Active Vs Passive Investing in South Africa

FxJalarupa

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Feb 23, 2016
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#61
Mr FX has a good point that multi asset is one of the best, I agree, unfortunately there are no multi asset ETF's. I'm a fan of the true Flexible UT's, especially with things as they are in this country.
I just feel one cannot compare them to ETF's, as they operate completely different.
Sygnia and 10x have Index UT's that are close, but they more to meet Reg 28 requirements, so are limited.
Exactly... But you don't need to have a comparison unless you are a purest... I'm saying that a rational investor has a choice... cheap and limited... or expensive and unlimited... AND as long as the Expensive outperform the cheap then who cares how many Jon Biccards or Neville Chesters there are in the world... the ONLY thing that matters in active management is the ability for tactical asset allocation...

https://blogs.cfainstitute.org/investor/2016/03/28/the-importance-of-multi-asset-investing/

This chaps makes a very good point on this exact topic...
 

supersunbird

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#62
Only one quarter of unit trust investors get what they pay for:
http://www.moneyweb.co.za/investing/one-quarter-unit-trust-investors-get-pay/

For the year to the end of December 2015, 50.6% of local equity funds produced returns below the S&P South Africa Domestic Shareholder Weighted (DSW) Index. Over five years, however, 74.6% of active equity funds fail to beat the benchmark
In the US, 79.0% of active managers failed to beat the S&P Global 1200 over five years, but in South Africa, the number is 96.43%. In other words only 3.57% of South African-registered global equity funds beat the index for the five years to the end of December. In a universe of 31, that is only a single fund.
 

FxJalarupa

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169
#63
Am I being misinterpreted when I say the words multi asset?

Do you guys actually understand what this means?

A multi asset fund is not a pure equity solution...
 

supersunbird

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#64
Am I being misinterpreted when I say the words multi asset?

Do you guys actually understand what this means?

A multi asset fund is not a pure equity solution...
Yes, and having a portfolio of multiple asset index funds is a multi asset portfolio :)

Questions for FxJalarupa:
1. Is all your own money in multi asset funds?
2. What will be the top 5 multi asset funds (order doesn't matter) as on 28 Feb 2017 over a 1 year and a 5 year period?
3. Did you have Legos as a kid?
 

Hendrix

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#65
hahaha, I think we all have our panties in a twist...

Whilst its true that the majority of Local Pure Equity Funds get owned by the index they try to beat, this is not what FxJalarupa is saying, I think he is saying there is a high likelihood of Flexible Multi Asset Funds (not Reg28 funds) beating the Top40 for instance, as they have the option of offshore exposure whereas a local ETF doesn't. In this case active management makes sense, as your risk can be hedged.

as an example, Satrix40 did 47% over 3 years, and 80% over 5 years (not annualized)
whereas the Top Multi Asset Flexible Fund, 36ONE Met Flexible Opportunity did 54% over 3 years, and 142% over 5 years (not annualized)

Now I know these 2 are no-where near the same, but it just illustrates a point what FxJalarupa is trying to make.
Then again, choosing a winning Multi Asset fund is the issue, hence why I wish there was a Multi Asset Index Fund.

a lot of useful info here: http://www.fundsdata.co.za/navs/default.htm
 

Excalibur

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#66
hahaha, I think we all have our panties in a twist...

Whilst its true that the majority of Local Pure Equity Funds get owned by the index they try to beat, this is not what FxJalarupa is saying, I think he is saying there is a high likelihood of Flexible Multi Asset Funds (not Reg28 funds) beating the Top40 for instance, as they have the option of offshore exposure whereas a local ETF doesn't. In this case active management makes sense, as your risk can be hedged.

as an example, Satrix40 did 47% over 3 years, and 80% over 5 years (not annualized)
whereas the Top Multi Asset Flexible Fund, 36ONE Met Flexible Opportunity did 54% over 3 years, and 142% over 5 years (not annualized)

Now I know these 2 are no-where near the same, but it just illustrates a point what FxJalarupa is trying to make.
Then again, choosing a winning Multi Asset fund is the issue, hence why I wish there was a Multi Asset Index Fund.

a lot of useful info here: http://www.fundsdata.co.za/navs/default.htm
Pegasus is right, it's like picking an Industrial ETF and showing how it beat a Resources unit trust. Again can you tip us about the Flexible Multi asset Funds that will outperform the humble index in the next 5 years? And as for these funds having foreign exposure there are foreign ETFs that you can include in your portfolio to get the exposure. Even having multiple assets is possible with ETFs. ETFSA even have a fund that is multi asset.
 

Hendrix

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#67
Pegasus is right, it's like picking an Industrial ETF and showing how it beat a Resources unit trust. Again can you tip us about the Flexible Multi asset Funds that will outperform the humble index in the next 5 years? And as for these funds having foreign exposure there are foreign ETFs that you can include in your portfolio to get the exposure. Even having multiple assets is possible with ETFs. ETFSA even have a fund that is multi asset.
Of course we won't know what will happen in 5 years, but I would pick a Flexible Fund over any Index tracker right now, as the Markets are very volatile, in a Bull Market I'd go the ETF route.

What fund do ETFSA have that is multi asset? With a Flexible mandate?
 

FxJalarupa

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Feb 23, 2016
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169
#68
Guys it's about CHOICE... If you choose an ETF over multi asset because of fees... Then you missing the point... Greatly
 

FxJalarupa

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#69
Maybe you should re-read my initial post to clarify my positioning and view in the matter you are addressing above... It's there as clear as day...
 

supersunbird

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#70
Maybe you should re-read my initial post to clarify my positioning and view in the matter you are addressing above... It's there as clear as day...
So lets go back to that:

But my message to you is, if you gather the data and cross examine the funds you can and will find many pockets of good value for money in active management!
You will also find many pockets of dismal performance.

