debacle there was no shortage of negative news this year. Yet still, 24 of the 25 ASISA categories tracked by Morningstar produced positive returns for investors.

However, all that negative news didn’t go unnoticed by markets and resulted in much more subdued returns as compared to previous years. Last year at this time, the largest unit trust categories had enjoyed large double digit returns in the region of 15% to 20% off the back of a 21.4% return for the FTSE/JSE All Share Index (ALSI). This year, the figures were more toward the high single digit range and in line with the ALSI’s 10.9% return. For instance, the South African Multi-Asset categories all experienced similar returns: High Equity (9.8%), Medium Equity (9.2%), Low Equity (8.2%), and Flexible (10.3%).

The off-shore multi-asset categories generally produced similar performance as the benefit of the depreciating rand was offset by more modest returns from many developed markets.

The best performing categories this year included more specialized categories such as South African Financials and Industrials which returned 22.5% and 16.7% respectively and the Global and South African Listed Property categories with 28.6% and 25.2% returns. 

Predictably, the fixed income categories experienced even more muted returns falling toward the bottom half of the performance charts. For instance, the South African Interest Bearing Variable Term and South African Interest Bearing Short Term returned 8.9% and 5.5% respectively.

The worst performing unit trust category was the South African Equity Resources category. Continued labour unrest and a softening in the gold and platinum markets hurt local miners. Meanwhile the price for oil imploded in 2014. Oil ended the year down nearly 50% marking levels not seen since 2009. Remarkably, despite this frightening backdrop the South African Equity Resources category lost just 3% on the year.

The best performing funds for 2014 were Prescient China Balanced Feeder Fund (46.3%), Sanlam India Opportunities Feeder Fund (39.7%), and ABSA Property Equity (39.7%). These results aren’t surprising given the Shanghai SE Composite returned 52.9% in 2014 (in local currency terms) and the S&P BSE SENSEX returned 29.9% (in local currency terms).

Meanwhile the three worst performing funds included Old Mutual Mining (-14.8%), Momentum Resources (-15.8%), and Momentum Value (-15.9%). The two resources funds were casualties of falling resource prices and continued labour unrest in South Africa. Meanwhile Momentum Value was hit hard by the African Bank collapse as the fund had the largest percentage exposure (10%) to the failed lender.

 

ASISA Categories

1 Month

2014 Calendar Year

3 Year

5 Year

 Global Real Estate General

5.8

28.6

26.7

20.6

 South African Real Estate General

2.0

25.2

21.6

19.1

 South African EQ Financial

0.1

22.5

25.3

19.4

 South African EQ Industrial

0.7

16.7

26.5

22.3

 Global EQ General

3.1

12.0

26.4

17.1

 Worldwide MA Flexible

2.3

11.1

19.9

14.6

 South African EQ General

- 0.1

10.3

16.5

14.1

 Global MA Flexible

2.9

10.0

21.8

14.6

 Global MA High Equity

2.6

9.8

23.7

16.0

 South African MA Flexible

0.5

9.7

15.0

12.7

 South African MA High Equity

0.7

9.5

14.6

12.0

 South African EQ Mid/Small Cap

1.2

9.2

18.7

16.7

 South African MA Medium Equity

0.8

9.2

13.5

11.5

 Global MA Low Equity

3.3

9.1

16.7

11.7

 South African IB Variable Term

- 1.2

8.9

8.3

9.6

 Global IB Variable Term

3.4

8.3

13.0

11.3

 South African MA Low Equity

0.7

8.2

11.1

9.8

 South African EQ Large Cap

- 0.9

7.9

17.6

14.0

 Regional EQ General

2.5

7.8

22.9

13.1

 Global IB Short Term

4.2

7.3

11.1

8.6

 South African IB Short Term

0.4

5.5

5.9

6.4

 South African IB Money Market

0.0

5.3

5.3

5.6

 Global MA Medium Equity

2.9

5.0

18.4

12.4

 Regional IB Short Term

3.3

2.6

11.2

7.6

 South African EQ Resources

- 0.3

- 3.0

- 0.9

1.7

About Author David O'Leary

David O'Leary  is Director of Fund Research for Morningstar South Africa