A Fin24 user wants to know why global category unit trusts are performing so well. He writes:
What is the reason for global category unit trusts giving excellent returns for the past year?
Is this due to the weak rand?
What will happen to global category unit trust performances when the rand starts to become a strong currency?
Jannie Leach of Nedgroup Investments responds:
During 2013 global equities delivered 27.4% (in USD), so any portfolio exposed to this asset class would have done well.
The rand also depreciated by 23.5% during this period, which would have added to a South African investor's rand returns. global equities delivered 57.2% in ZAR.
So to answer the first and second question:
- Global unit trusts invested in global equities would have done well due to global market growth and the currency weakening.
- Global unit trusts not invested in equities would have done well mainly due to the currency weakening.
- Strengthening of the rand will, therefore, lower returns, but it is not the only factor determining returns.
The total return received by a SA investor in a rand denominated global unit trust has two main dependencies:
- Performance of global asset classes
- Strengthening or weakening of the rand relative to the dollar.
- Fin24
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Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
What is the reason for global category unit trusts giving excellent returns for the past year?
Is this due to the weak rand?
What will happen to global category unit trust performances when the rand starts to become a strong currency?
Jannie Leach of Nedgroup Investments responds:
During 2013 global equities delivered 27.4% (in USD), so any portfolio exposed to this asset class would have done well.
The rand also depreciated by 23.5% during this period, which would have added to a South African investor's rand returns. global equities delivered 57.2% in ZAR.
So to answer the first and second question:
- Global unit trusts invested in global equities would have done well due to global market growth and the currency weakening.
- Global unit trusts not invested in equities would have done well mainly due to the currency weakening.
- Strengthening of the rand will, therefore, lower returns, but it is not the only factor determining returns.
The total return received by a SA investor in a rand denominated global unit trust has two main dependencies:
- Performance of global asset classes
- Strengthening or weakening of the rand relative to the dollar.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.