I myself prefer a mix...

"OMG, how is that possible SSB"

Easy peasy. Just have active and passive funds, and you can have a portfolio of passive funds (I prefer index UTs, as apposed to ETFs, please stop that "ETF is the Best Way to Invest" dogma insinuation FxJalarupa, you off all should know ETFs are not the only index products) to be very similar to the Multi Asset Funds, the flexibility will have to come from yourself though.

Retirement:
15% of you employer retirement fund is in a managed product where you have few or no choices, then put your own RAs 5% (you should ideally after all be saving 20%) to 12.5% (to reach the new limit of 27.5% if you want) into a index providers whose method you likes RA.

Or if your employer retirement fund is with a index provider (10x in my case), have your own RA with a manager....
 

supersunbird

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#71
http://www.moneyweb.co.za/investing/unit-trusts/top-unit-trusts-past-10-years/
This is further emphasised by the fact that none of them beat the exchange-traded fund (ETF) that tracked the index in the same sector. Over this same period, the Satrix Indi ETF returned 19.16% per annum, and so was in fact the best performing fund in the country.

A similar story played out in property funds over this same period. Listed property was the best performing asset class in South Africa over the past decade, and therefore funds focused on this sector did well. Nine of the funds on the above list are real estate unit trusts.

However, the best of them was once again an index tracker. The Prudential Enhanced SA Property Tracker Fund is designed to deliver the returns of the listed property index, and in doing so it out-performed all its competitors.
Interesting...
 

supersunbird

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#72
And here is something that supports FxJalarupa view:

http://www.iol.co.za/business/personal-finance/are-worldwide-funds-the-way-to-go-offshore-2024377

Hutchinson says the international mutual fund data provider Morningstar has shown that the average returns of the worldwide multi-asset flexible funds have outperformed the average South African multi-asset high equity funds by almost three percentage points a year over 10 years to the end of January this year, albeit it at a slightly higher risk – as measured in terms of standard deviation or the variance of returns.
But note, FxJalarupas view would definitely just be related to discretionary savings, outside of Reg28 compliant requirements.

Would it even be possible to have a index style worldwide multi-asset flexible fund?
 

russellO

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Jan 26, 2007
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336
#76
I didn't know about all the Sygnia, 10x, places a few months ago when I got into investing so my TFSA is 60% RMB Growth Fusion and 40% DBXWD. Hope it works out.

I still believe in actively managed funds for certain cases/scenarios so my emergency fund is in a actively managed unit trust. Not the specialist funds like Industrial, Resources, etc (an Index is better for those) I mean like a good balanced fund for example. Like, if a market lost 60% (like has happened to some economies), the indices would take a nose dive but an actively managed fund could sell out into cash or whatever other instrument. I might be wrong but that is my hope.
 

Hendrix

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#77
I didn't know about all the Sygnia, 10x, places a few months ago when I got into investing so my TFSA is 60% RMB Growth Fusion and 40% DBXWD. Hope it works out.

I still believe in actively managed funds for certain cases/scenarios so my emergency fund is in a actively managed unit trust. Not the specialist funds like Industrial, Resources, etc (an Index is better for those) I mean like a good balanced fund for example. Like, if a market lost 60% (like has happened to some economies), the indices would take a nose dive but an actively managed fund could sell out into cash or whatever other instrument. I might be wrong but that is my hope.
I use both as well, they both have their advantages.
 

supersunbird

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#79
So FxJalarupa has an issue with index investing from this thread https://mybroadband.co.za/vb/showthread.php/806213-Best-Retirement-Annuities-(RA)-for-2016/page2 and made the thread we are now in. Unfortunately FxJalarupa has not been on the forum since Feb 2017, but in any case, a conversation in another thread made me recall this thread:

Had a look at https://www.sygnia.co.za/docs/default-source/institutions---global-balanced-funds/2017-may-(skel70)-sygnia-skeleton-70-fund---ffs_2016_institutional.pdf?sfvrsn=48 and can't help but notice that the performance has been terrible the last year or two.

Is this still the one everyone is recommending?
The super great best and most awesomenest Coronation Balanced Plus Fund did 0.5% in 2016 and 8.1% in 2015 (so slightly better in 2016 and a bit worse in 2015 than Sygnia, and AG has a TER of 1.64% vs whatever the low TER for Syngia is).

http://www.coronation.com/Assets/za...2017-May-Balanced-Plus-Fund-Comprehensive.pdf

So your point is moot. The SA market itself is flat, the rand strengthened so the 25% overseas allocations and the Rand hedge shares are flat in R terms and both these fund are/were too low in property shares (I see AG has finally uped it to an almost acceptable 13%, up from the historical 6% range, my self constructed RAs have an 20% to 25% property allocation).

If you have evidence of a recommendation from yourself on a Balanced Fund to use from 2014 that did better then the Sygnia or AG funds, that would be pretty sweet and brag worthy.

If your seriously just asking a question, now you have the answer.
I rest my case.

The only evidence that one can reasonably accept as showing this "index funds are nonsense, managed fund uber als" idea is a 2014 recommendation for a managed Balanced Fund (or any Regulation 28 compliant fund in fact, like money market), that then performed at least much better than the AG and Sygnia Balanced Funds in 2015 and 2016.
 

Pegasus

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#80
When the fees for South African passive funds become as low as those in the USA and they have a tracking error of closer to zero you can rest your case.
As far as asset allocation goes, the active manager needs to do that bit.
 
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