Last week I gave a brief attempt at explaining what tracker funds are. Today I am going to give you some figures of a client’s returns in two of these funds vs. a couple of managed equity funds.
It was fifteen years ago now, back in 2008, when I helped a client invest a sum of money across five equity unit trust funds. An equity fund is a fund that is 100% invested in shares on the stock market, there is no property or bonds or cash owned in the fund. They are the most volatile asset class in terms of value, but also offering the greatest potential for capital growth. Two of these five equity funds are Satrix funds – which are tracker funds. Each of the Satrix funds follows a different sector of the market. We split the funds equally across all five funds, the two Satrix funds and then the three managed equity funds: Allan Gray, Ninety One and Foord.
I’ve often mentioned to the client that it has been an interesting example, because he has had this basket of funds for so long now that it has been a good test of equity returns, which should always be at least 10 years.
Over the past 15½ years, the two Satrix funds together have grown by 298%. The three managed equity funds together have grown by 359%. Both return numbers are good. But the result is interesting. In this case, the managed equity funds have done 60% more.
As mentioned last week, many coaches might not be good enough to create anything more than the average team, which will often be adequate. Above average coaches would be required to gain above average results.
I use Satrix funds here and there for clients for capital growth. But never for income, you need active management for that. I also sometimes use the Satrix Balanced Fund as part of the mix in Retirement Annuities.