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PlexCrown Unit Trust Survey: Third Quarter 2014

22 October 2014 PlexCrown

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 September 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.

Top management companies:

Coronation retains top spot, PSG leaps into second place

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. Coronation had the highest CIS management company rating of 4.367 PlexCrowns among ASISA-registered management companies in the September quarter (SEE TABLE 5). Coronation had the second-highest rating behind Community Growth in the broad South African Interest Bearing category with 4.992 PlexCrowns, and the third-highest rating of 4.815 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 seventh-highest weighted average rating of 3.846 PlexCrowns in the broad rand-denominated Global & Worldwide category and the seventh-highest rating of 3.428 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, Coronation Jibar Plus Fund and Coronation Strategic Income 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 (SEE TABLE 1).

Table 1


Coronation’s rated funds Rated category Rating Position Out of
Coronation Global Opportunities Equity [ZAR] Feeder Fund A  Global--Equity--General 4 3rd 20
 Coronation Global Emerging Markets Flexible [ZAR] Fund A  Global--Multi Asset--Flexible 3 8th 15
 Coronation Financial Fund A  South African--Equity--Financial 4 2nd 6
 Coronation Top 20 Fund A  South African--Equity--General 3 41st 84
 Coronation Equity Fund A  South African--Equity--General 4 19th 84
 Coronation Industrial Fund A  South African--Equity--Industrial 5 1st 5
 Coronation Smaller Companies Fund R  South African--Equity--Mid and Small Cap 3 4th 6
 Coronation Resources Fund A  South African--Equity--Resource 4 2nd 6
 Coronation Jibar Plus Fund A  South African--Interest Bearing--Short Term 5 1st 16
 Coronation Bond Fund R  South African--Interest Bearing--Variable Term 4 4th 17
 Coronation Balanced Plus Fund A  South African--Multi Asset--High Equity 5 6th 63
 Coronation Strategic Income Fund A  South African--Multi Asset--Income 5 1st 39
 Coronation Balanced Defensive Fund A  South African--Multi Asset--Low Equity 5 3rd 64
 Coronation Capital Plus Fund A  South African--Multi Asset--Medium Equity 4 11th 41
 Coronation Property Equity Fund A  South African--Real Estate--General 5 2nd 18
 Coronation Market Plus Fund A  Worldwide--Multi Asset--Flexible 4 4th 18
 Coronation Optimum Growth Fund A  Worldwide--Multi Asset--Flexible 4 3rd 18
         


On a straight performance basis Coronation Capital Plus, 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 led its subcategory over five years.

PSG had the second-highest CIS management company rating of 3.969 PlexCrowns among ASISA-registered management companies in the third quarter. PSG was runner-up to Foord in the broad South African Equity & Real Estate category with a weighted average rating of 4.367 PlexCrowns. PSG was ranked sixth in the broad South African Multi Asset Non-income category with 4.133 PlexCrowns and seventh in the broad rand-denominated South African Interest Bearing & Income category. Nine of PSG’s 11 rated funds had above-average ratings of 4 or more PlexCrowns while two funds achieved 5 PlexCrowns (SEE TABLE 2).

Table 2

PSG’s rated funds Rated category Rating Position Out of
 PSG Multi-Management Foreign Flexible Fund of Funds A  Global--Multi Asset--Flexible 3 9th 15
 PSG Multi-Management Equity Fund of Funds A  South African--Equity--General 4 24th 84
 PSG Wealth Creator Fund of Funds D  South African--Equity--General 4 18th 84
 PSG Equity Fund A  South African--Equity--General 5 3rd 84
 PSG Flexible Fund A  South African--Multi Asset--Flexible 4 6th 53
 PSG Wealth Moderate Fund of Funds D  South African--Multi Asset--High Equity 4 11th 63
 PSG Balanced Fund A  South African--Multi Asset--High Equity 5 3rd 63
 PSG Multi-Management Income Fund of Funds A  South African--Multi Asset--Income 3 22nd 39
 PSG Diversified Income Fund A  South African--Multi Asset--Income 4 11th 39
 PSG Wealth Income Fund of Funds D  South African--Multi Asset--Income 4 5th 39
 PSG Wealth Preserver Fund of Funds D  South African--Multi Asset--Low Equity 4 11th 64

 

Allan Gray had the third-highest CIS management company rating of 3.898 PlexCrowns among ASISA-registered management companies in the September 2014 quarter. The company shared the third-highest rating of 4.000 PlexCrowns in the broad South African Equity & Real Estate category and shared fourth spots in the broad South African Interest Bearing and Global & Worldwide categories with 4.000 PlexCrowns. Allan Gray was ranked tenth in the broad South African Multi Asset Non-income category with 3.708 PlexCrowns. Four of Allan Gray’s six rated funds had above-average ratings of 4 or more PlexCrowns (SEE TABLE 3).

Table 3

Allan Gray’s rated funds Rated category Rating Position Out of
 Allan Gray-Orbis Global Equity Feeder Fund A  Global--Equity--General 4 5th 20
 Allan Gray Equity Fund A  South African--Equity--General 4 20th 84
 Allan Gray Bond Fund A  South African--Interest Bearing--Variable Term 4 3rd 17
 Allan Gray Balanced Fund A  South African--Multi Asset--High Equity 4 7th 63
 Allan Gray Optimal Fund A  South African--Multi Asset--Low Equity 1 61st 64
 Allan Gray Stable Fund A  South African--Multi Asset--Low Equity 3 37th 64

Oasis was the leading FCIS management company in the third quarter with an overall rating of 4.500 PlexCrowns (SEE TABLE 6). Oasis had the third-highest rating in the broad Offshore Equity & Real Estate category. All three of Oasis’ rated funds achieved above-average ratings of four or more PlexCrowns. Oasis Crescent Global Property Equity Fund (Ireland) was the leading fund in the Global Real Estate category (SEE TABLE 4).

