03 August 2001
GREAT FUND - LOUSY MARKET
OLD MUTUAL FINANCIAL & INDUSTRIAL FUND
You have to be bullish to invest in this one right now
| FOLLOWING THE BIG-CAP TRAIL |
Unit price: 977c
Total assets R639m |
Top ten holdings:* Richemont, Stanbic, Old Mutual, FirstRand, Remgro, Imperial, Absa, Sanlam, Didata, Nedcor.
Asset allocation: Equities 94%, Cash 6%.
Sector breakdown: Financials 47%, Industrials 53%.
Top sectors: Banks 26%, Divers Indust 20%, Assurance 13%, Transport 10%, Financial Services 5%, Services 3%, IT 3%, Retail 3%.
| Period | Total Return (%) | Rank/ No of funds | Sector mean (%) | Total assets** (Rm) | Cash holdings** (%) |
| 3 years | (16,9) | 3/6 | (17,4) | 340 | 7 |
| 1 year | (4,9) | 2/6 | (6,0) | 948 | 15 |
| 6 mnth | (6,3) | 2/6 | (8,4) | 813 | 10 |
| 3 mnth | 2,0 | 1/6 | 0,8 | 640 | 15 |
| *As at June 30 2001. **At start of period. | © Financial Mail |
Two qualities to look for in a unit trust are performance consistency and fund management continuity. In fact many US fund pickers will usually not even consider a fund where the fund manager has had less than three years at the helm.
This is not always easy in SA, with its plethora of funds with short histories and a high level of management change.
Old Mutual Financial & Industrial Fund (OMFI) is one of a select few SA unit trusts to have established a record of consistency under the guidance of one fund manager, Johan Strydom, who assumed management of the fund in 1994.
Strydom's performance benchmark is the JSE Financial & Industrial index, which OMFI's returns have exceeded comfortably over the long term.
During the past seven years, the period that covers Strydom's tenure, OMFI's return after costs on a lump sum investment was 10,9%/year compared with the Financial & Industrial index's 8,6%/year including income from dividends.
OMFI's returns relative to the index's have reflected a gradual rather than spectacular out-performance over time. This is not surprising as OMFI's equity content reflects closely that of the Financial & Industrial top 30 share index (Findi).
OMFI's portfolio contains 36 shares, of which 21 are in the Findi and comprise 83% of OMFI's equity exposure. And, in keeping with the general trend in the unit trust industry, OMFI's equity exposure reflects an increasing exposure to a small number of big cap shares.
In September 2000, for example, OMFI's top 10 shares comprised 46% of its share exposure. The top 10 now account for 56% of OMFI's shareholdings, of which eight (49% of the fund) are in the Findi's top 10.
OMFI's performance fate in the short to medium term will thus be very much a function of the behaviour of a small number of shares in the Findi. These shares in turn depend primarily on institutional buying support, which is determined largely by prevailing market sentiment.
Right now that sentiment appears vulnerable despite the beating of many bullish asset management drums, including one by Old Mutual Asset Manager's executive director Peter Linley.
Though OMFI can be relied on to produce consistent relative returns these could well be in tandem with a further slide in the Financial & Industrial index.
03August2001
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