SA’s top unit trusts over ten years

Investing in unit trusts is usually a long-term exercise. In general, these are vehicles that try to grow money over many years. 

When assessing their past performance it is therefore best to use at least a seven- or ten-year horizon, which also includes a number of market cycles. This allows you to see how funds have performed through varied market conditions. 

However, even then, one may find distortions because certain market sectors or asset classes performed unusually well over a certain sustained period. In South Africa over the past decade, this is certainly the case.

A list of the top-performing unit trusts over the last decade is dominated by real estate funds because listed property has had such an incredible run. While this asset class certainly still has characteristics that make it an attractive long-term investment, one shouldn’t necessarily presume that it will repeat its recent performance. 

Similarly, industrial sector equity funds have also featured strongly over the past decade because the big multi-national industrial stocks, led by Naspers, have been such strong performers on the JSE. Once again, however, one should be cautious about presuming that this can continue indefinitely, particularly since the market returns we saw in 2016 suggested that we are entering a new cycle .

The table below shows the top 20 funds to the end of December last year:

Source: Morningstar

It is clear that property has been a great place to be invested over the past decade. Eleven of the unit trusts on this list are in the real estate sector.

However, there is still a fair range in their returns. The Absa Property Equity Fund outperformed the Efficient BCI Property Fund by just under 4% per annum, which is a significant difference when you compound it over ten years.

It is also noteworthy that only the top three property funds on this list outperformed the index. The FTSE/JSE Property Index showed an annualised total return of 15.76% over the past ten years.

There is a similar story among the industrial equity funds, where performance also varies quite widely. The difference between being invested in the Coronation Industrial Fund and the Stanlib Industrial Fund is nearly 2.5% per annum. In addition, none of these funds beat the index. The FTSE/JSE Indi 25 showed an annualised total return 16.42% over this period.

The most interesting unit trusts on this list, however, are perhaps the six outside of these two groups of funds that have benefited so much from having market conditions in their favour.

The two Nedgroup Investments funds on this list both stand out as the only unit trusts in their respective classes that make it into the top 20. Both the Nedgroup Investments Financials Fund and Nedgroup Investments Entrepreneur Fund, which is a small-cap portfolio, have consistently been top performers for a number of years.

The Nedgroup Investments Financials Fund has also significantly outperformed against the comparable index. Over the past ten years the FTSE/JSE Fini 15 has shown an annualised total return of 10.83%, which this unit trust has surpassed by more than 3.5% per annum.

The four flexible funds – Centaur, PSG, 36ONE and BlueAlpha – also deserve special mention. Not only did they all outperform all local general equity funds, but they all produced returns of at least 3.5% above the FTSE/JSE All Share Index.

Flexible funds are often overlooked by investors and advisers who perhaps aren’t aware of their benefits, but their long-term performance shows that they deserve consideration. All four of these funds are effectively equity portfolios that are better able to manage risk than general equity funds as they don’t have to remain fully invested in the stock market at all times. When they are unable to find good opportunities they can sit in cash, and that gives investors a much higher degree of protection, ultimately leading to better long-term returns.

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