Why returns from giant SA unit trusts may be wildly different in coming years

But managers are taking different views on their exposure to offshore equity, to credit and to private equity.

Over five years, the difference is around eight percentage points a year. The top-performing fund returned 13.36 % a year and the worst performer just 4.39% a year on average for the past five years. Coronation and PSG use the valuations of shares, bond or other securities to decide what to include in their funds and this determines their bottom-up allocation to the different asset classes.

Bastian Teichgreeber, the chief investment officer of Prescient Investment Management, said Prescient’s low allocation to local shares had nothing to do with negativity about South Africa and more to do with diversifying away from a bias most investors have towards home-based assets. Justin Floor, the fund’s manager, says the fund is small enough to invest meaningfully in about 100 to 150 local companies, making it possible to invest in some exciting opportunities that larger managers cannot invest in as their holdings in any company’s shares are restricted.

He warned against getting sucked into buying something on a"crazy" high valuation, as it would end in tears or losses. The exposure to these asset classes is not always reported separately on fund fact sheets – private equity may be bundled with equity exposure, private credit as bond exposure and infrastructure may be included as either bond or equity exposure, depending on how the fund is invested in it.

De Kock says while private equity is serious assets class globally, it is difficult to find good players in South Africa and the illiquidity is a problem as most of Coronation’s investors can withdraw money within 24 hours.

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