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Overview of unit trust returns for the quarter ended 31 March 2010

15 April 2010 Plexus
Dr Prieur du Plessis, Plexus group chairman

Dr Prieur du Plessis, Plexus group chairman

The year 2010 started off with most global stock markets delivering negative returns in January. According to Dr Prieur du Plessis, Plexus group chairman, nervousness returned to financial markets as scepticism about the sustainability of the economic recovery and the new bull market resurfaced.

“However, this was short-lived and global markets experienced a strong rebound during the latter half of the quarter. The overall sentiment of global investors once again improved and, with the exception of China, most major stock market indices delivered reasonable returns for the quarter,” says Du Plessis.

“The quarter was also characterised by earnings reports from many companies that surprised on the upside. This was a good indicator of not only a stabilising global economy, but also further expansion in most regions.”

The MSCI World Index ended the quarter up 2,7%. “This was mostly due to a great March during which the Index gained a very respectable 5,9%,” explains Du Plessis. “The MSCI Emerging Markets Index managed to obliterate its four-week decline of 12,7% from 11 January to 5 February 2010 and ended with a gain of 2,1% for the quarter. Most of the quarter’s gains came during March, which saw the MSCI Emerging Markets Index notching up a powerful 8,0%.”

The continued global economic expansion resulted in a decline in the capital value of mature-market bonds, with the JPM Global Bond Index yielding a return of -1,1% for the quarter. “Much of the damage emanated from the US during March, where the yield on the US 10-year Treasuries rose to 3,83%,” says Du Plessis. “The heightened appetite for riskier assets resulted in emerging-market bond yields declining, however, with the JPM Global Emerging Markets Bond Index yielding a return of 3,6% for the quarter.”

The domestic stock market followed the global trend with a negative start to the year, followed by a good rally during the second half of the quarter. “After a decline of just under 9% from the 11 January high to the 5 February low, the FTSE/JSE All Share Index yielding a total return of 3,9% for the quarter. Most of this can be ascribed to the strong March performance of 7,4%,” says Du Plessis.

The best-performing sector for the quarter was financials, with the FTSE/JSE Financial Index yielding a total return of 9,9%. “This was mostly due to positive monetary stimuli on the back of lower inflation, as well as an overall pick-up in consumer credit extension,” explains Du Plessis. The FTSE/JSE SA Industrial Index delivered a return of 4,4% for the quarter.

“The sub-par return of 2,1% from the FTSE/JSE Resources Index over the quarter can be ascribed to a very negative start to the year. The index posted a return of -6,4% in January and -16,3% from the 11 January high to the 5 February 2010 low,” says Du Plessis.

The decline in resources shares was due to a broad correction in commodity prices, as well as a strengthening of the rand relative to the US dollar. “While the CRB Commodities Index declined slightly in March (-0,5%), the Economist Metals $ Index showed an increase of 3,3%. Despite the rand’s continued strength, the FTSE/JSE Resources Index managed to yield a stellar return of 10,2% in March. This was most probably on the back of a 9,5% increase in the Baltic Dry Index – a measure of global bulk freight rates – which signifies an increase in demand for commodities,” he explains.

According to Du Plessis, the platinum price experienced an increase of 11,9% over the quarter, which boosted the prices of local platinum-producing companies. “The gold price, on the other hand, delivered a more modest return of 1,5% for the quarter.”

After a slow start in January, the local fixed-interest market ended the quarter on a strong note. The BESA All Bond Total Return Index delivered a return of 4,5% for the first quarter of 2010. “The good positive return was due mainly to a sharp decrease in the yield of longer-dated bonds,” says Du Plessis. “The All Bond 7-12 Year Index yielded a return of 5,6% while the All Bond 1-3 Year Index delivered a more modest return of 2,6%.”

“Not surprisingly, the best-performing unit trust sectors over the quarter were those that benefit from lower short-term interest rates,” says Du Plessis. The Domestic – Equity – Financial sector was ranked first with an average return of 10,2%. The second-best sector was the Domestic – Real Estate – General category with 8,3%.

The worst-performing sectors were the Foreign – Fixed Interest – Varied Specialist and the Foreign – Fixed Interest – Bond categories with -3,8% and -1,2% respectively. “This was due to higher mature-market bond yields (with corresponding lower capital values), extremely low money-market rates and the relative strength of the South African rand against other major international currencies.”

