South African investors have a choice of two gold unit trust funds: Old Mutual Gold and Standard Bank Gold.
Both have about R100 million in assets under management, both invest in the same market and have the same degree of volatility.
That is where the similarity ends.
When it comes to investment returns the discrepancy between these two is so enormous that you have to question the investment strategy of the one fund manager relative to the other.
If the differences were slight, you could be more understanding. However, look at the following statistics and make up your own mind.
Over the past six months the Old Mutual fund has returned 48,13 percent to its investors, Standard Bank 11,75 percent. Over a one-year period the return for the Old Mutual fund was 2,05 percent while Standard returned minus 25 percent. Over three years Old Mutual grew by 24,87 percent while Standard lost 11,42 percent and over five years Old Mutual delivered a return of 45 percent while Standard Bank lost 15 percent of your money.
In a two-horse race such as this, it is very difficult for a fund manager to hide mediocre performance. Am I being unfair to Standard Bank? I don't think so. Let's compare the returns of Standard Gold to the gold index, a more objective and passive criteria.
According to the latest survey by Professor Hugo Lambrecht from the University of Pretoria, Standard Gold has been under-performing the Johannesburg Stock Exchange All Gold index over one, two and three years. It barely manages to beat the index over five years and ten years, while over seven years the index beats Standard Gold's returns once again.
Instead of questioning whether I'm being unfair to Standard Bank, I would rather say that I am exercising the role of the press as a watchdog for the investing public.
Standard Bank and its advisers won't point out these discrepancies to potential and current investors.
One possible reason for the great variance in performance is the different investment styles adopted by the two fund managers. Old Mutual adopts an aggressive, fully-investing style while Standard tends to time the market by means of increasing or decreasing fund liquidity.
But the facts speak for themselves. Gold and gold shares have not been a good investment for many years now and, in fact, would have consistently lost you money had you stayed invested over any period of time.
However, had you remained committed to your belief that gold and the gold price will one day again regain its former glory as a haven of safety in turbulent times, then you should choose your funds carefully.
Should you be switching your gold exposure from Standard Bank to Old Mutual? Based on the past performance which of course is no guarantee of future performance the answer is a resounding yes, especially if you have your funds in a linked-portfolio.
No doubt, the fund managers at Standard Bank are cringing over how their only opposition is beating them in the performance stakes. This could be the time for them to reposition their funds and fund managers like Old Mutual did with its under-performing Investors Fund a year ago in order to boost their performance.
But based on the returns over the past few years you should seriously question whether Standard Bank is adding any value when it comes to their Gold Fund.