Being invested in the South African market for the past few years has definitely not been for the faint hearted. Returns have been disappointing for the long-term investor and growth assets play an import role in reaching their investment goals. Recent political events, globally and locally, have been placing more pressure on asset returns leaving investors with little performance to get excited about. Comparing the fund flows of the South African unit trust sectors gives one an indication of where investors have been taking their money in these uncertain times.
In June last year equity investors were disappointed, being invested in the large cap listed companies would have delivered next to nothing over a 2-year period. Comparing the Top40 Index performance to the SA Listed Property Index and the All Bond Index, made properties and bonds look like a much better proposition at that time.
Not wanting to lose out on a possible turnaround, investors might have opted for a portfolio with a lower exposure to growth assets and a bit more towards income generating assets. In a diversified portfolio containing these three major asset classes, such as the Medium Equity sector unit trusts, two of the asset classes were still contributing positively at that time.
Looking at the performance over the past year, equities still remained a dragging factor and the property sector lost most of its grounds leaving your local portfolio with only one leg left to stand on. This can be seen in the virtually zero 1-year average performance of the Medium Equity sector unit trusts.
Now, let us look what unit trust investors decided to do with their money one year ago and if this decision has been profitable. The tables below show the South African unit trust sectors that received the most inflows and the most outflows (as a % of the total sector market value) over the past year. The transition from growth assets to interest bearing assets becomes quite clear and the average performance of these sectors, 6 months into the past year, shows a possible reason why the transition was made.
Total Return 6 Months ago
Also, looking at the tables below, the performance of these winning and losing sectors over the past year shows that one could have received a return of 7.1% on average if you stuck to the high-income unit trust sectors as appose to an average loss of 1.7% generated by the more growth orientated unit trusts.
Total Return at 30 September 2018
*Sectors are ranked according to net flows as a % of the total sector market value.
Whether the market is moving back into the 4200 - 4900 range remains an unanswered question but in the meantime most investors can’t afford to have a portfolio that could possibly lose more of its value over the coming years.
One solution that we could offer is to invest a portion of your portfolio in the Sharenet BCI Income Plus Unit Trust. This fund has been consistently outperforming its peer group average within the South African Multi Asset Income sector, having delivered an 8.8% return over the past 1 year and 3 years (annualised). Leaving your saving in a bank account could only become profitable if you have a few R100 000 and willing to deposit the money for a fixed period of time. The Sharenet BCI Income Plus Unit Trust provides the convenience of accessing your money within 24 hours and there is no minimum investment required in order to share in the fund returns.
If you would like to diversify your portfolio with a low risk, income generating component, fill in the form below or alternatively you could visit our website and follow the easy steps.
Joani van Wyk
Joani van Wyk joined the asset management team in January 2017, responsible for quantitative research of equities across all industries. Joani completed her degree in Mathematical Science in 2015, as well as an Honours degree in Financial Risk Management in 2016, both at the University of Stellenbosch. She is currently a CFA candidate.