Nedgroup ousts Coronation as top manager

[First published in Personal Finance, April 2015]

Nedgroup Investments has overtaken Coronation Fund Managers and PSG to become the top manager of South African unit trust funds, the latest PlexCrown survey, to the end of March 2015, shows.

Allan Gray, meanwhile, has fallen further down the rankings, according to the survey, which rates actively managed collec-tive investment schemes and scheme managers based on risk-adjusted returns.

Nedgroup has been ranked the third-best manager for many quarters (although it was in fourth place in the third quarter of 2014). But in the quarter to March 30, 2015, it achieved the highest management company rating of 4.152 PlexCrowns.

Unlike other large asset managers, Nedgroup Investments outsources the management of its funds to the managers it regards as the most adept at managing a particular type of fund. It calls this approach “best of breed”.

Coronation was the runner-up, with a rating of 4.031 PlexCrowns. Coronation displaced Allan Gray to become the top management company in the fourth quarter of 2012. It lost its crown to Allan Gray in the third quarter of 2013, but regained the top spot in the following quarter – and held it until the first quarter of this year.

PSG, which has been ranked second for two consecutive quarters, came in third, with a rating of 3.954 PlexCrowns.

Prudential, with 3.625 PlexCrowns, was ranked fourth, as it was in the previous quarter.

Allan Gray, with 3.270 PlexCrowns, fell to sixth position as Absa moved from being ranked eighth in the fourth quarter of 2014 to fifth place in the first quarter of this year. Absa had 3.327 PlexCrowns.

The PlexCrown ratings take into account both consistency of performance and the risk that a fund manager takes when investing, with managers scoring higher for good returns at low risk (see “How ratings are calculated”, below).

A company’s qualifying funds are rated in one of four broad unit trust sectors:

* South African equity and real estate;

* South African interest-bearing and multi-asset income;

* South African multi-asset (excluding multi-asset income); and

* Global and worldwide.

A company’s rating in each sector is accorded a different weighting when its overall rating is calculated:

* South African equity and real estate: 25 percent of the overall rating;

* South African interest-bearing and multi-asset income: 25 percent;

* South African multi-asset (excluding income): 35 percent; and

* Global and worldwide sector: 15 percent.

Nedgroup

Nedgroup’s overall rating was supported by its:

* Second-highest weighted average rating, behind Coronation, in the broad South African interest-bearing sector, with 4.354 PlexCrowns;

* Third-highest rating, behind Old Mutual and Foord, in the broad rand-denominated global and worldwide sector, with 4.495 PlexCrowns;

* Third-highest rating of 4.490 PlexCrowns, behind Ashburton and Rezco, in the broad South African multi-asset (non-income) sector; and

* Seventh-highest rating of 3.272 PlexCrowns in the broad South African equity and real estate sector.

Eight of Nedgroup’s 18 funds that qualify for a rating achieved the highest rating of five PlexCrowns. Three of these funds, rated in the broad South African equity and real estate sector, were ranked first in their respective South African equity sub-categories. The funds were:

* The Entrepreneur Fund (small cap sub-category);

* The Financials Fund (financial); and

* The Mining and Resource Fund (resource).

Nedgroup has four funds that qualify for a rating in the broad South African multi-asset (non-income) sector, and three of these funds achieved five PlexCrowns:

* The Core Diversified Fund (high equity sub-category);

* The Core Guarded Fund (low equity); and

* The Stable Fund, which was ranked second in the low-equity sub-category.

However, Nedgroup’s multi-asset high-equity fund, the Managed Fund, received the lowest rating of one PlexCrown.

The other Nedgroup fund that achieved five PlexCrowns is rated in the broad global and worldwide sector. The Global Equity Feeder Fund was ranked second in the global equity general sub-category.

Two Nedgroup funds in the global and worldwide sector achieved four PlexCrowns each:

* The Global Flexible Feeder Fund (global multi-asset flexible sub-category); and

* The Global Cautious Feeder Fund (global multi-asset low equity).

One of Nedgroup’s funds in the broad South African equity and real estate sector, the Growth Fund (equity general sub-category), received four PlexCrowns.

A Nedgroup fund in the broad South African interest-bearing and income sector, the Core Income Fund (interest-bearing short-term sub-category), also received four PlexCrowns.

