South Africa’s Best Unit Trusts

unit-trustsMost responsible brokers and financial advisors recommend investing over the long term. Unlike day-trading and short-term investments which often see investors losing money as they chase the ‘next big thing’ on the stock market, long term investment allows your portfolio to grow at a stable rate over the years and decades, while guarding your investments against short-term fluctuations in the markets.

Unit Trusts – A Balanced Approach

If you are cautious about diving in at the deep end of the stock market, which has been volatile in recent years, a unit trust is a great initial investment to make. By investing in a managed fund, which is optimised on a regular basis by experienced fund managers, you are likely to make a higher return over the long term. As the markets experience their ups and downs, a seasoned fund manager will adjust the fund’s holdings to make the most out of bull markets and minimise the losses that a bear market can bring.

Ranking SA’s Unit Trusts

Moneyweb recently released the results of a survey which ranks South Africa’s unit trusts in order of highest returns. Comparing unit trusts over the 10 year period from 2001 to 2011, the survey identifies the trusts which have managed to move with the times and have adapted to the recent turbulence in financial markets.

At the top of the list, with a 10 year return of 824% is Momentum’s Small/Mid-Cap A fund, which averaged a 24.9% annual return, or 19.01% after inflation – a real winner.

The top ten South African unit trusts include well-known funds such as Allan Gray’s Equity A fund, Coronation’s Industrial fund, the Nedbank Entrepreneur fund, and Old Mutual’s Industrial fund.

At the bottom of the list was Sanlam’s pan-Europe fund, which lost 31.69% over the ten year period. The ABSA International fund and Old Mutual Global Technology fund were also among the poorer performers.

The results of the survey point to one major fact: the best performing funds hold domestic equities with a large focus on smaller businesses, while the worst performers were exposed to foreign equities, particularly in Europe, which have been hit by the financial crisis and Eurozone crisis over the past decade. These results are great news for South African business, and should give investors confidence in the local market. For the full report, click here.

2 thoughts on “South Africa’s Best Unit Trusts

    • Dear Ephraim,
      As I understand your observation, you hope to find a Moderate Unit Trust that will return at least 20% per annum over the following three years.

      A unit trust is made up of investments in at least 20 companies. To generate an average return of at least 20%, it has to generate an average of around 22% before costs. So, if they miss the boat on three companies, the other companies must have a higher return to make up.

      It is better to express unit trust returns in terms of inflation. So, a unit trust which aims at an inflation plus 3% return (a moderate risk fund) could return 9% when inflation is 6% and could return 20% when inflation runs at 17% per annum.

      Since our inflation is at around 6% I would say that it is unlikely that a moderate unit trust fund will perform at 20% per annum per year over three years.

      When, as now we are in recovery, a higher return than normal could be expected, but what you want to achieve is not likely.

      I would expect that kind of return for single shares, but then you are no longer in the territory of Moderate or Medium risk.

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