Equity Unit Trusts

Hendrix

Hendrix

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I currently invest a monthly amount into the Allan Gray Equity fund, but have recently been wondering why?
There are many funds that produce much better returns and have lower costs.
One is constantly reading about the awards they win year after year with their funds.
They are good, but not the best.
Am I missing something? What else would you recommend?
 
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http://www.equinox.co.za/unittrusts/funds/fundperformances.asp

http://www.etfsa.co.za/ETF_factsheet.htm

There are a whole bunch of UTs to choose from as well as a growing number of ETPs (exchange traded products).

Personally my RA is going into 3 Coronation UTs (50% local equity, 25% foreign equity and 25% bonds) and then I am starting 2 Coronation UTs in Feb (property equity fund and emerging markets). Already got money going into Satrix Divi and Rafi ETFs(which have lower costs) but need to diversify and there are no emerging markets ETFs that I know about and only the proptrax property ETFs which I am not sure about yet, looking at their perpormance compared to the UTs.
 
I buy satrix etf's too , divi, rafi and indi
My question is to do with unit trusts, and more specifically allan gray and their equity fund.
Their funds are seldom top performers, yet always winning awards.
Basically, is there something I don't see that makes them so great?
 
I read that property stocks are over priced, they've done very well the last few years and are at a high at the moment
I think climbing into resources right now would be a good move...
 
What kind of awards do they win? Also, since their funds can get very big, it becomes harder for them to beat the market perhaps, as they start becoming more of the market itself.

The only real award is performance perhaps?

My timeframe is 21 years. So if property is overpriced or underpriced currently or in the future it doesn't matter, over those 252 months I will be buy steadily at low price points and high price points along the way and the peaks and troughs will even out.

If resources climb so should emerging markets and if they pay good dividends they will be in Divi and/or Rafi.
 
VG008 said:
Sorry for derailing the thread.

Is it better to have three different UT's considering the fees involved.
Or better to take out one UT which complies with RA regulations.

I am considering an RA and looking at Coronations balance plus fund; your comment is quite interesting.
Click to expand...

Most UT charges are percentage based so it should not make any difference if you invest R900 in one fund or R300 into three different funds. The only time it may make a difference is if you invest on a platform where they have a sliding scale of fees (ie z% for the first x amount, y% for the next x amount etc) but this usually only applies to large lump sums.

The benefit of investing in more than one fund is diversification. I personally would also look at diversifying across asset managers as this often leads to diversified investment styles too. Coronation may make a bad invest call, which affects their return, whereas someone does not make that call, and vice versa.
 
ClintZA said:
Most UT charges are percentage based so it should not make any difference if you invest R900 in one fund or R300 into three different funds. The only time it may make a difference is if you invest on a platform where they have a sliding scale of fees (ie z% for the first x amount, y% for the next x amount etc) but this usually only applies to large lump sums.

The benefit of investing in more than one fund is diversification. I personally would also look at diversifying across asset managers as this often leads to diversified investment styles too. Coronation may make a bad invest call, which affects their return, whereas someone does not make that call, and vice versa.
Click to expand...

Makes sense. I will look into this further.

Thanks Clint!
 
Hendrix said:
I currently invest a monthly amount into the Allan Gray Equity fund, but have recently been wondering why?
There are many funds that produce much better returns and have lower costs.
One is constantly reading about the awards they win year after year with their funds.
They are good, but not the best.
Am I missing something? What else would you recommend?
Click to expand...

I'd be very cautious about constantly trying to chase the best performing fund. I am not certain of your investment term but I'd recommend choosing a fund that performs reasonably on a consistent basis rather than constantly trying to chase yesterday's winner. Or better still heed my advice above and choose a few consistently decent performing funds to allow for some diversification (obviously this does depend on the amount you are looking to invest as most funds do have minimums).

I would also look at the asset class composition of your investment and align this with your time horizon. If you are investing for the long term then a 100% equity exposed portfolio may suit your needs but you might consider a little exposure to other asset classes too if you term is not as long.
 
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VG008 said:
Makes sense. I will look into this further.

Thanks Clint!
Click to expand...

Remember too that there are a few ways to invest in a number of different unit trust funds.

One is to invest directly with the various asset managers. A downside of this is three accounts to keep track of, with three statements and the like. Also you would have three debit orders coming off.

The other is to invest on a platform that will give you exposure to these various asset managers but in one investment. The latter may have slightly higher fees but with rebates and the like it is not always the case. An advantage is that you are not limited to the funds that a specific asset manager offers and you may also be allowed free switches and the like. You would also only have one debit order, one statement and one point of call for all enquiries.

Important to always consider costs though. The minimums mentioned above may also play a part in your decision as each asset manager, and platform, would have their own minimum investment amount per fund or overall investment amount.
 
