It was nostalgic looking at the list of funds which have performed best over the past six months. Many were the same funds that performed best in 1997 and the first half of 1998.
For example, the top performer over the past six months — which is a statistically meaningless period — is the Coronation Financial Fund. This fund was first run by the late Hugh Broadhurst and, for a short time, by Kokkie Kooyman, who acquired cult status at the comparable fund at Old Mutual. The fund had a 27.3% return over the six months to September 30.
Coronation Financial has been a prime beneficiary of the repricing of South Africa Inc shares after the government of national unity was formed. About 40% of the fund is in two shares, FirstRand and Standard Bank — both well-run, low-risk, primarily South Africa Inc businesses.
Second, on 26.4%, was the Ninety One Emerging Companies Fund. This is déjà vu all over again, as the great Yogi Berra would have said. This fund became the largest fund in South Africa in the mid-1990s, overtaking the stalwart funds of the day, Old Mutual Investors’ and Syfrets Growth.
Fund manager Rhett Hammond was even compared in the press to the legendary Peter Lynch, from Fidelity, given his stockpicking ability.
These days investors looking for a financials building block would generally opt for an index fund. There isn’t much value active managers can add in the long term to such a concentrated sector. And in fact the fourth best performer was the Satrix FINI exchange traded fund, with a 24% return.
In spite of the proliferation of unit trusts — there are close to 2,000, according to the Association for Savings & Investment South Africa — there is only one fund in the half-year top 10 not run by the major houses. This is the clunkily named Perspective Executive Equity Prescient Fund. But it has a solid pedigree, because it is run by Daniel Malan, previously chief investment officer of RECM.
There is hardly any demand for specialist sectors such as financials and small caps — even discretionary fund managers, who advise brokers on their model portfolios (what used to be called wrap funds), rarely use them in their models. They might be regretting that now, as South Africa Inc shares rebound.
I have long since stopped looking at the short-term performance of unit trusts. But 30 years ago, when I first covered the industry, I took a lot of notice of one-year, six-month and even three-month performance.
The selling point of unit trusts was that their performance was transparent, unlike life insurance endowment policies.
They were also perceived to be better performers because they were run by young and energetic portfolio managers, including Chris Logan at BOE and Gail Boon (later Daniel) at Metboard/Investec.
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