Fees charged by asset managers are once again in the spotlight as investors globally start to question the value of active management. Certainly, our local unit trust figures suggest that at least half the fund managers are adding no value through active fund management.
In the general equity unit-trust category, the average return for the sector was 16,15% over the last five years (ended December 2009), while their benchmark, the JSE All Share Index, delivered 20,25%. The sector averages for equity growth funds, equity value funds, equity large caps and equity resources were all below their benchmarks, which would suggest that you would be better off buying an index-tracking fund at substantially lower cost.
That said we are talking about the average return for the sector. Some fund managers do outperform their benchmarks and deliver superior returns to their investors; this is just a reminder that not all fund managers are equal.
The key for investors is to select a fund manager that has consistently outperformed their benchmark over the last five and 10 years. This does not mean that they necessarily are the number one fund; in fact, research shows that a top-performing fund in one year will often deliver dismal returns the following year.
What you are looking for is consistency, a fund that manages to retain a top quartile position over a period of time. PlexCrown Fund Ratings is a good starting place to see how your fund is rated.