Summary of retail rand-denominated unit trust and FSB-approved foreign collective investment scheme returns, fund ratings and management company ratings for the quarter ended 30 June 2014.
The PlexCrown survey was done in collaboration with ProfileData and based on return data provided by ProfileData and market data by I-Net BFA.
1. Coronation still on top
Coronation maintained its position as South Africa’s leading collective investment scheme manager based on the risk-adjusted performance over three and five years of all its rated funds under management. According to the PlexCrown Survey for the second quarter of 2014 Coronation had the highest CIS management company rating of 4.366 PlexCrowns among ASISA-registered management companies in the June quarter (SEE TABLE 1). Coronation had the third-highest rating behind Cadiz and Community Growth in the broad South African Interest Bearing category with 4.992 PlexCrowns, and the third-highest rating of 4.809 PlexCrowns behind Ashburton and Foord in the broad South African Multi Asset Non-income category. Coronation’s overall rating was also supported by the investment house’s eighth-highest weighted average rating of 3.849 PlexCrowns in the broad rand-denominated Global & Worldwide category and the ninth-highest rating of 3.430 PlexCrowns in the broad South African Equity & Real Estate category.
Fourteen of Coronation’s 17 rated funds had above-average ratings of 4 or more PlexCrowns. Nine of the investment house’s rated funds were in the top three slots in their subcategories. Coronation Industrial Fund and Coronation Jibar Plus Fund were the leaders in their respective subcategories. Three funds, namely Coronation Financial Fund, Coronation Resources Fund and Coronation Property Equity Fund, were runners-up in their respective subcategories. On a straight performance basis Coronation Balanced Plus Fund, Coronation Market Plus Fund, Coronation Strategic Income Fund and Coronation Top 20 Fund were the top-performing funds in their subcategories over ten years, while Coronation Global Capital Plus (ZAR) Feeder Fund and Coronation Property Equity Fund led their subcategories over five years.
Allan Gray had the second-highest CIS management company rating of 4.145 PlexCrowns among ASISA-registered management companies in the June quarter. The company shared the third-highest rating of 4.000 PlexCrowns in the broad South African Equity & Real Estate category and shared fourth spot in the broad South African Interest Bearing category with 4.000 PlexCrowns. Allan Gray was ranked fifth in the broad South African Multi Asset Non-income category with 4.414 PlexCrowns, and sixth in the broad Global & Worldwide category with 4.000 PlexCrowns. Four of Allan Gray’s six rated funds had above-average ratings of 4 or more PlexCrowns.
Nedgroup Investments reclaimed the third spot overall with a CIS management company rating of 4.062 PlexCrowns in the second quarter. Nedgroup Investments had the third-highest rating in the broad Global & Worldwide category with 4.602 PlexCrowns, and the joint fourth-highest rating of 4.000 PlexCrowns in the broad South African Interest Bearing & Income category. The investment house’s weighted average rating of 4.492 PlexCrowns secured the fourth spot in the broad South African Multi Asset Non-income category. Nine of Nedgroup Investments’ 15 rated funds had above-average ratings of 4 or more PlexCrowns, while three funds achieved 5 PlexCrowns. Nedgroup Investments Entrepreneur Fund and Nedgroup Investments Financials Fund were the top-rated funds in their subcategories.
PSG had the fourth-highest overall CIS management company ranking with 3.954 PlexCrowns. PSG was runner-up to Foord in the broad South African Equity & Real Estate category with a weighted average rating of 4.344 PlexCrowns. The company was ranked sixth in the broad South African Multi Asset Non-income category with 4.327 PlexCrowns and ninth in the broad rand-denominated South African Interest Bearing & Income category. Eight of PSG’s 11 rated funds had above-average ratings of 4 or more PlexCrowns, while three funds achieved 5 PlexCrowns.
Oasis was the leading foreign CIS (FCIS) management company in the second quarter with an overall rating of 4.750 PlexCrowns (SEE TABLE TWO). Oasis had the second-highest rating in the broad Offshore Equity & Real Estate category. All three of Oasis’ rated funds achieved above-average ratings of 4 or more PlexCrowns. Oasis Crescent Global Property Equity Fund (Ireland) was the leading fund in the Global Real Estate category, while Oasis Global Equity Fund and Oasis Crescent Global Equity Fund were ranked in the top five in the Global Equity General category.
