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    Seed Weekly - Fund Management Industry Update

    2016 was a challenging year for investors as macroeconomic issues rather than fundamentals, proved to be the key market drivers. Politics in particular, played a key role in markets both locally and globally with key issues around Brexit, the US election and domestic politics.

    The challenges within the economy and markets however did not deter local fund managers from launching new products. According to data from Morningstar Direct, 177 new unit trust funds were launched in 2016, with 22 management companies responsible for the launches. As at 31 January 2017, Assets under Management within these funds totalled R37 billion, 85% of which is attributed to only 6 of the management companies. Approximately 68% of the new funds are co-named portfolios.

    Figure 1: New Funds launched in 2016 per Association for Savings and Investment South Africa (ASISA) category

    Source: Morningstar Direct (3 February 2017)

    The majority of the new funds, both in count and assets are locally focussed as illustrated in Figure 1. The Assets under Management of these South African focused funds total R32 billion and the total number of funds is 130. Unsurprisingly, the bulk of the assets are in the ASISA Multi-Asset categories which have seen good growth in recent years. The South African General Equity category also saw significant changes with 25 funds launched with assets of almost R8 billion by the end of January 2017.

    Although there was a significant number of new funds, only a relatively smaller number of funds were terminated. Analysis of Morningstar data indicates that approximately 24 funds were terminated. These funds held a combined R4.1 billion in assets at the beginning of 2016. A total of 91 fund classes were liquidated over the year. Furthermore, 9 funds were merged with other funds thereby ceasing to exist in their original form. All in all, 33 fund classes were merged and incorporated into other funds.

    The above statistics show that the industry continues to grow and this makes choosing funds for investors even more complicated. It remains important for investors that funds actually deliver performance in line with their investment targets. Absolute performance provides a quick reference point for investors to check if investment objectives are being met. The table below summarises the best and worst performing funds in popular ASISA categories.

    Table 1: Fund Performance (% Return) as at 31 January 2016

    Source: Morningstar Direct (6 February 2017)

    The dispersion in performance between the best and worst performing funds over the last year is quite large. Moreover, some of the winners over the last year were the losers in the last few years with the opposite also true for some of the losers. The dispersion and cycles of performance highlights some of the complexities investors face in choosing appropriate funds to meet their investment objective especially in this growing industry.

    At Seed, our process helps us to navigate the fund choice complexities for our clients. We carry out extensive fund and manager research using a combination of industry and proprietary analytical tools, which we couple with our extensive manager experience. With a long-term philosophy, opportunity seeking and risk management mind-set, we are well equipped to assist our clients in meeting their investment targets over the long run.

    Kind regards,

    Tawanda Mushore

    Tel +27 21 914 4966
    Fax +27 21 914 4912
    Email info@seedinvestments.co.za

    Please click here to view our disclaimer. For more information please visit our website.

    Permalink2017-02-09, 10:58:26, by Mike Email , Leave a comment
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