Some positive returns despite rough economy

22 February 2015 - 02:00 By BRENDAN PEACOCK
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Johannesburg Stock Exchange.
Johannesburg Stock Exchange.
Image: MICHAEL BRATT

Morningstar's South African Fund Observer for the last quarter of 2014 shows that while some sectors rode out some negative economic news last year, returns from general equity funds are beginning to slow.

The best-performing funds for 2014 were Prescient China Balanced Feeder Fund, which returned 46.3%, and Sanlam's India Opportunities Feeder Fund (39.7%).

The worst-performing were Old Mutual Mining (-14.8%), Momentum Resources (-15.8%) and Momentum Value (-15.9%), which was negatively affected by a 10% exposure to African Bank's collapse.

A look at the inflows and outflows from the country's 20 largest funds by assets under management through the last quarter of 2014 shows the largest outflow of R1.44-billion was experienced by Stanlib's Income R fund in the short-term bond sector.

Allan Gray's Orbis Global Fund of Funds also lost R1.09-billion.

The largest inflows were seen by Coronation Fund Managers' Balanced Plus A fund (which gained R3.1-billion), Allan Gray's Balanced A fund (which gained R2.84-billion) and Prudential Inflation Plus A (which grew by R1.44-billion).

Of the various investment houses, Stanlib Multi-Manager attracted the greatest inflow with R14.42-billion in new funds, whereas Coronation continued to attract new business to the tune of R6.12-billion for the quarter. Foord Unit Trusts secured R5.05-billion and Prudential Portfolio Managers attracted R3.88-billion.

Most fund houses attracted inflows, but Investec Fund Managers South Africa saw an outflow of R5.45-billion, whereas Momentum Collective Invest-ments saw R2.27-billion walk out the door in the last three months of 2014.

David O'Leary, director of manager research for Morningstar South Africa, said most unit trusts performed better than expected, given the rough economic climate.

"Between the collapse in the price of 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 in 2014."

Despite that, said O'Leary, 24 of the 25 fund categories tracked by Morningstar produced positive returns.

But he cautioned that "where we might have been looking at 16% to 20% for general equity funds over the last few years, now we're looking at 10% to 12%".

In 2013, the largest unit trust categories enjoyed large double-digit returns off the back of a 21.4% return for the FTSE/JSE All Share index.

"In 2014, the figures were more towards the high single-digit range and in line with the ALSI's 10.9% return. 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%."

Listed property was the clear winner, with global property providing returns of 28.6% and South African property 25.2%. Financials provided returns of 22.5% and industrials 16.7% - compensating to some extent for the poor returns in fixed income and resources, O'Leary said.

"The biggest outflow came from the short-term fixed-income category, but this is often a temporary investment."

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