Nedgroup Investments International had the second-highest FCIS management company rating of 4.000 PlexCrowns in the second quarter. The investment house shared the top spot in the broad Offshore Asset Allocation category and shared fourth position in Offshore Equity & Real Estate. Two of Nedgroup Investments International’s three rated funds had above-average ratings of 4 or more PlexCrowns. Nedgroup Investments Global Flexible Fund was the top-rated fund among 29 funds in the Global Asset Allocation Flexible category, while Nedgroup Investments Global Equity Fund was ranked sixth in the Global Equity General category.
Table 1: Top 8 ASISA-registered management companies as at 30 June 2014
Note: The methodology to calculate the ratings of CIS management companies is based on applying weights to each of the four broad unit trust sectors based on the total money invested in the sectors and skill. The size of a rated fund of a company relative to the combined size of all the rated funds in that company’s fold in a specific broad unit trust sector is also taken into account to determine each management company’s rating in its broad unit trust sector. The company’s South African rating accounts for 85% of the overall rating, with South African Equity and Real Estate combined accounting for 25% of the overall rating, South African Interest Bearing and Multi Asset Income combined 25%, and South African Multi Asset (excluding South African Multi Asset Income) 35%. The company’s Global rating accounts for 15% and is a combination of the Global and Worldwide categories as an asset class. The fund sizes at the end of the previous quarter are used in the calculations.
To qualify for a CIS management company rating, a company must be registered as such and must have a rated fund in each of the broad unit trust sectors. However, the company must have a rated fund in the South African Equity General category or an actively managed fund in the Large Cap subcategories. A management company with a rated fund in the Worldwide category but with no rated funds in the Global category will not qualify for a Global and Worldwide rating or an overall management company rating.
Table 2: Top 3 FCIS management companies as at 30 June 2014
Note: To qualify for an overall rating, a management company must have at least one fund in Global Equity General or Global Asset Allocation (Flexible and Prudential combined) and at least three rated funds. A management company with a global real estate fund but no other rated equity funds will not obtain an Equity & Real Estate rating. The ratings of the FSB-approved global real estate general funds are included in the broad Offshore Equity & Real Estate sector or asset class, which replaces the previously broad Offshore Equity sector. In the calculation of the total offshore PlexCrown rating of FCIS management companies the following weights are applied to the average PlexCrown ratings per broader category:
2. The investment markets in the second quarter of 2014
The rally in global equity markets resumed in the second quarter as the ongoing accommodative monetary policy of central banks and economic data hinting at stronger economic growth swung investors’ sentiment unperturbed by increased geopolitical tensions that saw oil prices rise. The so-called “investor fear gauge”, the Chicago Board Options Exchange (CBOE) Volatility Index (“VIX”), dropped to near all-time lows that were reminiscent of past market euphoria.
Emerging markets had a strong quarter. The MSCI Emerging Markets Index gained 5.64% in the quarter in US dollars and outperformed the MSCI World Index’s 4.15%. The FTSE/JSE All Share Index (AlSI) performed slightly better than the MSCI Emerging Markets Index with a gain of 5.68% in US dollars. The MSCI World Index returned 24.71% in US dollars over the past 12 months with dividends reinvested. Although still lagging in the current cycle, emerging markets are catching up on developed equity markets, with the MSCI Emerging Markets Index returning 14.68% in US dollars with dividends reinvested(?). The AlSI was one of the better-performing emerging markets and a short head behind the MSCI World Index with a return of 23.24% in US dollars over the past 12 months with dividends reinvested. In rands the JSE, as measured by the AlSI, returned 7.18% in the second quarter with dividends reinvested and 32.74% on an investment in the AlSI a year ago.
Global Real Estate funds topped the charts in the second quarter with an average return of 8.48% with income distributions reinvested. South African Equity Industrial was the second-best-performing subcategory with a total return of 8.33%, income distributions reinvested, followed by South African Equity Financial and South African Equity Mid and Small Cap with 7.14% and 6.31% respectively.
South African funds dominated the top of the return tables for the 12 months to the end of June. South African Equity Resource was the best-performing subcategory over one year with 35.46% with income distributions reinvested. South African Equity Financial was the second-best-performing South African subcategory over one year with an average return of 32.47%, followed by South African Equity Large Cap with 31.85% with dividends and interest reinvested.
The South African Equity Industrial subcategory was the best subcategory overall over three, five and ten years with average returns of 27.08%, 26.86% and 23.92% per year respectively. Global Equity General achieved the second-best returns over three years with 26.64% per year, while Global Real Estate General was runner-up over five years with 23.20% per year with income and dividends reinvested.
