Last Updated on 09/10/2024 by Carl-Peter Lehmann
As we enter the final quarter of 2024, it’s a pivotal time to assess the performance of unit trusts in the global equity category as of the end of September. Have the rankings shifted since our last update? For South African investors, especially those investing in Rands, global equities have typically offered superior returns over the last decade, largely fueled by the Rand’s depreciation and the explosive growth of tech. Recently, however, the landscape has begun to shift. With the Rand strengthening and South African equities starting to outperform international markets, the investment scenario is evolving. Despite these changes, limiting your portfolio to domestic markets might mean missing out in a globally connected, digital economy. The ‘Global Equity General’ category, as classified by ASISA, continues to offer South African investors a valuable and convenient route to diversify internationally. Let’s explore the top performers in this sector and what they offer.
Why Offshore Equities for South African Investors?
While the JSE has its merits, it represents a small slice of the global economic pie. Offshore equities offer diversification not just in terms of geography but also sectors, giving you access to industries and technologies that may be under-represented locally like AI. Investing globally can act as a hedge against local economic uncertainties, political instability, and the devaluation of the Rand.
1. Ease of Investment
One of the advantages of Global Equity Unit Trusts is that they provide a straightforward gateway to international markets without the complexities of moving money offshore (although that remains our preferred strategy once your income level and/or wealth warrants it). Investing in these unit trusts is as simple as investing in any South African-based unit trust, eliminating the need for tax clearance from SARS (once you go above your R1 million annual discretionary allowance) or complicated tax reporting (even though these days it’s not that complicated and we help our clients with that).
2. Devaluation of the Rand
The Rand has historically been a volatile currency, subject to long-term depreciation. 10 years ago the USD/ZAR exchange rate was about 10.50. As of today, it hovers between 17.00-18.00. You do the maths and what that means to your global purchasing power, ability to travel and achieve or maintain real financial security? Investing in global equities offers a hedge against this currency risk. While your offshore investments may appreciate in value, you could also benefit from any weakening of the Rand, as your global assets would then be worth more in local currency terms.
3. Tax Basics - 'Direct' Offshore vs Feeder Fund
One of the reasons why we prefer direct offshore exposure whenever possible for our clients (aside from the security of having your money outside local borders) – is the impact of currency fluctuations on your investment returns and the consequent tax implications. Returns calculated in hard currency (e.g., USD when your money is actually offshore) – are not subject to exchange rate fluctuations. In other words, if your USD investment appreciates or depreciates by 10% – that is your gain or loss and makes the tax calculation simple. If investing offshore in ZAR – a 10% gain in USD terms could be boosted or dampened by Rand volatility. If the Rand say depreciates by 5% during the same time frame, your gain is suddenly 15%. If the Rand strengthens by 5%, your gain is now only 5%. Not the end of the world, but not ideal either.
Further Reading: Offshore Investing 101 and How to Go About It Properly
4. Unveiling Great Investment Opportunities
Global Equity unit trusts offer South African investors a ticket to participate in the growth stories of powerhouse companies like Nvidia, Microsoft, Eli Lilly, and Crowdstrike — entities not listed on the JSE. This allows you to tap into disruptive technologies and trends that are shaping the future, from clean energy and electric vehicles to AI, cybersecurity and cloud computing.
Unveiling The Best Performing Unit Trusts in the Global Equity Space
Choosing the ‘best performing’ unit trusts requires a nuanced approach when considering global options. It’s not just about returns but also about risk diversification, currency impact, and geopolitical considerations. In this article, we focus on long-term annualized returns in the global equity category to identify which funds and asset managers are delivering results and outperforming their peers. It’s important to note that this analysis is not an explicit recommendation to invest in any of these funds, as there are many factors to consider beyond absolute returns (there are a few funds here would not recommend clients commit capital to). This is a fun exercise meant to generate ideas and inspire further research. *Source of all performance figures is Morningstar. Retail fund prices used.
A few additional points worth mentioning are that some of the popular and highly regarded foreign asset managers like Fundsmith, T. Rowe Price, Sands Capital and Lindsell Train have only recently introduced feeder funds to South African investors, so they don’t show up in longer-term performance stats on Morningstar yet. Additionally, many funds under the banner of a local company, such as the Old Mutual Global Equity Fund, are actually managed by foreign asset managers (in this case, Jupiter Asset Management).