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They've won the "raging bull award" many times.
I think they a great company, but think there's better out there.
I like the Coronation Emerging Markets UT idea, will look into it to diversify (I'm a bit heavy with domestic equity)
 
Thanx Clint

I'm invested in about 95℅ equity (excluding my pension and RA's), and my time horizon is about 25 years.
I'm aware of the dangers of chasing the best yields, was just wondering what makes them so great, I guess its their consistant performance.
 
VG008 said:
Sorry for derailing the thread.

Is it better to have three different UT's considering the fees involved.
Or better to take out one UT which complies with RA regulations.

I am considering an RA and looking at Coronations balance plus fund; your comment is quite interesting.
Click to expand...

Remember I'm no expert, just saying what I'm doing and why.

A 2% fee of R90 000 is the same as 2% each for 3 funds of R30 000.

From the way the funds are composed (they have property and cash parts to them) and regulation 28 limits, my 50% local equity and 25% foreign equity funds will give me the exposure/diversifation that I want and in the end even property exposure (some local and very small bit foreign), its only because of regulation 28 that I will need to be in bonds at all. I want to be partly in control and not have a fund manager in control of the asset allocations, given my long investment timeframe and the fact that they might be too conservative on balanced funds.

My new employers providend fund (they use 10x, which tracks a index of the top 60 JSE companies and none of those companies can have a weight of more than 6%, so its cheaper than a normal pension fund) I cant control, so I control what I can.
 
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Hendrix said:
I currently invest a monthly amount into the Allan Gray Equity fund, but have recently been wondering why?
There are many funds that produce much better returns and have lower costs.
One is constantly reading about the awards they win year after year with their funds.
They are good, but not the best.
Am I missing something? What else would you recommend?
Click to expand...

This is just my opinion...


Their performance took a dip after Stephen Mildenhall left, that guy was a genius.
Also as mentioned already, their fund has gotten rather large so it's more difficult for them to change positions.

There company has also gotten rather large.


Some awards are won over 10 years, 5 years, 3 years etc, can't remember all the terms.


They are still a great company though, and the people there are competent as any others out there.
 
ClintZA said:
Remember too that there are a few ways to invest in a number of different unit trust funds.

One is to invest directly with the various asset managers. A downside of this is three accounts to keep track of, with three statements and the like. Also you would have three debit orders coming off.

The other is to invest on a platform that will give you exposure to these various asset managers but in one investment. The latter may have slightly higher fees but with rebates and the like it is not always the case. An advantage is that you are not limited to the funds that a specific asset manager offers and you may also be allowed free switches and the like. You would also only have one debit order, one statement and one point of call for all enquiries.

Important to always consider costs though. The minimums mentioned above may also play a part in your decision as each asset manager, and platform, would have their own minimum investment amount per fund or overall investment amount.
Click to expand...

Clint, can you please give examples of these platforms where you can do all in one?
 
The issue with Alan Gray is that the original fund managers have moved off or become senior managers and most of their traders are bright young Indians and Chinese guys. Hence its unproven if the newer generation of income generators at the company are capable of matching Alan Grey's long term average. I like the company and their style and currently have 100% of my pension contributions going into Alan Gray products but I am watching it closely now and considering switching some out to Investec and Coronation if I see the performance dropping.

I do an annual review of all the options available to me (company pension so there are only 8 options total half of which are low or medium risk and hence off the table) and of the Aggressive fund options the Old mutual ones suck, and the remainder are comparable. Investec's Balanced portfolio and Alan Gray's Global Balanced portfolio have mostly the same shares so as one would expect their performance is close. Numbers look like this:

Alan Gray: 5Y return 9.50%; 3Y return 15.3%; 1Y return 15.3%
Investec: 5Y return 10.1%; 3Y return 15.8%; 1Y return 10.6%

Both of these far outperform my companies automatic life stage choices which have some Old Mutual and Coronation crap in them that perform terribly. Its important to be aware of what your company does with your pension money. Most people just ignore it not realizing that they are getting 9-10% growth each year when they could be getting 15-16% on average. If you take inflation into affect my return is double what most of my colleagues get as they just tick the life stage model and let some company accountant manage their pension allocation.

As to additional money into Unit trusts I would rather buy into a good ETF than a Unit trust. Fees are lower and the growth tends to be better if you get a decent aggregated ETF. I like Satrix Divi and Nedbanks Betta Beta. If I had to pick a unit trust (which I don't advise) then I would look at something like Rainmaker.
 
Well, sometimes there is no ETFs for what one wants to do so one has to go Unit Trust route (for example emerging markets).

And you are right about the pension funds not performing as good as they can (risk averse). At least my new employers providend fund is a index tracker. Old employers pension fund delivered about 10% pa return, I will now get this amount of money to perform much better in a preservation fund with unit trusts of my own choosing.
 
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