A yardstick to measure excellence

The beginning of the year is always nervous as it is a time when people are counting their pennies and taking stock, making sure that their investments are performing as promised.

A major focus in February was on Parliament where Finance Minister Pravin Gordhan presented the 2017 budget. However, come rain or shine, a good budget or a bad budget, the sun will rise on 24 February and life will have to carry on.

Educated decisions

In times like this, the public looks for assurances that the companies they put their faith in are worth the fees they are asking. Hot off the heels of the Raging Bull Awards, Morningstar recently announced the finalists for its own awards.

The annual Morningstar South Africa Fund Awards recognise funds and fund houses that added the most value – according to the company – for investors within the context of their relevant peer group in 2016 and over longer time periods.

Morningstar selects the finalists using a quantitative methodology with a qualitative overlay that considers the one, three, and five year performance history of all eligible funds, and adjusts returns for risk using Morningstar Risk, a measure that imposes a higher penalty for downside variation in a fund’s return than it does for upside volatility.

The 2017 roll of honor

In a release to the media, Tal Nieburg – Managing Director for Morningstar South Africa – said that he is excited about the performance of the companies throughout the year. “Each of the finalists in the Morningstar South Africa Fund Awards has surpassed their peers, and have been selected for the ability to deliver strong returns after adjusting for risk, demonstrating potential for sustained returns in the long-term.”

He added that the Morningstar South Africa Fund Awards offer due recognition to the highest-performing funds (according to Morning Star) and fund houses that demonstrated excellence over the course of the previous year. “We look forward to congratulating all of the finalists and winners at our presentation event in March,” he said.

The finalists for the awards are:

The other side of the coin

This information is great and it provides a good yardstick that advisers and clients can use when selecting a fund that they will use to grow their wealth. It is also a good way for companies who run these funds to validate the fees that they are charging clients.

While there is a place for active investment, and awards such as the Morningstar South Africa Fund Awards do good work in highlighting excellence in this industry. Those looking at the awards must bear in mind that there is a significant focus on active investments in them, and not every client in the country can afford the fees active fund managers ask.

Perhaps there needs to be a focus on passive investments and platforms whereby the performance of companies operating in this area are highlighted.

There is also the question of financial inclusion; more work needs to be done on highlighting the options that companies have for lower income earning individuals. 

Editor’s Thoughts:
The Morningstar South Africa Fund Awards provides an insight into a world the public admittedly knows very little about. We wish the finalists luck and it will be nice to see how they grow following receiving the awards. Let’s use these awards as an example of how the efforts of other sectors desperately need to be highlighted.  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.