Over 12 months the best-performing sectors were the Domestic – Equity – Financial and Domestic – Equity – Value sectors with 55,7% and 52,3% respectively. As was the case over the quarter, the worst-performing sectors over the 12-month period were the Foreign – Fixed Interest – Varied Specialist and the Foreign – Fixed Interest – Bond categories with returns of -18,5% and -10,7% respectively.

The three-year and five-year charts are topped by the Domestic – Fixed Interest – Money Market and Domestic – Equity – Resources & Basic Industries sectors with 9,9% and 22,9% per annum.

The best-performing fund over the last quarter was the Grindrod Global Property Income Fund with a return of 11,9%, followed by the Coronation Financial Fund with 11,7%. The worst fund over this period was the Prescient Global Income Feeder Fund A1 with -7,4%.

The best-performing fund over the last 12 months was the RMB Small/Mid-Cap Fund A with a return of 63,8%. Over the last three years it was the Cadiz Equity Ladder Fund with 19,4% per annum, and over the last five years the Old Mutual Mining & Resources Fund A with 26,5% per annum.

Du Plessis says the strong recovery in global equity prices since the lows of March 2009 has been nothing less than astounding, and many investment professionals were surprised by the magnitude of the rally. “While the current bull market remains intact, albeit for the time being, any signs of a renewed slowdown in economic growth or earnings disappointments could trigger a pull-back in equity prices,” says Du Plessis.

According to Du Plessis, the major risk to global equity markets is a double-dip recession in Western countries due to China’s efforts to cool its economy and the emergence of the debt crisis in the eurozone.

“Global equity markets are likely to become more volatile as the probability of such a scenario increases. The secular bear market that started in 2008 will resume if such a scenario becomes a reality,” says Du Plessis. That said, the near-term outlook remains positive and we do not believe the time is right to underweight equities now.”

Best and worst sectors

 

