S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the S&P Indices Versus Active (SPIVA) U.S. Scorecard in 2002. The SPIVA South Africa Scorecard measures the performance of actively managed, South African equity and fixed income funds denominated in South African rands (ZAR) against their respective benchmark indices over one-, three-, and five-year investment horizons.
YEAR-END 2018 HIGHLIGHTS
Over 38% of South African active equity funds failed to outperform the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index in 2018.
In a year with increasing concerns over global growth, South Africa’s markets were particularly plagued with local concerns. From failing stateowned enterprises, inaction over corruption and state capture cases, to the unemployment crisis and land expropriation laws. Promises by President Ramaphosa to stimulate economic growth through foreign investment appeared at risk.
The S&P South Africa DSW Capped Index was down 10.8% in 2018. The asset-weighted performance of active funds was down 9.1% over the same period. This represented an outperformance of 1.7% for actively managed South African equity funds in 2018.
In comparison, the S&P South Africa 50 outperformed the capped DSW benchmark by 5.5% over the one-year period, indicating that the performance of large-cap companies was typically higher than that of companies measured by the broader benchmark. When comparing active South African Equity funds to the S&P South Africa 50, the proportion that outperformed in 2018 significantly dropped; fewer than 15% of funds outperformed the index.
Many local S&P DJI factor-based indices also outperformed the S&P South Africa DSW Capped Index in 2018. The S&P South Africa Composite Quality, Value & Momentum Multi-factor Index outperformed by 5.3%, the S&P GIVI South Africa Composite Index outperformed by 6.6%, while the S&P Momentum South Africa, the a
The performance of actively managed funds over the five-year time horizon was notably lower, with less than a quarter of funds in the South African Equity category beating the S&P South Africa DSW Capped Index. The annualized asset-weighted return of funds in the South African Equity category over the five-year period was 4.4% compared with 5.1% for the benchmark.
The South African rand weakened against the dollar in 2018. Tightening monetary policies in developed markets, along with U.S.-China trade tensions, put pressure on emerging market currencies. South African exporters were among the beneficiaries of the currency move and, as a result, the Materials sector was the best-performing sector in 2018. The S&P South Africa DSW Materials Index ended the year up 7.8%.
Fewer than 10% of active South African Equity funds investing in global equities were able to beat the S&P Global 1200 in 2018. The same was true when assessing this fund category over the three-and five-year period. In local currency terms, the S&P Global 1200 was up 6.6% in 2018. The relative appreciation of the U.S. dollar more than offset the losses experienced across global equity markets. In comparison, the asset-weighted return of active South African funds investing in global equities was 0.3% in 2018.
The SPIVA South Africa Scorecard also covers the performance of actively managed fixed income funds. In 2018, 85% of Short-Term Bond funds outperformed the South Africa Short Term Fixed Interest (STeFI) Composite. Over the same one-year period, 62% of Diversified/Aggregate Bond funds outperformed the S&P South Africa Sovereign Bond 1+ Year Index. When assessing the same bond funds over the three- and five-year periods, the proportion that beat the index decreased to 25% and 46%, respectively.
