Nedgroup top of the pile

[First published in Personal Finance, October 2015]

Nedgroup top of the pile

Nedgroup Investments has ousted long-time leading unit trust fund manager Coronation to become the top manager of South African funds, while retaining its position as the best manager of offshore funds, the latest PlexCrown survey, to the end of September, shows.

The PlexCrown survey rates actively managed collective investment schemes and scheme managers based on risk-adjusted returns (see “How the PlexCrown ranking system works”, below).

Coronation Fund Managers, which was the top manager in the quarter to June 30, was ranked third, while Allan Gray, which has languished in sixth place for the past two quarters, shot into second place (see table, link below). PSG, which was ranked third for the past two quarters, dropped to sixth place.

The PlexCrown ratings take into account both consistency of performance and the investment risk that a fund manager takes, with managers scoring higher for good returns at low risk.

When South African management companies are rated, their qualifying funds are rated in one of four broad unit trust sectors:

  • South African equity and real estate (25-percent weighting);
  • South African interest-bearing and multi-asset income (25-percent weighting);
  • South African multi-asset, excluding multi-asset income (35-percent weighting); and
  • Global and worldwide (15-percent weighting).

NEDGROUP

Nedgroup Investments was the best manager of South African unit trusts, with a PlexCrown rating of 4.178, compared with 4.118 in the quarter to June 30.

Nedgroup was ranked the top manager in the quarter to the end of March this year, after occupying third place for a number of quarters. Coronation regained the top spot in the quarter to June 30, pushing Nedgroup into second place.

Nedgroup outsources the management of its funds to the managers it regards as the most adept at managing a particular type of fund.

The investment house has 19 funds that qualify for a PlexCrown rating, of which 12 had an above-average rating of four or five PlexCrowns.

Compared with the quarter to June 30, two of Nedgroup’s funds improved their rating. The Bravata Worldwide Flexible Fund gained two PlexCrowns to receive a rating of four PlexCrowns. The Global Flexible Feeder Fund gained one PlexCrown, also receiving a rating of four PlexCrowns.

Three funds each lost one PlexCrown compared with the quarter to June 30. The Mining and Resources Fund fell to four PlexCrowns, while both the Core Bond Fund and the Growth Fund fell to three PlexCrowns. However, these funds contribute only 2.6 percent to Nedgroup’s overall rating.

Nedgroup’s Property Fund made its debut in the ratings in the quarter to September 30, with four PlexCrowns.

Nedgroup was ranked second, after Old Mutual, in the broad global and worldwide sector, with 4.659 PlexCrowns; third, after Rezco and Ashburton, in the broad South African multi-asset (non-income) sector, with 4.520 PlexCrowns; and fourth in the broad South African interest-bearing and income sector, with 4.319 PlexCrowns.

Five of Nedgroup’s funds achieved five PlexCrowns: the Entrepreneur Fund, Financials Fund, Global Equity Feeder Fund, Flexible Income Fund and Stable Fund.

ALLAN GRAY

Runner-up Allan Gray had a rating of 3.618 PlexCrowns, compared with 3.217 in the previous quarter.

Allan Gray has eight funds that qualify for a PlexCrown rating, of which two achieved an above-average rating of four or five PlexCrowns.

Compared with the quarter to June 30, two of Allan Gray’s funds improved their ratings by one PlexCrown. The Balanced Fund moved up to four PlexCrowns, while the Stable Fund moved up to three. The Balanced Fund makes the biggest contribution (26.1 percent) to Allan Gray’s overall rating, while the Stable Fund’s contribution is 8.7 percent.

Allan Gray was ranked first in the broad South African interest-bearing and income sector, with five PlexCrowns.

One fund, the Bond Fund, achieved five PlexCrowns and was ranked second out of the 17 funds in the South African interest-bearing variable-term sub-category that qualify for a PlexCrown rating. The Bond Fund contributes 25 percent to Allan Gray’s overall rating.

CORONATION

Coronation was ranked third, with a PlexCrown rating of 3.607, compared with 4.206 in the quarter to June 30.

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, when Nedgroup Investments achieved the highest rating.

Of Coronation’s 19 funds that qualify for a PlexCrown rating, 11 obtained an above-average rating of four or more PlexCrowns.

Eight of Coronation’s funds lost PlexCrowns since the quarter to the end of June. The Resources Fund lost two PlexCrowns, to receive a rating of one PlexCrown. Seven funds each lost a PlexCrown. The Balanced Plus Fund, the Global Capital Plus (ZAR) Feeder Fund and the Strategic Income Fund fell to four PlexCrowns; the Equity Fund, the Market Plus Fund and the Optimum Growth Fund fell to three PlexCrowns; and the Capital Plus Fund fell to two PlexCrowns. The Strategic Income Fund contributes 22.8 percent to Coronation’s overall rating, and the Balanced Plus Fund 19.8 percent.

Three funds achieved five PlexCrowns: the Global Managed (ZAR) Feeder Fund, Industrial Fund, and Jibar Plus Fund.

OFFSHORE FUNDS

Nedgroup Investments International retained its position as the top manager of offshore funds registered with the Financial Services Board. Nedgroup achieved a PlexCrown rating of 4.750 in the quarter to September 30, compared with 4.000 in the previous quarter.

Nedgroup was ranked first in the broad offshore equity and real estate sector, with a rating of five PlexCrowns, and second, after ACPI, in the broad offshore asset allocation sector, with a rating of 4.500 PlexCrowns

All three of Nedgroup’s qualifying funds achieved a rating of four or more PlexCrowns. Two funds, the Global Flexible Fund and the Global Equity Fund, obtained five PlexCrowns. The flexible fund was ranked second out of 38 funds in the global asset allocation flexible sub-category, while the equity fund was third out of 39 funds in the global equity general sub-category.

Oasis, which was ranked joint-first with Nedgroup in the quarter to June 30, was the runner-up in the offshore rankings in the third quarter, with a rating of 4.250 PlexCrowns.

Oasis shared second place with Investec in the broad offshore equity and real estate sector, with 4.250 PlexCrowns.

All three of Oasis’s qualifying funds achieved an above-average rating of four or more PlexCrowns. The Oasis Crescent Global Equity Fund achieved five PlexCrowns and was ranked second out of 39 funds in the global equity general sub-category.

Investec retained third place, with 4.125 PlexCrowns. It shared third place, with Foord and PSG, in the broad offshore asset allocation sector, with four PlexCrowns.

All of Investec’s five qualifying funds achieved four or more PlexCrowns. The Global Strategic Equity Fund obtained five PlexCrowns and was ranked first out of 39 funds in the global equity general sub-category.

HOW THE PLEXCROWN RANKING SYSTEM WORKS

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.

PlexCrown manager rankings

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