To mark the end of the 2nd quarter of 2021 and our entry into the 4th quarter we thought an update on the performance of unit trusts available in Zimbabwe would be of service. Thanks to the team at Growealth who provide a fantastic aggregated report of unit trusts (GroWealth September 2021 Unit Trust Report) we managed to compile a few charts to understand the performance of the various options available to us. So how well have unit trusts been performing in 2021 thus far? Let’s find out.
Just a note on the information we provide here. We will look at the returns provided on a year to date basis and yield basis on interest-based unit trusts. We do this to give some sort of comparability to the returns. However, it is important to note that funds differ in many ways. Some funds have a minimum buy-in of ZWL$100 others as much as ZWL$5000. Funds also differ in terms of maturity; some funds require you told for 3 months or more. And of course, funds are created for different purposes; some are more aggressive than others in the pursuit of returns. Management fees are a fact of life in Unit Trusts and these also differ from fund to fund. All this to say what we provide is a simple look at the returns but there is a lot more to look at. You can find out more from the individual investment companies offering the Unit Trusts.
Equity and Property
There’s a lot to digest in equity and property-based unit trusts. With the shift that has occurred on the ZSE in the second half of September, we saw a lot of growth and action in the Top 10 and 15 on the ZSE. This has brought about gains in many equity-based funds which understandably would be heavily weighted in blue-chip and top companies. 14 of the (now) 23 equity and property-based Unit Trusts managed to beat both the ZSE All Share Index (226%) and the ZSE Top 10 index (194%) returns for 2021 so far. With inflation at 35.06% according to ZimStat, which is coincidentally very close to the 37.14% currency depreciation of the currency on the parallel market only Zimnat and Old Mutual property funds failed to beat inflation. Special mention to Platinum Wealth Management who not only have the best performing fund (Platinum Childcare Fund 348.65%) but have all of their funds beating the ZSE and the Top 10 indices. The same can be said of Fidelity and Zimnat (Property Fund excluded). A fair comparison with these funds would be against the OLD Mutual ZSE Top 10 ETF which returned 211.34% in the period under review making some of these Unit Trusts look very attractive before costs of course.
Much in the equity and property unit trusts we are starting to see a similar resurgence in the interest-based unit trusts. There will be a lot of debate about which measure of inflation to use between ZimStats CPI Inflation, the official foreign currency auction exchange rate and the parallel market exchange rate. Which you use is up to you. In the period under review 5 funds managed to beat all 3 measures. 6 if we give the Zimnat USD Bond Umbrella Fund the benefit of the doubt for being a foreign currency based fund. Top fund managers here include Samrtvest and First Mutual who beat all three measures and Old Mutual who beat all inflation with 2 funds and falling a few percentage points shy with their Money Market Gross Fund.
Nobody would fault you a year ago for thinking fund managers were perhaps not earning their keep. Credit to the managers who have justified their existence and in some cases done exceptionally well. Unit Trusts serve an important purpose, they cater for segments of the market that either have the time or the knowledge to dive into self-managing the finer details of investments. There are some funds worth looking at as we round up the year. We will of course do a year-end update to give a full-year picture and compare them with other viable alternatives.