The domestic general equity fund that has produced the best performance most consistently over three years is an index fund which aims to track or replicate the performance of the All Share index.
Investec's Index fund tops the general equity sector in the latest consistency of performance table found here. This table effectively summarises each fund's performance results for the past 12 quarters, awarding points based on the fund's rank. The fund with the highest score is the sector's most consisent performer.
Although index funds are called passively managed funds, Grant Irvine-Smith, the quantitative portfolio manager at Investec Asset Management, says Investec does not just blindly let a computerised risk model run their index fund. Rather, the fund managers enhance the fund's performance to ensure that it does not under-perform the index after costs (management and transaction fees) and the effects of the fund's manda-tory cash holding have been taken into account.
At least one actively managed fund put its recent under-performance of the All Share index down to managers making the wrong calls on market trends.
For nine quarters until June last year, FTNIB's Prime Select fund was the most consistent performer in the general equity sector, but lately middle-of-the-road returns have ruined its consistent track record.
After being the top-performing general equity fund over three years every quarter in 2000, Prime Select started appearing lower down the performance table in 2001. By the end of last year it had dropped to 24th out of 40 general equity funds.
Prime Select's fall can be attributed to the stronger performance of the rand last year, as the fund is invested to benefit from a weak rand. Just under a quarter of the fund was invested in foreign equities, unit trusts or cash. And another quarter of the fund's portfolio was invested in rand hedge shares.
Reuben Beelders, the chief investment officer at Nedcor Wealth Management which is responsible for the fund, says its performance also suffered as a result of investments made at a time when local shares outperformed those in offshore markets. It was also invested in larger cap shares locally when small and mid-cap shares were delivering better returns.
Beelders says the fund did not change its investment strategy to take advantage of these trends, because they believed that these trends had run their course. At the end of September last year, for example, he says, the rand had strengthened to about R10.55 to the dollar and the houseview was for the currency to end the year at R10.25 to the dollar. In fact the rand ended the year at R8.59 to the dollar.
Recently Prime Select has bought shares in the financial sector, hoping to benefit from strong earnings among banks as a result of the peak in the interest rate cycle, and increased its exposure to gold.
Beelders says the fund is also reducing its exposure to some industrial shares that rely on exports, the prices of which have not yet fully reflected the impact of the stronger rand. Beelders believes that action taken will restore the fund's historic track record.
The consistency table's summary of one-year performance shows that Investec's Index fund has had some stiff competition over this period and may in future be outranked over the three-year period. The Oasis Crescent Equity fund is the most consistent performer over the one-year period, followed hotly by the Allan Gray Equity fund.
Both of these funds have impressive three-year track records as well, but they have not been in existence for the six years necessary in order to show up in the consistency table's three-year results.