The performance of South African unit trusts for the period 1984 to 2003
Date
2004-12
Authors
Brink, Margaretha Engela
Journal Title
Journal ISSN
Volume Title
Publisher
Stellenbosch : Stellenbosch University
Abstract
ENGLISH ABSTRACT: Many fund managers who are supposed to have your best interest at heart have become just as greedy,
have vested interests and their performance has been mediocre. Until they clean up their act, your best bet
is to opt for an index fund, or the type that uses our money to track a stock market index, provided the
initial and ongoing costs are low if you invest in shares.
A great many funds have been run well and conscientiously. However, it’s often not clear to individuals
which ones these are. In the absence of clarity, those index funds that are very low-cost are investorfriendly
by definition and are the best selection for most of those who wish to own equities.
Warren Buffet
Throughout the past twenty years, investment funds have been transforming financial markets. There
has been a tremendous growth in this industry and at the end of 2003 more than USD 13 trillion were
invested in investment funds around the globe. In the United States, 12 percent of all money invested in
mutual funds resides in index mutual funds and investors can choose from 149 index funds. Academics
have researched mutual funds in depth and most are in favour of index-related funds. The reason for this
is that the average US mutual fund that is actively managed does not manage to outperform its
benchmark index.
In South Africa, the scenario is very different. There are currently only nine index unit trusts with a net
asset value of ZAR 1.4 billion. This represents only 60 basis points of all money invested in South African
unit trusts. In this study, a few factors are discussed as possible contributors to this situation, with
exchange-traded funds and enhanced index fund strategies identified as the most significant factors.
This study investigates whether active unit trusts succeed in outperforming their benchmark index. It
provides empirical research showing that All-Share Index have been a better risk-adjusted investment
over the twenty years studied. This may be seen as a reason why investors prefer enhanced strategies
since they provide a premium on the index’s return, and the risk and costs are lower than for active unit
trusts.
Exchange-traded funds have accumulated investments of close to ZAR 6 billion since the launch of the
first Satrix fund, Satrix 40, in 2001. These funds aim at the same return as index unit trusts and have
significant cost advantages over index unit trusts.
AFRIKAANSE OPSOMMING: Many fund managers who are supposed to have your best interest at heart have become just as greedy, have vested interests and their performance has been mediocre. Until they clean up their act, your best bet is to opt for an index fund, or the type that uses our money to track a stock market index, provided the initial and ongoing costs are low if you invest in shares. A great many funds have been run well and conscientiously. However, it’s often not clear to individuals which ones these are. In the absence of clarity, those index funds that are very low-cost are investorfriendly by definition and are the best selection for most of those who wish to own equities. Warren Buffet Beleggingsfondse het tot gevolg gehad dat daar ‘n drastiese verandering in finansiële markte oor die afgelope twintig jaar plaasgevind het. Daar was ‘n aansienlike groei in hierdie industrie en aan die einde van 2003 was daar wêreldwyd meer as USD 13 triljoen in beleggingsfondse belê. In die Verenigde State behoort 12 persent van alle geld wat in effektetrusts belê is aan indeksfondse en beleggers het 149 indeksfondse waaruit gekies kan word. Effektetrusts is al in diepte deur akademici bestudeer en die meeste is ten gunste van indeks-verwante fondse. Die rede hiervoor is dat die gemiddelde effektetrust in die Verenigde State nie dit reg kry om beter as sy indeks maatstaf te presteer nie. In Suid Afrika is die omstandighede heeltemal anders. Daar is huidiglik slegs nege indeksfondse met ‘n netto bate waarde van ZAR 1.4 biljoen. Dit verteenwoordig slegs 60 basis punte van al die geld wat in Suid Afrikaanse effektetrusts belê is. In hierdie studie word daar ‘n paar faktore bespreek wat moontlik bygedra het tot hierdie situasie. Beursverhandelde fondse en ”verbeterde” indeksfondse word geïdentifiseer as die twee vernaamste faktore. Hierdie studie kyk of aktiewe effektetrusts suksesvol was om beter te presteer as hulle maatstaf indeks. Empiriese navorsing word gegee wat wys dat die Algemene Indeks ‘n beter risiko-aangepaste belegging was oor die twintig jaar van die studie. Dit kan gesien word as ‘n rede hoekom beleggers “verbeterings” strategieë verkies wat ‘n premie bied op die indeks se prestasie en beide die risiko en koste is laer as met aktiewe fondse. Beursverhandelde fondse het beleggings ten bedrae van ZAR 6 biljoen opgebou sedert die begin van die eerste Satrix fonds, Satrix 40 in 2001. Hierdie fondse mik vir dieselfde opbrengs as indeks effektetrusts en het groot koste voordele bo indeksfondse.
AFRIKAANSE OPSOMMING: Many fund managers who are supposed to have your best interest at heart have become just as greedy, have vested interests and their performance has been mediocre. Until they clean up their act, your best bet is to opt for an index fund, or the type that uses our money to track a stock market index, provided the initial and ongoing costs are low if you invest in shares. A great many funds have been run well and conscientiously. However, it’s often not clear to individuals which ones these are. In the absence of clarity, those index funds that are very low-cost are investorfriendly by definition and are the best selection for most of those who wish to own equities. Warren Buffet Beleggingsfondse het tot gevolg gehad dat daar ‘n drastiese verandering in finansiële markte oor die afgelope twintig jaar plaasgevind het. Daar was ‘n aansienlike groei in hierdie industrie en aan die einde van 2003 was daar wêreldwyd meer as USD 13 triljoen in beleggingsfondse belê. In die Verenigde State behoort 12 persent van alle geld wat in effektetrusts belê is aan indeksfondse en beleggers het 149 indeksfondse waaruit gekies kan word. Effektetrusts is al in diepte deur akademici bestudeer en die meeste is ten gunste van indeks-verwante fondse. Die rede hiervoor is dat die gemiddelde effektetrust in die Verenigde State nie dit reg kry om beter as sy indeks maatstaf te presteer nie. In Suid Afrika is die omstandighede heeltemal anders. Daar is huidiglik slegs nege indeksfondse met ‘n netto bate waarde van ZAR 1.4 biljoen. Dit verteenwoordig slegs 60 basis punte van al die geld wat in Suid Afrikaanse effektetrusts belê is. In hierdie studie word daar ‘n paar faktore bespreek wat moontlik bygedra het tot hierdie situasie. Beursverhandelde fondse en ”verbeterde” indeksfondse word geïdentifiseer as die twee vernaamste faktore. Hierdie studie kyk of aktiewe effektetrusts suksesvol was om beter te presteer as hulle maatstaf indeks. Empiriese navorsing word gegee wat wys dat die Algemene Indeks ‘n beter risiko-aangepaste belegging was oor die twintig jaar van die studie. Dit kan gesien word as ‘n rede hoekom beleggers “verbeterings” strategieë verkies wat ‘n premie bied op die indeks se prestasie en beide die risiko en koste is laer as met aktiewe fondse. Beursverhandelde fondse het beleggings ten bedrae van ZAR 6 biljoen opgebou sedert die begin van die eerste Satrix fonds, Satrix 40 in 2001. Hierdie fondse mik vir dieselfde opbrengs as indeks effektetrusts en het groot koste voordele bo indeksfondse.
Description
Thesis (M.Comm.)--Stellenbosch University, 2004.
Keywords
Mutual funds -- South Africa, Rate of return, Investment analysis, Dissertations -- Business management, Theses -- Business management