2018 was a year that started with a huge amount of positive sentiment. In fact, consumer confidence in the South African economy rose faster than at any prior point over the last 30 years. This was mainly driven by the massive political shift at the ANC Elective Conference in December 2017. Many of us in the investment industry believed that this would translate in strong investment performance across all investment types.
The year didn’t end as well as it started, the confidence at the start of the year had waned and by the end of the year South African equity market performance was negative. Rising global trade tensions, the performance of the US economy and of course, South Africa’s own missteps are to blame. You can read more about the political and economic backdrop here to the markets in our quarterly update here.
Looking back to 2017, all investment returns were positive over the year. In 2018 South African Equities and Property were negative performers. SA listed property had a particularly difficult year as early in the year there were investor concerns over accounting irregularities and undisclosed cross shareholdings. In addition to this, poor economic growth and the extreme financial pressure on consumers has weighed heavily on the share price performance of property companies in 2018, as it has for the broader equity market. The only equity sector that saw positive growth over 2018 was resources, mainly as a result of the weakness of the rand. Many of the products of resources companies are exported and priced in US Dollars, which when translated back to rands means higher earnings, and higher share price growth.
Funnily enough, even global equities had a difficult 2018, and individuals who moved money offshore and invested in US equities would have seen negative returns in dollars (-4.4%). It is only the weakness of the rand that has meant that investors who went offshore, and priced then investments in rands were happy. As an indication the rand weakened by nearly 14% against the US Dollar over 2018. In 2017 the reverse was true, and the rand strengthened against the US dollar by over 10%.
Performance selected of investments over the year to 2017 and 2018.
|
|
2018 |
2017 |
|
South African Equities |
-8.5% |
21.0% |
|
US Equities (in Rands) |
11.1% |
10.0% |
|
South African Bonds |
7.3% |
10.2% |
|
South African Property |
-19.1% |
12.3% |
|
Cash |
7.3% |
7.5% |
|
USD / ZAR |
-13.9% |
10.5% |
Source: Thomson Reuters, Datastream. Performance is in rands, and includes the contribution from dividends. This is historical performance information and does not include any estimates of cost.
Take a look below at the performance of the funds on the OUTvest platform over the last year. The value of diversification of diversification is clear when you compare the performance of SA Equities with the OUTaggressive Fund, both have nearly all of their assets in listed equities, but the key difference is the diversification of investments in the OUTaggressive Fund across different listed equity types and currencies.
In addition to trying to understand what has driven fund performance, we also compare the performance of the funds relative to their peers in the investment industry. This analysis measures the performance of our funds, net of the fund fees, against relevant peers with similar investment objectives and exposures. We are comfortable with level of outperformance against our peers.
Performance of the funds on the OUTvest platform
|
Fund |
Growth over 1 year to 31 December 2018 |
Percentage of peer group outperformed |
ASISA Peer Group |
|
CoreShares OUTaggressive Index Fund |
-3.13% |
91% |
SA Equity General |
|
CoreShares OUTmoderate Index Fund |
-2.94% |
65% |
SA Multi-Asset High Equity |
|
CoreShares OUTstable Index Fund |
0.28% |
85% |
SA Multi-Asset Medium Equity |
|
CoreShares OUTcautious Index Fund |
1.83% |
61% |
SA Multi-Asset Low Equity |
|
Granate SCI Money Market Fund |
7.53% |
67% |
SA Interest Bearing |
Source: Morningstar. Performance is net of fees, distributions reinvested. Past performance is not indicative of future performances. For the CoreShares OUTaggressive Index Fund we have used the SA Equity General Peer group rather than the World Equity General Peer group for this comparison as the Fund as a high allocation to South African investments.
Lastly, it’s always worth remembering that these figures do not represent the performance of your individual portfolio. The funny thing about investing is that each individuals’ investment performance is different, even in the same unit trust / Exchange Traded Fund. The reason is that everyone invests a different amount of money at different times. These differences have a huge impact on your individual performance and means it’s actually difficult to compare your performance with another individual or with a factsheet.
Would really like to hear from you with any comments that you have.
Sincerely
Grant Locke
Head of OUTvest
0860 688 837