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 2019 HIGHLIGHTS
South African Equities
Over 68% of South African active equity funds underperformed the S&P South Africa 50 over the one-year period. The same equity funds fared better when compared to the broader benchmark; 56% outperformed the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index in 2019.
The difference in fund performance between the two aforementioned benchmarks reflected the strength of South African large-cap stocks in relation to mid and small caps. The large-cap benchmark, the S&P South Africa 50, was up 10.4% in 2019. It outperformed the S&P South Africa DSW Capped Index by over 3% annualized over each of the one-, three-, and five-year periods, demonstrating the tendency of the largest 50 stocks to outperform in recent years.
Local market gains in 2019 were generally buoyed by the global rally following the late 2018 selloff and were not widely viewed as a reflection of economic strength. In fact, the IMF concluded in November 2019 that South Africa faced persistently weak economic growth, deteriorating debt, and major difficulties in its state-owned enterprises.
S&P DJI’s series of factor, smart beta, and sector indices within South Africa had a disperse range of outcomes in 2019. Momentum strategies led the field in factors, with the S&P Momentum South Africa up 28.5% over the calendar year. The S&P Enhanced Value South Africa Composite Index trailed behind and was down 3.8% over the same period. The S&P South Africa DSW Materials Index posted a strong return of 32.5%, while the S&P South Africa DSW Information Technology Index lost ground and fell 10.6%. Interestingly, the S&P South Africa DSW Capped Carbon Efficient Index outperformed its benchmark by 2.6% in the year that saw the South African government introduce the Carbon Tax Act.
Global Equities
South African funds with a global portfolio saw higher returns than those with a domestic focus when measured on an asset-weighted basis—the Global Equity category returned 21.8% for the one-year period. This growth was more than matched by the S&P Global 1200 in local ZAR, with 73% of funds in this category unable to beat it in the year. On an asset-weighted basis, these funds underperformed the global benchmark by 3% in 2019. Similarly, over a three- and five-year period, the annualized asset-weighted returns were below that of the benchmark, by 3% and 2.5%, respectively.
Fixed Income
Over 73% of funds in the Diversified/Aggregate Bond category were unable to surpass the one-year performance of the S&P South Africa Sovereign Bond 1+ Year Index, which posted gains of over 10% in 2019. This was higher than the benchmark’s annualized five-year return of 7.7%. Over both time periods, the returns from the S&P South Africa Sovereign Bond 1+ Year Index outstripped those from the broad local equity index (S&P South Africa DSW Capped Index).
In the Short-Term Bond funds category, 92% of managers were able to outperform the South Africa Short Term Fixed Interest (STeFI) Composite. The ability of these managers to outmaneuver the benchmark persisted across the three- and five-year periods.
