The unit trust quarterly results make for interesting reading and it is worth highlighting a couple of figures that jump off the page.
According to the latest unit-trust figures provided by Profile Media, the top performing sector over five years has been the worst performing sector over the last six months.
The resources and basic industries sector, which delivered 18,99% per annum over five years, has crashed out of the party and over the last six months has lost investors 8,35%.
By comparison financial sector unit trusts on average delivered 4,26% over the last six months and were the top performers over one year delivering 28,85%, yet over five years the sector doesn’t feature.
And then there is the small cap sector which is the Great Dipper of rollercoaster rides. Over one year the small cap sector came in second place, delivering 27,21%, and has continued to deliver over the last six months, up 4,5%. Yet this sector was one of the worst performing sectors over three years — with investors losing on average 7,30% per year!
This all simply tells us that markets work in cycles. Resources outperform at different times to financials and you don’t want to be near small companies in a market crash, but boy, do you want them in a recovery.
The fund managers who are able to use these cycles to enhance performance are the once that consistently deliver above average returns. Bear in mind however that these managers are the least likely to top the returns-table because they do not want to catch the peak of the sector for fear of being dumped when the wave crashes. But as investors we want the steady returns, not the heady ones.
So where does this leave offshore equities; the promise that has as yet failed to deliver? Over five years, three years and one year, foreign equities have been among the worst performing sectors and have remained there over the last three months.
Fund managers keep telling us foreign equities are undervalued compared to SA equities and that now is the time to invest. Allan Gray has increased its offshore exposure to the maximum and is a big believer in the offshore story, yet its Orbis Global Equity Feeder Fund was one of the worst performing funds in June.
Given the cyclical nature of sectors can one afford not to have offshore equities in your portfolio or will it just continue to be the drag on performance it has been for five years? If you bet against offshore you will be betting against one of our most successful fund management teams.
Property appears to be one sector you have to hold in your portfolio as it has proven the most consistent. Over five years it is the second best performing sector, over one year it is the fourth best and over six months it is the best performing sector. And not once has it shown up in the worst performing category.
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