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27 Oct 2015

Sweet Performance From SA's Top General Equity Funds

Despite the market crash in 2008, the last decade has been a very rewarding one for equity investors. Even with that dip, the FTSE/JSE All Share Index (Alsi) has delivered an annualised return of more than 15% since September 2005. 

The volatility in the market over the last twelve months or so may however be the warning sign that the good times are over. Asset managers have now been suggesting for some time that investors should not expect the exceptional returns of the last ten years to continue. 

However, investors should feel comfortable if their fund managers have been able to bank the good returns of the last decade. Some local equity funds have certainly done so, having enjoyed a royal run. 

It may not be the same managers that do well in the different market conditions we are likely to face in future, but given that the last ten years did include one of the worst twelve month periods in history, there is something to be said for those funds that out-performed the market over this time. 

The below table shows the top general equity funds for the ten years to the end of August: 

Top performing SA general equity funds to August 31 2015

Fund

10 Year annualised total return

Foord Equity Fund R

17.72%

Coronation Top 20 Fund A

17.36%

Prudential Equity Fund A

17.25%

Prudential Dividend Maximiser Fund A

16.84%

SIM General Equity Fund R

16.72%

Coronation Equity Fund R

16.54%

Allan Gray Equity Fund A

16.33%

Nedgroup Investments Value Fund R

16.32%

Absa Select Equity Fund

16.21%

Marriott Dividend Growth Fund R

16.08%

FTSE/JSE All Share Index

15.74%

SA general equity fund category average

13.61%

Source: Morningstar

The first thing worth noting is that all ten of these funds out-performed the Alsi. They were, however, the only ten funds that did so. None of the other 42 general equity funds with performance records that stretch back to 2005 beat the market over this period. 

It is also interesting that almost all of South Africa's larger asset managers appear on this list. The only big fund houses that are missing are Investec and Stanlib (since Marriott is part of Old Mutual). But with that said Investec has two funds within the next five and Stanlib's Index Fund ranks 20th

To some extent this is a function of most smaller funds not having ten-year track records, but it is also a reflection of the stability of these larger funds and why they have attracted assets in the first place. 

The Foord Equity Fund and Coronation Top 20 Fund in particular have been the stand-out funds in this category over a sustained period. They have consistently been near the top of long term performance rankings, and the reputations of these two fund houses enjoy is largely due to these flagship funds. 

It not surprising therefore that the Coronation Equity Fund also appears on the list, as does the Nedgroup Investments Value Fund, which is managed by Foord. 

The appearance of both of Prudential's equity funds on the list is also noteworthy. It is questionable whether the Dividend Maximiser Fund has actually followed its stated mandate of generating a higher dividend yield than the market, but it has nevertheless produced outstanding capital growth. 

Looking at this category over a shorter time frame, the below table lists the top ten general equity funds over the last five years: 

Top performing SA general equity funds to August 31 2015

Fund

5 Year annualised
total return

Mazi Capital MET Equity Fund A1

22.90%

Harvard House BCI Equity Fund

21.26%

Foord Equity Fund R

20.28%

Momentum Best Blend Specialist Equity Fund A

19.77%

Imara MET Equity Fund

19.72%

PSG Equity Fund A

19.71%

Sasfin MET Equity Fund A

19.57%

Investec Equity Fund R

18.90%

Stanlib Equity Fund R

18.52%

Old Mutual Managed Alpha Equity Fund A

18.28%

FTSE/JSE All Share Index

16.36%

SA general equity fund category average

14.13%

Source: Morningstar

What stands out is that the Foord Equity Fund is the only one to appear on both lists. It once again underlines how consistent the performance in this fund has been. 

There are also more smaller funds here than the ten year rankings. The Mazi and Harvard House funds both have assets under management of less than R200 million, compared to the R40 billion in the Allan Gray Equity Fund or R22 billion in the Coronation Top 20 Fund. 

The ten funds on this list all out-performed the Alsi, but again the majority of funds in this category did not. Of the 82 general equity funds with five-year performance records, 55 produced below market returns. 

Interestingly, three of the funds that out-performed over ten years came in below the Alsi over the last five years – the Allan Gray Equity Fund, Nedgroup Investments Value Fund and Absa Select Equity Fund. All three of those funds do have a value bent which may explain their shorter term relative under-performance, given how little reward there has been for the value style in the most recent bull market.

This article, written by Patrick Cairns, was first published by The Moneyweb investor.
 

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