Coronation

Coronation topped the ratings in the broad South African interest-bearing sector, with 5.000 PlexCrowns. It had the fifth-highest rating, 4.105 PlexCrowns, behind Ashburton, PSG, Nedgroup Investments and Rezco in the broad South African multi-asset (non-income) sector.

Coronation’s overall rating was also supported by its above-average ratings in the broad rand-denominated global and worldwide, and South African equity and real estate sectors.

Seven of Coronation’s 19 funds that qualify for a rating achieved five PlexCrowns.

Coronation has three funds that qualify for ratings in the South African interest-bearing and income sector, and all of them achieved five PlexCrowns:

* The Jibar Plus Fund, which was ranked first in the South African interest-bearing short-term sub-category;

* The Bond Fund, which was ranked second in the South African interest-bearing variable-term sub-category; and

* The Strategic Income Fund, which was ranked second in the South African multi-asset income sub-category.

Two of Coronation’s funds rated in the broad global and worldwide sector not only achieved five PlexCrowns each, but also ranked first in their respective sub-categories:

* The Global Managed [ZAR] Feeder Fund (global multi-asset high equity); and

* The Global Capital Plus [ZAR] Feeder Fund (global multi-asset low equity).

Coronation’s Industrial Fund, in the broad South African equity and real estate sector, achieved five PlexCrowns and was ranked first in the South African equity industrial sub-category.

The sixth Coronation fund to achieve five PlexCrowns, the Balanced Defensive Fund, is in the broad South African multi-asset (non-income) sector.

Five of Coronation’s funds achieved a rating of four PlexCrowns. Two of these are in the broad South African equity and real estate sector:

* The Financial Fund (equity financial sub-category); and

* The Property Equity Fund (real estate general).

Two Coronation funds that achieved four PlexCrowns are in the broad global and worldwide sector:

* The Global Opportunities Equity [ZAR] Feeder Fund (global equity general sub-category); and

* The Market Plus Fund (worldwide multi-asset flexible).

The fifth Coronation fund to achieve four PlexCrowns, the Balanced Plus Fund, is in the broad South African multi-asset (non-income) sector.

PSG

PSG was in third place, behind Foord and Marriott, in the broad South African equity and real estate sector, with a weighted average rating of 4.283 PlexCrowns.

PSG was ranked fourth in the broad South African multi-asset (non-income) sector, with 4.143 PlexCrowns, and ninth in the broad South African interest-bearing and income sector, with 3.933 PlexCrowns.

Two of PSG’s 11 funds that qualify for a PlexCrown rating achieved five PlexCrowns. One of these funds, the Equity Fund, in the broad South African equity and real estate sector, was ranked first in the equity general sub-category.

The other fund with five PlexCrowns, the Balanced Fund, in the broad South African multi-asset (non-income) sector, was ranked third in the multi-asset high-equity sub-category.

Six of PSG’s funds achieved four PlexCrowns. Three of these funds are rated in the broad South African multi-asset (non-income) sector:

* The Flexible Fund (multi-asset flexible sub-category);

* The Wealth Moderate Fund of Funds (multi-asset high equity); and

* The Wealth Preserver Fund of Funds (multi-asset low equity).

Two multi-asset income funds rated in the broad South African interest-bearing and income sector each achieved four PlexCrowns:

* The Wealth Income Fund of Funds; and

* The Multi-Management Income Fund of Funds.

The sixth PSG fund to achieve four PlexCrowns, its Wealth Creator Fund of Funds, is in the broad South African equity and real estate sector.

OASIS TOP AMONG OFFSHORE MANAGERS

For the fourth quarter in a row, the offshore arm of the Oasis asset management group was rated the top manager of offshore funds approved by the Financial Services Board as suitable for South African investors. Oasis achieved an overall rating of 4.750 PlexCrowns in the quarter to March 31, 2015.

Lloyds Investment Fund Managers, which has been among the top three of the past two quarters, fell to fourth place as Nedgroup Investments, which was in ninth position in the fourth quarter of 2014, took second place, with an overall 4.250 PlexCrowns.

Investec, which was in second place in the fourth quarter, fell to third place with a rating of 4.000 PlexCrowns.

