PlexCrown Unit Trust Survey Summary: Third Quarter 2013

This survey was done in collaboration with Profile Data and based on data provided by Profile Data, I-Net Bridge and new fund classifications by ASISA that became effective on 1 January 2013.

Global equity markets delivered positive returns in the third quarter as markets resumed the rally on the back of stronger economic data in the US and amid signs that the eurozone is emerging from the recession.

The MSCI World Index gained 7.68% in the quarter in terms of US dollars. In the belief that the global economy is at the early stage of a recovery, investor sentiment towards emerging-market equities turned for the better at long last. The MSCI Emerging Market Index gained 5.01% in US dollars, strongly supported by the FTSE/JSE All Share Index (Alsi) that gained 9.52% in US dollars. Although the MSCI Emerging Markets Index and Alsi returned 1.33% and 5.81% respectively over the past 12 months with dividends reinvested, in US dollars the returns were tepid compared to the MSCI World Index’s positive 17.70% in US dollars. The apparent swing in investor sentiment to positive territory eased the downside pressures on emerging-market currencies during the quarter, but the rand again weakened by 1.58% against the US dollar and 5.22% against the euro to end the past 12-month period down 17.19% and 21.16% respectively.

In rands, the JSE, as measured by the Alsi, returned 12.53% in the third quarter with dividends reinvested and 26.97% on an investment in the Alsi a year ago. Resources led the way during the quarter with a total return of 19.69% as the FTSE/JSE Platinum Index returned 36.72% after the sell-off caused by the instability at South African mines in the second quarter. The non-mining sectors of the JSE had a decent quarter, with the FTSE/JSE Industrial Index returning a solid 11.29% with dividends reinvested. Relatively high long-term interest rates continued to weigh on the financial sector, though. The FTSE/JSE Financial Index returned 6.86% with dividends reinvested, while within the sector the FTSE/JSE Banks Index returned 11.48% and the total return on the FTSE/JSE Listed Property Index amounted to minus 1.31% for the September quarter.

Resources-oriented funds turned the scales in the third quarter on the rebound of especially the platinum counters after the sell-off caused by the instability at South African mines in the second quarter. The interest-bearing and real estate subcategories were the laggards in the third quarter.

Global funds again dominated the top of the return table for the 12 months to the end of September, while South African precious-metal-related funds populated the bottom. South African Equity Industrial was the best-performing South African subcategory over one and three years with returns of 34.78% and 23.94% per year respectively with dividends and interest reinvested. The South African Equity Industrial subcategory was also the best subcategory overall over five years with 21.90% per year, followed by South African Real Estate General with 17.98% per year and South African Financial with 17.95% with income and dividends reinvested.

Although the returns for the quarter appeared solid in most cases, they masked the significant volatility experienced during the quarter in equity, bond and real estate indices. The value contribution of active managers is clearly explained in the graph below where the Rolling three- month price returns of the money-weighted SA general equity index in excess of the FTSE/JSE All Share Index compared to the rolling three-month price return of the FTSE/JSE All Share Index: (Please note that LS and RS on the graphs refer to Left Scale and Right Scale respectively)

Sources: I-Net Bridge; PlexCrown

It is clear that the active managers, through share selection again acted as a type of hedge fund manager to protect the downside of the unit holders’ wealth. Yes, that is what they are paid for!

Allan Gray managed to wrestle the lead from Coronation as leading domestic collective investment scheme manager out of 16 with an overall rating of 4.528 PlexCrowns in the third quarter. Coronation was a short head behind with 4.499 PlexCrowns while PSG edged out Nedgroup Investments for third place with an overall rating of 4.058 PlexCrowns.

Among the management companies that did not qualify for overall management company ratings, Foord continued to top the management company ratings in the broad South African Equity & Real Estate and South African Multi-asset non-income categories.

FirstGlobal was the top non-management company with its funds administered as third-party funds by a registered management company that met the requirements for an overall rating. The company achieved an overall rating of 3.229 PlexCrowns at the end of September.

Franklin Biotechnology Discovery Fund produced the highest return of 25.89% in terms of SA rand for the third quarter, followed by Franklin European Small-Mid Cap Growth Fund in second place with 21.66% and Orbis SICAV Japan Equity Fund (Euro Class) third with 19.53%.

Orbis SICAV Japan Equity Fund (Euro Class) was also the leading fund over the year to 30 September 2013 with a return of 111.32% in terms of SA rand. Franklin Biotechnology Discovery Fund was runner-up with 85.07% over the year and the best-performing FSB-approved foreign fund for three and five years with 51.45% and 25.54 respectively.

Oasis was the leading foreign collective investment scheme manager out of 15 with an overall offshore rating of 4.750 PlexCrowns, followed by Orbis and Momentum with 4.000 and 3.750PlexCrowns over three and five years respectively.

This Survey was based on data provided by Profile Data and new fund classifications by ASISAthat became effective on 1 January 2013.