It will be more difficult for unit trusts to earn good returns for their investors in the year ahead than it was in the year past, and you need to be invested with a management company that has a track record of providing consistent returns.
The Plexus survey of unit trust management companies ranks companies based on the performance of most of their unit trust funds over various periods to March 31, 2004.
Prieur du Plessis, the managing director of Plexus Research & Surveys, which produces the survey every quarter, says choosing the right company becomes particularly important when returns have been good over the shorter term.
Most unit trusts, especially domestic equity funds, have produced good results over the past year. A year ago, share prices were very low, but the share market has recovered to what is regarded as a fair level.
As a result, it was difficult for any fund manager with local equities in his or her portfolio not to earn good returns over the past year. But as shares are no longer cheap, fund managers will have to use their skills to earn good returns.
"Good shorter-term returns should not encourage investors to take greater risks, but rather to look to trusted and knowledgeable management companies to take care of things properly in the long run," Du Plessis says.
The Plexus survey shows that Investec is again the overall leader. The company was also the overall leader at the end of the fourth quarter of 2003. As a result, it was awarded the Personal Finance/Association of Collective Investments Raging Bull Award for the Unit Trust Company of the Year for 2003.
A number of top-performing funds have contributed to Investec's overall position. The company is also ranked first over the three-year period. Over this period, the funds which contributed to Investec out-performing its peers, are: the Investec Equity Fund (a domestic general equity fund), the Investec Gilt Fund (a fixed interest bond fund), the Investec Growth Fund (a domestic equity growth fund), the Investec Opportunity Fund (an asset allocation flexible fund), the Investec Value Fund (a domestic equity value fund), the Investec Worldwide Fund (a foreign general equity fund), the Investec Emerging Companies Fund (a smaller companies fund), the Investec High Income Fund (a fixed interest income fund) and the Investec Managed Fund (a prudential medium equity fund).
Every qualifying unit trust in the Plexus Survey is ranked in one of five quintiles over one, three and five years. Those companies that can boast the most consistently well-performing unit trusts over all periods emerge as the winners.
Du Plessis says the top performers in the survey are examples of how sticking to a well thought-through plan - regardless of market conditions - delivers the best results.
Investment reward lies not in an ability to crystal-gaze the markets, but in the tried and tested rule of patience and sticking to a good investment plan, he says.
Although Investec is the overall winner, Du Plessis says the company's lead is a result of a slim 0.001-point difference between its score and that of its rival, Coronation, which won the Raging Bull Company of the Year award in 2002. Coronation has also claimed the top position over the five-year period to March 31, 2004, where Investec is its runner up.
Du Plessis says the marginal difference in their rankings shows that there is little to choose between the two companies.
Coronation's top-performing funds were: the Coronation Bond Fund (a fixed interest bond fund), the Coronation Financial Fund (a domestic equity financial fund), the Coronation International Active Fund of Funds (a foreign general equity fund) and the Optimum Growth Fund (a worldwide flexible fund).
RMB features in one of the top five positions in all the ranking periods, and is placed third overall.
Over the three-year period RMB showed the greatest improvement, moving from eighth to fourth position. The RMB Balanced Fund (a prudential medium equity fund) moved up two quintiles and three other funds each improved by one quintile.
Sage, up from 10th to seventh position overall, showed the greatest improvement in the overall rankings over the past quarter, due to an improvement in the performance of its funds over the five-year period.
In the rankings over five years, Sage moved up from 10th to seventh position. Sage Global (a foreign equity varied specialist fund) and Sage Performance (a worldwide asset allocation flexible fund) were included in the five-year period for the first time and were placed in the first and third quintiles respectively.
Nedcor, down from fifth to ninth place overall, showed the greatest decline in performance thanks to poorer results over both the three- and five-year periods.
Over the five-year period, Nedcor slipped from sixth to ninth place. The Nedbank Mining and Resources Fund (a domestic equity resources fund) dropped by two quintiles, and the Nedbank International Equity Fund of Funds (a foreign general equity fund of funds) was included for the first time in the five-year period and placed in the fifth quintile.
Over the three-year period, the Nedbank Entrepreneur Fund (a domestic equity smaller companies fund) and the Nedbank International Balanced Fund of Funds (a foreign asset allocation flexible fund of funds) each deteriorated by two quintiles. Only one Nedbank fund managed to improve its position by one quintile.
The consolidation of Liberty and Standard Bank's funds under Stanlib has been completed and these two management companies therefore no longer appear separately in the rankings. Stanlib was fourth in the overall rankings.
In the overall rankings the management company at the bottom of the ladder is Sanlam.
Great shuffles took place in the rankings over one year, Du Plessis says, with Prudential emerging as the winner for this period. Three of the management company's eight funds were placed in the first quintile.
The top-performing Prudential funds were the Prudential Global High Yield Bond Fund of Funds (a foreign bond fund), the Prudential Money Market Fund and the Prudential Optimiser fund (a domestic equity general fund).
Old Mutual was the runner-up over one year and also the management company that improved the most over this period, Du Plessis says. It moved up from ninth to second position.
The Old Mutual Dynamic Floor Fund (a targeted absolute return asset allocation fund) improved its position by three quintiles, while the Old Mutual Balanced (a prudential medium equity fund) and Old Mutual Value (a domestic equity fund) funds were each placed in the first quintile.