1 month

Best

%

Domestic--Equity--Financial

8.65%

Domestic--Equity--Large Cap

7.26%

Domestic--Equity--Resources & Basic Industries

7.07%

Domestic--Equity--Value

6.07%

Domestic--Equity--General

6.05%

Worst

Worldwide--Equity--Technology

0.74%

Domestic--Fixed Interest--Money Market

0.54%

Foreign--Asset Allocation--Flexible

-1.58%

Foreign--Fixed Interest--Bond

-4.50%

Foreign--Fixed Interest--Varied Specialist

-4.99%

3 months

Best

%

Domestic--Equity--Financial

10.23

Domestic--Real Estate--General

8.29

Domestic--Equity--Smaller Companies

5.72

Domestic--Equity--Value

4.88

Domestic--Equity--Varied Specialist

4.59

Worst

Gold and Precious Metals

0.15

Worldwide--Equity--Varied Specialist

-0.01

Foreign--Asset Allocation--Flexible

-0.39

Foreign--Fixed Interest--Bond

-1.21

Foreign--Fixed Interest--Varied Specialist

-3.81

6 months

Best

%

Domestic--Equity--Resources & Basic Industries

15.98

Domestic--Equity--Financial

15.58

Domestic--Equity--Large Cap

14.84

Domestic--Equity--Growth

13.20

Domestic--Equity--Value

12.97

Worst

Foreign--Equity--General

3.72

Domestic--Fixed Interest--Money Market

3.56

Foreign--Asset Allocation--Flexible

-0.18

Foreign--Fixed Interest--Bond

-3.43

Foreign--Fixed Interest--Varied Specialist

-5.50

12 months

Best

%

Domestic--Equity--Financial

55.71

Domestic--Equity--Value

52.29

Domestic--Equity--Smaller Companies

47.65

Domestic--Equity--Growth

47.02

Domestic--Equity--Industrial

45.48

Worst

Domestic--Fixed Interest--Bond

8.41

Domestic--Fixed Interest--Money Market

8.30

Foreign--Asset Allocation--Flexible

0.94

Foreign--Fixed Interest--Bond

-10.68

Foreign--Fixed Interest--Varied Specialist

-18.48

3 years

Best

% per year

Domestic--Fixed Interest--Money Market

9.94

Domestic--Fixed Interest--Income

9.38

Domestic--Fixed Interest--Varied Specialist

8.83

Domestic--Real Estate--General

7.61

Domestic--Fixed Interest--Bond

6.98

Worst

Worldwide--Equity--General

-1.42

Foreign--Asset Allocation--Flexible

-1.99

Domestic--Equity--Smaller Companies

-4.09

Foreign--Equity--General

-6.41

Foreign--Equity--Varied Specialist

-9.53

5 years

Best

% per year

Domestic--Equity--Resources & Basic Industries

22.88

Domestic--Real Estate--General

19.20

Domestic--Equity--Large Cap

19.02

Domestic--Equity--Industrial

18.57

Domestic--Equity--Value

18.14

Worst

Foreign--Fixed Interest--Bond

7.23

Foreign--Asset Allocation--Flexible

5.91

Foreign--Equity--General

5.40

Foreign--Equity--Varied Specialist

5.10

Foreign--Fixed Interest--Varied Specialist

4.52

 

Source: Profile Media

 

Best and worst funds

 

1 month

Best

%

Coronation Financial Fund A

9.59

RMB Financial Services Fund A

9.01

Old Mutual Financial Services Fund A

8.75

Old Mutual RAFI 40 Tracker Fund A

8.59

RMB Resources Fund

8.56

Worst

Personal Trust Vuna Fund

-5.76

RMB Sterling Income Fund A

-5.81

Prescient Global Income Feeder Fund A1

-5.86

RMB Euro Income Fund A

-5.94

RMB International Bond Fund A

-6.45

3 months

Best

%

Grindrod Global Property Income Fund

11.88

Coronation Financial Fund A

11.70

Nedgroup Investments Financials Fund A

11.32

36One Flexible Opportunity Fund

11.07

SIM Financial Fund

9.93

Worst

RMB Sterling Income Fund A

-6.77

STANLIB Euro Currency Fund of Funds A

-6.87

RMB Euro Income Fund A

-7.15

Old Mutual UK Money Market Feeder Fund A

-7.20

Prescient Global Income Feeder Fund A1

-7.43

6 months

Best

%

36One Flexible Opportunity Fund

22.17

RMB Resources Fund

19.65

36One Target Return Fund

19.21

Coronation Financial Fund A

18.06

Centaur Flexible Fund

17.89

Worst

Prescient Global Cautious Feeder Fund A1

-8.66

Prescient Global Income Feeder Fund A1

-8.71

Absa Euro Income Fund

-9.49

STANLIB Euro Currency Fund of Funds A

-9.59

RMB Euro Income Fund A

-9.94

12 months

Best

%

RMB Small/Mid-Cap Fund A

63.80

RMB Financial Services Fund A

62.02

Nedgroup Investments Financials Fund A

61.40

Fortress REIT Fund A

60.03

36One Flexible Opportunity Fund

59.71

Worst

Absa US Dollar Income Fund

-21.38

STANLIB US Dollar Cash Fund of Funds A

-22.12

RMB US Dollar Income Fund A

-22.73

RMB Euro Income Fund A

-22.94

Investment Solutions US Dollar Cash Feeder Fund

-23.49

3 years

Best

% per year

Cadiz Equity Ladder Fund

19.39

Cadiz Absolute Yield Fund A

10.89

Coris Capital International Bond Feeder Fund A

10.82

Cadiz Inflation Plus Fund

10.81

STANLIB Property Income Fund A

10.73

Worst

RMB Global Fund

-11.32

STANLIB International Property Fund A

-13.71

Fortress REIT Fund A

-14.32

Marriott International Real Estate Feeder Fund A

-18.13

STANLIB Small Cap Fund A

-24.06

5 years

Best

% per year

Old Mutual Mining and Resources Fund A

26.51

Coronation Top 20 Fund A

24.46

Nedgroup Investments Mining & Resource Fund A

24.39

Absa Rand Protector Fund

24.17

Coronation Resources Fund A

23.88

Worst

RMB Global Fund

2.19

Old Mutual UK Money Market Feeder Fund A

1.94

RMB International Income Fund A

0.78

Marriott International Real Estate Feeder Fund A

0.74

STANLIB Small Cap Fund A

0.47

 

Source: Profile Media

 

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