Third Circle MET Target Return Fund was the best-performing fund in the second quarter with a total return of 19.50% with income distributions reinvested, followed by Old Mutual Global Emerging Markets Fund and Coronation Industrial Fund with 11.50% and 10.80% respectively. Third Circle MET Target Return Fund was also the best-performing fund over one year with a total return of 51.52%, income distributions reinvested. Investec Value Fund and SIM Top Choice Equity Fund were in second and third place with 45.09% and 41.67% respectively. Old Mutual Global Equity Fund topped the charts over three years with a return of 35.03% per year, income distributions reinvested. Allan Gray-Orbis Global Equity Feeder Fund was runner-up with 33.70% per year over the same period. The passively managed Satrix INDI etf and actively managed Coronation Industrial Fund were the top-performing South African funds over three, five and ten years.
Franklin India Fund was the best-performing FSB-approved offshore fund in the past quarter with a return of 15.51% in SA rand with income reinvested. Templeton Thailand Fund and STANLIB Multi-Manager Global Equity Fund were in second and third place with returns of 12.15% and 11.90% respectively. The Franklin MENA Fund that invests primarily in equity and fixed-income securities of companies in the Middle East and North Africa region was the worst-performing FSB-approved offshore fund with a return of minus 5.98% for the quarter. Franklin Biotechnology Discovery Fund was the leading fund over one year, three years and five years. Templeton Latin America Fund and Franklin European Small-Mid Cap Growth Fund were the top-performing funds over ten years with 20.90% and 19.60% per year respectively.
The best-performing foreign category for the three months ended June 2014 was the Far East--Equity--Varied Specialist category with 8.66%, followed by Far East--Equity--General with 8.18%. The USA--Equity--Varied Specialist category was the best-performing category over one, three and five years. Far East--Equity--General was the best-performing foreign category for the ten years ended June 2014.
PlexCrown fund-rating methodology
The PlexCrown Ratings are done in line with guidelines set by ASISA and other criteria set by PlexCrown:
• Unclassified and varied specialist funds are not rated.
• Gold and precious metals funds are also excluded due to the specialist qualities.
• A subcategory will be rated only if it consists of at least five funds of five years or older.
• Only funds with an official track record of at least five years qualify for a rating.
• Pure index-tracking funds that require no skill are excluded from the ratings.
• Funds in the Interest-bearing Money Market subcategory are not rated.
• Only retail funds that have published their performance figures in the public domain are considered in the ratings.
• FSB-approved funds in the Global - Asset Allocation - Prudential and Global - Asset Allocation - Flexible subcategories are rated in the broader Global - Asset Allocation category.
• Only one class of a fund is taken into account in the calculation of the fund’s subcategory return averages. Where a fund has more than one class, the higher-cost A fund’s returns are used. In the absence of an A class, the R class is used. If an A class fund has a shorter return history than that of the R class, the R class’s history is used until the A class was listed for the first time. If a fund has no A or R classes and only a B1 class, for instance, the latter’s returns are used. Where an FSB-approved fund has A and B classes the A class is used. Where an accumulation class is listed together with the normal class the normal class is used.
Funds in Non-multi Asset subcategories and Interest Bearing Variable Term subcategories are ranked on a percentile basis over five- and three-year periods according to the Sharpe Ratio, Alpha, Treynor Ratio, Sortino Ratio and Omega. Funds in the Multi Asset subcategories (excluding Multi Asset Income) are ranked over five- and three-year periods according to the Sharpe Ratio, Alpha, Sortino Ratio and Omega. Funds in the Multi Asset Income and the Interest Bearing Short Term subcategories are ranked over five- and three-year periods according to the Sharpe Ratio, Alpha and Sortino Ratio.
The funds’ percentile rankings per measure over three and five years are time-weighted by applying weights of 40% and 60%. The total percentile ranking of funds in Non-multi Asset subcategories and Interest Bearing Variable Term subcategories are then calculated by applying a weight of 20% to each fund’s applicable percentile rankings per measure.
In the Multi Asset subcategories (excluding Multi Asset Income), a weighting of 25% is applied to four performance measures: the Sharpe Ratio, the Sortino Ratio, Alpha and Omega, excluding the Treynor Ratio.
In the Multi Asset Income and the Interest Bearing Short Term subcategories a weighting of 33.33% is applied to three performance measures: the Sharpe Ratio, the Sortino Ratio and Alpha, excluding the Treynor Ratio and Omega.
The funds are classed in their subcategory according to the normal distribution curve and awarded PlexCrown Ratings as follows:
Get the latest issue of FAnews