All three of Oasis’s funds that qualify for a rating achieved four or more PlexCrowns. They are all based in Ireland.

The Oasis Crescent Global Property Equity Fund not only achieved five PlexCrowns, but was also ranked the top fund in the global real estate sub-category. The Oasis Crescent Global Equity Fund achieved five PlexCrowns, while the Oasis Global Equity Fund achieved four PlexCrowns.

Oasis had the third-highest rating, behind Contrarius and Coronation, in the broad offshore equity and real estate sector, with 4.750 PlexCrowns.

Nedgroup was runner-up to Coronation in the broad offshore asset allocation sector, with 4.500 PlexCrowns. It shared fourth place (with Investec and Stanlib) in the broad equity and real estate sector, with 4.000 PlexCrowns.

All three of Nedgroup’s rated funds achieved above-average ratings of four or more PlexCrowns. The Global Flexible Fund, which achieved five PlexCrowns, was ranked second in the global asset allocation flexible sub-category. Another Nedgroup fund in this sub-category, the Global Cautious Fund, achieved four PlexCrowns, as did the Global Equity Fund.

Investec shared the third-highest position with Lloyds, Marriott and Sarasin in the broad offshore asset allocation sector, with 5.000 PlexCrowns.

The manager shared fourth place in the broad equity and real estate sector with 4.000 PlexCrowns.

Investec has five offshore funds that qualify for a rating, and four of them achieved above-average ratings of four or more PlexCrowns.

The Global Strategic Equity Fund achieved five PlexCrowns and was ranked second in the global equity general sub-category. Two other funds in this sub-category each achieved four PlexCrowns, the Global Dynamic Fund and the Global Franchise Fund.

The Global Strategic Managed Fund, which is in the global asset allocation flexible sub-category, also achieved four PlexCrowns.

HOW RATINGS ARE CALCULATED

The PlexCrown methodology to calculate the overall ratings of collective investment scheme management companies is based on applying weights to each of the four broad unit trust sectors.

The size of a fund relative to the combined size of all the rated funds in a company’s fold in a broad unit trust sector is also taken into account to determine the company’s rating in the sector.

To qualify for an overall rating, a company must have a rated fund in each of the broad unit trust sectors. In addition, it must have a rated fund in the South African equity general sub-category or an actively managed fund in the South African equity large cap sub-category. A company with a rated fund in the worldwide category, but no rated fund in the global category, will not qualify for a global and worldwide rating or an overall management company rating.

Individual funds are rated over three and five years and are time-weighted, with the emphasis on the longer measurement period. Funds within a unit trust sub-category are ranked only if there are at least five funds in that sub-category with a track record of at least five years.

The methodology uses up to five risk measures to calculate risk-adjusted returns: total risk (Sharpe Ratio), downside risk (Sortino ratio and Omega risk/reward measure) and manager’s skill (Jensen’s Alpha and Treynor).

The methodology requires that the unit trust funds under evaluation are exposed to similar risks; therefore, the sub-categories for unclassified funds and money market funds are excluded.

COMPANY PLEXCROWN RANKINGS TO MARCH 31, 2015

South African companies

1. Nedgroup Inv. – 4.152

2. Coronation – 4.031

3. PSG – 3.954

4. Prudential – 3.625

5. Absa – 3.327

6. Allan Gray – 3.270

7. Marriott – 3.255

8. Old Mutual – 3.239

9. Sanlam Inv. Man. – 3.119

10. Investment Sol. – 3.035

11. Discovery – 2.833

12. Prescient – 2.795

13. Momentum – 2.780

14. Investec – 2.752

15. Stanlib – 2.568

16. Oasis – 2.534

Offshore companies

1. Oasis – 4.750

2. Nedgroup Inv. – 4.250

3. Investec – 4.000

4. Lloyds – 3.667

5. Stanlib – 3.611

6. Sarasin – 3.375

7. Marriott – 3.250

8. Momentum – 3.000

9. Investment Sol. – 2.667

10. Franklin Templeton – 2.542

11. M&G – 2.250

11. Orbis – 2.250

13. Ashburton – 2.000

14. Sanlam – 1.250

Source: PlexCrown Fund Ratings

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