SA’s top unit trusts over 10 years

Local markets have been through a lot over the last ten years. It was a period that started with the global financial crisis in 2008, then saw the rand trading as low as R6.70 to the dollar in 2011 and as high as R16.85 in 2015, and ended with last year’s rally in both bonds and equities as investor confidence started to return after years of negative sentiment.

For many, this has been a period during which it has been very difficult to stay invested. Besides the ups and downs, there has been a general feeling of unease for some time about the sustainability of returns.

At the end of it, however, returns for local investors have been fairly good. As the table below shows, the JSE has not had a negative year since 2008, and in five of the last 10 years the market has been up 19.0% or more.

Source: FTSE Russell

Overall, the All Share Index showed an annualised return of 10.41% for the ten years to the end of December. That is below its long-term average, but still well ahead of inflation, which has averaged just above 6%.

The local bond market has also done reasonably well. The ten year annualised return on the FTSE/JSE All Bond Index was 8.62%.

The local asset class that has performed best, however, is listed real estate. The FTSE/JSE SA listed property index has returned an annualised 14.79%.

It is therefore not surprising that the list of top unit trusts over this period is dominated by property funds. This was also the case last year, when 11 of the top 20 funds over the ten year period to December 31 2016 were in the property sector.

For the ten years to the end of 2017, this has gone up to 13 out of the top 20. The table below shows the list of the 25 top performers over the past decade.

Source: Morningstar

The dominance of property funds is obvious, led by the incredible performance of the Absa Property Equity Fund. Over the last five years in particular, this offering has stood out in its category.

Apart from the property funds, a number of sector funds also make the list. Two industrial funds and three financial funds appear.

The industrial sector unit trusts have benefited most obviously from the rise of Naspers, in which they tend to carry more weight than general funds. They have however also enjoyed the strong performance of other rand hedge industrials like Richemont and British American Tobacco.

The more notable funds on the list, however, are those who haven’t been supported so strongly by the performance of their underlying sectors. This includes the two global equity funds – the Allan Gray-Orbis Global Equity Feeder Fund, and the Old Mutual Global Equity Fund – as well as the two flexible funds and three general equity funds.

The Centaur BCI Flexible Fund has been the most impressive, having delivered an outperformance relative to the FTSE/JSE All Share Index of nearly 4.5% per year over this period. That is an annualised real return of more than 8%.

The top general equity fund over this period was the Marriott Dividend Growth Fund. This is particularly interesting because the fund’s strategy prioritises investing in stocks that pay sustainable dividends.

This is a fairly conservative strategy, and its portfolio is essentially built on defensive counters like consumer goods companies, healthcare providers and insurers. Ordinarily one wouldn’t expect significant outperformance from these kinds of companies, but they have been in high demand in the years since the global financial crisis as investors have sought out their bond-like qualities in a period when interest rates have been so low.

Finally, it must be noted that this list only shows unit trusts, so the Satrix Indi and CoreShares Proptrax Sapy ETFs do not appear even though they would qualify. The Satrix Indi has shown an annualised return of 16.27%, and the CoreShares Proptrax 13.99%.

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