Consider Reading: If you prefer investing in shares directly these are our some of our top global stock investing ideas
Best Performing Global Equity Unit Trusts over 3 Years
In a competitive field of 84 funds, the Ranmore Global Value Fund emerges as the leader in the global equity fund category, posting an impressive annualised return of 23.98%. Not far behind, the Sygnia FANG.AI Equity Fund also demonstrates very strong performance with 20.06%.
1. Ranmore Global Value Fund – 23.98%
2. Sygnia FANG.AI Equity Fund – 20.06%
3. Merchant West Global Equity FF – 15.58%
4. Fairtree Global Equity FF – 14.9%
5. MI-Plan Global AI Opportunity Fund – 14.43%
These rankings highlight the exceptional performance of these top 5 funds in a peer group of 84, with an average return of 9.04% per annum, underscoring their significant outperformance in the global equity market.
These standout performances highlight the diversity of successful investment philosophies in the global equity space, whereby both value and high-tech focused growth names can do well.
Best Performing Global Equity Unit Trust Funds Over 5 Years
In a field of 61 global equity funds that boast a 5-year track record, the Sygnia FANG.AI Equity Fund has excelled, delivering an annualised return of 28.38%, miles ahead of the rest. This fund adopts a form of enhanced indexation (rather than being an active stock picker), tracking the NYSE FANG+ Index (which it actually underperforms) – and has been in the right place in the right time these last 2 years since AI really exploded.
1. Sygnia FANG.AI Equity Fund: 28.38%
2. Easy IP Global Equity Fund: 21.01%
3. Fairtree Global Equity FF: 17.13%
4. Anchor Global Equity FF: 16.12%
5. Sanlam Schroder Global Core Equity FF: 16.08%
These top 5 funds are standout performers well above the peer group average return of 12.62%, demonstrating their capacity for delivering strong returns to investors over the medium term.
Now Read: Henceforwards Role in Providing Global Investment Advisor Services
Top Global Equity Fund Performers over 10 Years
Among a peer group of 28 global equity funds with a 10-year track record, the peer group average return stands at 11.51%. Despite the limited number of funds that have a decade-long performance record, these funds have delivered relatively strong returns – but perhaps worringly even include an index fund.
Consider however, that the S&P 500 has delivered a return of about 13.00% p.a. in USD over the last 10 years, once you factor in Rand depreciation over the same time frame, these returns are a lot less impressive.
1. Blue Alpha Global Equity – 14.86%
2. Old Mutual Global Equity – 14.74%
3. PSG Wealth Creator FF – 13.91%
4. Satrix MSCI World Index – 13.72%
5. Stanlib Global Equity – 13.62%
Beyond the global equity fund category, the best performing fund in South Africa over the last 10 years is the BlueQuadrant Worldwide Flexible Fund, with an average annual return of 18.08%. This fund is known for its extreme volatility and seems to follow a boom-or-bust cycle. The last three years have shown exceptional returns, whereas the four years prior had poor performance. However, the recent strong returns have been so significant that the fund still manages to outperform all other Rand-denominated unit trusts available in the local market over a 10-year time horizon.
Consider Reading: Some of the Best Performing Hedge Funds in South Africa and How They Compare
How to Start Your Global Investment Journey
Investing in these unit trusts is as straightforward as making a local investment. Whether you prefer a lump sum or a monthly investment, the process is typically hassle-free. But simply picking funds past on past performance is a recipe for disaster because the best performing global equity funds over the next 10 years are likely to be very different to those on this list. Understanding your lifestyle, needs and goals is what really matters so that a portfolio can be built to achieve that. What we like to think of outcomes based investing and planning.
Conclusion
For South African investors, Global Equity unit trusts offer more than just diversification. They provide a hedge against local economic and currency risks and open doors to global opportunities that are otherwise hard to access. In a world teeming with possibilities, these unit trusts make going global easier than ever. However, with so much choice comes complexity, which is why at Henceforward, we spend a lot of time working with our clients to build investment portfolios aligned with their beliefs, needs, and risk tolerance.
Disclaimer: Never invest in a fund solely based on past performance, this article is for information purposes only and should not be construed as advice.
Carl-Peter Lehmann
Carl-Peter boasts over 20 years of expertise in investment and financial planning, with a keen specialization in the global and offshore investment arena. His knowledge and experience make him an invaluable guide for clients navigating the complexities of the global investment landscape.