Table 4

Oasis’ rated funds Rated category Rating Position Out of
Oasis Crescent Global Property Equity Fund (Ireland) Global--Real Estate--General 5 1st 5
Oasis Crescent Global Equity Fund (Ireland) Global--Equity--General 4 9th 34
Oasis Global Equity Fund (Ireland) Global--Equity--General 4 11th 34

Table 5: Top 8 ASISA - registered management companies as at 30 September 2014

Rand-denominated Overall PlexCrowns Rank
Coronation 4.367 1
PSG 3.969 2
Allan Gray 3.898 3
Nedgroup Investments 3.797 4
Prudential 3.596 5
Absa 3.581 6
Old Mutual 3.197 7
Investment Solutions 3.163 8

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 6: Top 3 offshore FCIS management companies as at 30 September 2014

Overall PlexCrowns Rank
Oasis 4.5 1
Lloyds 4.222 2
Investec 3.875 3

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:

  Weights applied where an FCIS management company has funds in
Equity & Real Estate  only Asset Allocation only Equity & Real Estate and Asset Allocation Equity & Real Estate and Fixed Interest Asset Allocation and Fixed Interest All three major categories
Total Equity & Real Estate 100%   50% 50%   33.33%
Total Fixed Interest       50% 50% 33.33%
Total Asset Allocation   100% 50%   50% 33.33%

 

The investment markets in the third quarter of 2014

Global equity markets reel in the face of strong headwinds

The rally in global equity markets became unstuck in the third quarter of 2014 as strong headwinds caused investors to cut their appetite for risk. The Crimean War, protests in Hong Kong, weak economic data in the Eurozone and the ISIS onslaught in the Middle East cast doubt in investors’ minds about the already tepid global economic recovery. The so-called “investor fear gauge”, the Chicago Board Options Exchange (CBOE) Volatility Index (“VIX”), increased to levels reminiscent of the beginning of past market anxiety or crisis.

The headwinds facing investors are amplified by the elevated levels of equity market valuations. The cyclically adjusted price-earnings ratios of developed markets as measured by the MSCI World (US$) Index and emerging markets as measured by the FTSE/JSE All Share Index receded significantly from the tops of their trading ranges of the past five years. However, the cyclically adjusted price-earnings ratios of the US market as measured by the S&P Composite Index continued to find itself in the trading range of the previous extended bull market from 2004 to 2007.

The MSCI World Index lost 2.58% in the quarter in US dollars while the MSCI Emerging Markets Index fell by 4.33%. The FTSE/JSE All Share Index (AlSI) fared worse with a fall of 8.73% in US dollars as commodity prices sagged. The MSCI World Index return in US dollars over one year with dividends reinvested decelerated to 12.80% from 24.71% in the June quarter. The MSCI Emerging Markets Index and AlSI returned 4.66% and 2.61% respectively in US dollars over 12 months with dividends reinvested. However, weaker currencies against the US dollar shielded emerging-market locals from capital losses in local currency terms. The PlexCrown implied emerging-market currency index that includes the rand ended the quarter 4.03% lower and fell by 3.66% over the past 12 months. In local currency terms the MSCI Emerging Markets Index returned 0.70% and 8.64% over three and 12 months respectively. The rand fared worse than the emerging-market currency index and ended the quarter 5.75% weaker against the US dollar. Over the past 12 months the rand fell by 11.12% against the US dollar.

In rands the JSE, as measured by the AlSI, returned minus 2.13% in the third quarter with dividends reinvested and 15.44% on an investment in the AlSI a year ago. The FTSE/JSE Listed Property Index was the best-performing equity sector during the quarter, returning 7.22% with dividends reinvested. Capital values in the financial and industrial sectors of the JSE were reasonably well protected as they delivered total returns of 0.40%% and minus 0.70% respectively with dividends reinvested. The resources sector bore the brunt of investors’ risk aversion and returned minus 7.14% with dividends reinvested as the prices of precious metal stocks plummeted. The FTSE/JSE Financial Index was the leading major JSE sector over the past 12 months with a return of 22.77% with dividends reinvested, followed by the Industrial Index with 16.47%.

Global bond yields eased further during the third quarter as geopolitical tensions intensified. The yield to maturity on the JPMorgan Global Bond Index declined by 10 basis points to 1.76%, but the increase in capital values was insufficient to set-off the rise in the US dollar, resulting in the bond index returning minus 2.50% in US dollars with interest reinvested. The yield to maturity on the JSE ASSA All Bond Index ended the quarter at 8.496%, virtually unchanged from the previous quarter, resulting in a total return of 2.21% with interest reinvested for the quarter and 5.79% for the 12 months to end September 2014.

Domestic (rand-denominated) fund returns in the third quarter of 2014

South African Real Estate funds topped the charts in the third quarter of 2014 with an average return of 7.11% with income distributions reinvested. Prescient China Balanced Feeder Fund was the best-performing fund in the second quarter with a total return of 22.61% with income distributions reinvested, followed by Prescient Africa Equity Fund and Absa Property Equity Fund with 14.38% and 13.80% respectively.

Global funds dominated the top of the return tables for the 12 months to the end of September. Sanlam India Opportunity Feeder Fund was the best-performing fund over one year with a total return of 53.73%, income distributions reinvested. Old Mutual Global Equity Fund topped the charts over three years with a return of 35.78% per year, income distributions reinvested.

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:

Top 10%       = 5 PlexCrowns
Next 22.5%   = 4 PlexCrowns
Next 35%      = 3 PlexCrowns
Next 22.5%   = 2 PlexCrowns
Bottom 10%  = 1 PlexCrown

 

 

 

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