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The figure is slightly unfair because the total of 458 includes all the unit trusts - which also means those that specialise in money and capital market investments. If the statistics of only the real competing funds are used, there's a good chance that the figures of the past will be repeated, says Satrix head Mike Brown. These statistics show that about 20% of the general unit trusts that compete directly with the Satrix 40 beat its returns.
Personally, I find that despite quite a few years of experience of investing on the JSE, and a lot of hard work keeping up with new opportunities, it's becoming increasingly difficult to beat the return of the Satrix 40 with my own investments.
Colleague Lucas de Lange recently offered to help me after my fruitless search for winners and gave the names of a few unit trusts that have in fact beaten the Satrix 40 regularly over the past few years. Thanks for the advice, Lucas, but until such time as I see a product that clearly sets out in advance all the costs involved in the investment, I'll be putting my spare cash into the Satrix 40.
Internationally, unit trusts are obliged to publish their total expense ratio. In SA a lot is being done to also make that ratio compulsory here. However, the Association of Collective Investments hasn't yet been able to take that step because some unit trust managers are apparently, for understandable reasons, strongly opposed to the compulsory publication of the ratio.
But among all the investment schemes, two exchange-traded funds of Deutsche Bank are starting to interest me. The products are based on the DJStoxx50, which is an index of the prices of Europe's 50 largest companies, and the FTSE100, which represents the 100 top companies on the London Stock Exchange. The JSE codes are ITXEU and ITXUK respectively.
The value of these listed investment instruments, which trade just like an ordinary share, only just failed to beat the return of the Satrix 40 last year. Let's say they were equal. But thanks to the latest decline in the value of the rand, for the 12 months to date both are outperforming the Satrix 40.
However, it wouldn't surprise me if the share prices of the 50 top listed companies in Europe beat the return on the 40 top listed companies on the JSE this year. The reasons for this optimism are that the JSE's top 40 naturally rely heavily on resources and precious metals, such as gold and platinum. That was a winning sector last year. However, the latest sharp fall in the copper price, and now also crude oil, are a warning against ongoing prosperity for 2007.
The top 50 shares in Europe rely much more heavily on trade and industry and the financial sector, which will probably beat resources in 2007. The top 50 in Europe, according to price:earnings ratios and dividend yields, are of course substantially cheaper than the resources shares, where price is seldom a function of current profits but rather something that could happen in the future.
A further advantage for 2007 is, of course, that the prices of Europe's top 50 are given in euros, while the JSE's top 40 of course use rand. Over the past few years the rand was a strong currency, but last year it bogged down seriously against the euro and sterling. Against the euro, the rand weakened over the past year from R7,30 to the current R9,37, while you now need R14,28 to buy one pound, versus only R10,80 a year ago.
Of course, that weakening in the value of the rand helped a great deal to push up the prices of ITXEU and ITXUK in rand - and that's one of the reasons why they're now beating the Satrix 40 on an annual basis.
The rand will probably not weaken much more in 2007, but the composition of the ITXEU just looks much more attractive to me than both the FTSE100 and the JSE's Top 40, which both rely heavily on mining shares, and these could have some problems in 2007.
Remember, both the ITXEU and ITXUK are listed on the JSE and can be bought directly from your stockbroker, just like any other share. Payment is made for them in rand, but they're a very effective diversification of your portfolio in quality developed world assets. It's far better to invest in them than to try hiding somewhere on an island with a few British pounds on which you earn a very modest interest rate.
