Overview of unit trust returns for the quarter ended 30 June 2009

The strong rebound in international equity prices, which began in March after a dismal start to the year, continued well into the second quarter of 2009. “The recovery has been astounding, to say the least,” says Dr Prieur du Plessis, Plexus group chairman.

The MSCI World Index, which sank to a low on 9 March, breaching its November 2008 low, has notched up more than 45% by 2 June. The MSCI Emerging Markets Index has risen by more than 68% since its low on 2 March.

Commodity prices also have also risen. The Commodities Research Bureau Index increased by 13,4% over the quarter and the Brent future price went up by 40,8%. “This indicates that global players believe the world economy is turning around and that investors are regaining their appetite for risk,” says Du Plessis.

Locally, the FTSE/JSE All Share Total Return Index increased by 8,7% over the quarter. The Financials Total Return Index delivered 12,3%, Industrials Total Return Index 14,0% and Resources Total Return Index 2,8%. The decline in the share prices of gold companies (the Gold Mining Index declined by 16,2% over the quarter), as well as the rand’s strength against the US dollar, diluted the performance of the Resources Index, according to Du Plessis.

The South African unit trust industry also showed a good improvement in performance over the period. Only five of the 29 unit trust categories rated were negative, according to the latest MoneyMate figures. “These were mostly foreign categories, as the rand strengthened to below R8 to the US dollar,” says Du Plessis. “During the first quarter, only five categories produced positive returns.”

The Domestic Equity Smaller Companies category emerged as the best over three months with 14,7%, followed by Domestic Equity Financials with 14,1%.

The worst categories over three months were Foreign Fixed Interest Varied Specialist and Foreign Fixed Interest Bond with -11,6% and -10,6% respectively.

Over one, three and five years Domestic Real Estate topped the charts with performances of 23,7%, 12,1% and 21,7% per annum respectively.

The best unit trust over three and six months was the Zshares Randplay Tracker Fund with 21,7% and 21,4% respectively. Over three months this fund was followed by the Old Mutual Value Fund and Discovery Equity Fund with 19,3% and 18,9% respectively. Over six months the second and third best funds were the Katzgold Flexible Fund and the RMB Resources Fund with 19,1% and 14,6% respectively.

The worst performing funds over three and six months were foreign fixed-interest funds. The worst return over three months was -19,0% from the Investment Solutions US Dollar Cash Feeder Fund, while the worst-performing fund over six months was the Prescient Global Growth Feeder Fund with -18,0%.

The top funds over a one-year period are all in the Domestic Real Estate category, with the STANLIB Property Income Fund taking the top honours with 33,8%. The worst fund over this period was the STANLIB Resources Fund with -53,1%.

Over three years the Investec Property Equity Fund performed best with 17,0% p.a. Over five years the best-performing fund was the Old Mutual Mining and Resources Fund with 27,5% per annum.

“With real estate and fixed-interest funds in the top spots over the one- and three-year periods, investors might be tempted to stick to these funds for the next few years,” says Du Plessis. However, he warns that the declining interest-rate cycle, which benefits these interest-rate sensitive asset classes, is close to a bottom and returns over the next few years will most likely be less competitive.

“If you are a long-term investor with a time horizon of more than five years, now is the time to invest in equity unit trusts,” says Du Plessis. “However, as the global economic recovery is still fragile and there may be further downside (or, at best, a sideways trend with volatility) in equity prices over the next few months, investors should adopt a phasing-in strategy.”

End