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Opinionista

Multi Asset Funds are holding up much better than the JSE – we should publish an index

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Marc du Plooy is MD of Wealth Associates South Africa and chair of the Investment Management Committee of the Financial Intermediaries Association of Southern Africa (FIA).

Daily media reporting of how the JSE is performing is not giving a fair shake to the 1.8 million South Africans invested in Multi Asset Funds (MAFs). Movement up or down on the JSE does not reflect the consistently better performing MAFs. Consequently, these investors would be better served if the daily movement of the Multi Asset indices were to be reported alongside the traditional reporting of the daily JSE movement.

After each business day, the financial media publish the day’s movement on the Johannesburg Stock Exchange (JSE) and its various indices… x percentage up or down. While this may be accurate and usable daily information for some, for close to two million South African investors it’s not very meaningful or useful information – and they might not even know it.

You may be shocked by such a statement and ask why, what do you mean? Allow me to explain.

Millions of South Africans have entrusted their investment portfolios to financial advisors and investment managers who (although there are probably exceptions) have invested these almost two million clients, both pre- and post-retirement, into a basket of asset classes, of which the JSE and its offering is but one.

Such a basket will also include local cash, bonds and property (the latter is perhaps not such a good asset class to mention now), and then all these asset classes are replicated in the offshore space too. Furthermore, within these baskets, multiple managers are often appointed within each asset class to enhance the diversification benefits for the clients.

The statistics support this statement. As at 31 December 2019, the ASISA CIS statistics show that of the R2.5-trillion invested in collective investment schemes (CIS – commonly referred to as Unit Trusts), some R1.2-trillion or approximately 50%, is invested in good old Multi Asset Funds (MAFs). For those not that familiar with what MAFs are, these are funds that have themselves invested in a basket of asset classes of which the JSE, or more accurately equities, is but one component. 

In addition to this, Interest-Bearing Unit Trusts separately account for a further R650-million invested, and this figure excludes double counting. So, of the R2.5-trillion in total invested in Unit Trusts, investments in Multi Asset and Interest-Bearing funds account for a whopping R1.8-trillion, or 72%.

What is so meaningful about this, you might ask. Simply this: when these millions of clients read in the daily media that the JSE is, for example, 6% or 8% down on the day, they probably suffer a minor heart attack. But they need not, as this is in no way an indicator of the performance of their personal pre- or post-retirement investments.

Your financial advisor or investment manager has your personal account balance at hand every day. But because he or she is looking after the client’s longer-term interests, it would serve no purpose for them to provide these balances to their clients daily. However, clients could, of course, look up the daily movement in their accounts online themselves, if they so wished.

So, it may be a case of, “Wow, look at the day’s movement on the JSE” as reported in the media; but then the client may quickly go online to see what happened to his or her portfolio. Thankfully for the client, the picture found there will be much more encouraging. For peace of mind, this exercise may have to be repeated each day.

For the naysayers who may already be asking for evidence, here it is:

Over 1 year to the end of March 2020 (including the dramatic negative effects of Covid-19):

JSE – down 20.36% (on R1m, a paper loss of R203,600)

SA MA Low Equity – down 3.4% (on R1m, a paper loss of R34,000)

SA MA Medium Equity – down 7.36% (on R1m, a paper loss of R73,600)

Over 3 years to the end of March 2020 (including the dramatic negative effects of Covid-19):

JSE – DOWN 7.28% (on R1m, a paper loss of R72,800)

SA MA Low Equity – up (yes up!) 8.12% (on R1m, a paper profit of R81,200)

SA MA Medium Equity – up 2.56% (on R1m, a paper profit of R25,600)

But we are all long-term investors, so let’s look at the five years to the end of March 2020 (including the dramatic negative effects of Covid-19):

JSE – STILL DOWN by 2.1% (on R1m, a paper loss of R21,000)

SA MA Low Equity – up (yes up!) 19.03% (on R1m, a paper profit of R190,030)

SA MA Medium Equity – up 10.11% (on R1m, a paper profit of R101,100)

True, this is still not accounting for inflation, as these baskets still have equity as an asset class as well, but on a million rand the difference could be huge. Which brings me to the point I’d like to make: why don’t we publish the readily available daily movement of the Multi Asset indices alongside the traditional reporting of the daily JSE movement?

It’s just a thought, but it might significantly calm the nerves of millions of investors each day. BM

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