Beating the odds: Can today’s large and successful investment funds repeat their performance record?

 Today’s Largest Equity Funds

 Typically these funds are the most well-known and popular funds among individual investors and advisors, or, if you like, the famous brands. As a group it constitutes 80% of all assets under management in the general equity, growth and value-style equity sectors of the collective investment industry (unit trusts).

 In total eleven fund management companies are represented in the top twenty largest equity funds. Among them are Allan Gray, Coronation, Investec, Old Mutual, Prudential, Sanlam (SIM) and Stanlib. While Nedgroup Investments is one of the biggest management companies it does not have its own fund management team and uses independent (often boutique) managers to manage specific investment mandates.

 All these funds have assets under management of more than R1.5bn (the biggest fund is Allan Gray with assets of more than R26bn). Many of these funds have outstanding long-term performance records (10-year plus).

 As a group today’s large funds have outperformed the “rest” of equity fund managers, both over shorter term and long-term intervals, which obviously is a significant reason why these funds have attracted investors’ funds over the past number of years.

 These large funds, however, on average did not outperform the equity benchmarks (ALSI and SWIX) at least over the past eight years, but did so over the past nine to twelve years.

Within today’s large funds a clear pattern emerges which investment funds outperformed their peers and the market, namely a value-orientated style of investing. Such an evaluation, however, does not vindicate the notion that value investing will always be effective. For example, during the 1990s value investing did not fare very well and it was rather funds that concentrated on companies with high expected earnings growth that dominated investors’ preferences.


Download: NewsletterAugust2011

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