Unit Trusts Funds outpaces ZSE, all share index, inflation

The latest edition of the GroWealth Unit Trusts Performance Survey shows that most Unit Trust Funds outpaced the Zimbabwe Stock Exchange (ZSE) All Share index and inflation in the first quarter ended 31 March 2021.

This is a positive outcome for Unit Trust investors as they enjoyed positive real returns above inflation, which was on a downward trend during the period under review, thanks to the stability on the exchange rate.

The performance was driven by a bullish trend on the ZSE, which was up 70,27 percent for the first three months of the year. Fund managers who had superior stock-picking ability surpassed this average growth on the ZSE.

To reflect the impact of the ZSE performance, the survey shows that the returns from Unit Trust funds that invest in listed equities grew between 65 percent and 104,71 percent during the quarter under review while for balanced funds, which can invest in both listed equities and fixed income securities, the returns ranged between 49,91 percent and 90,15 percent in the comparable period.

On the other hand, the money market funds offered yields ranging between 3 percent and 46 percent, which remain below inflation. However, should inflation continue on a downward trend, it is possible that fixed income funds may also start offering positive real returns in due course.

Even on a monthly basis, most equity funds outperformed inflation and the ZSE performance in March, an indication of good stock selection by Fund Managers. On average the equities funds recorded a positive performance of 13,73 percent in March 2021 against the ZSE All Share index performance of 8,05 percent and inflation at 2,26 percent in the month.

To give investors choices in the multi-currency environment, some Fund Managers have recently started foreign currency denominated (USD) unit trust funds to cater for those investors with hard currency or nostro balances. This widens the available options in the market.

Since the launch of the GroWealth publication in November 2020, interest from different stakeholders has been growing, reflecting the impact the publication is having on the investing public. In addition, Fund Managers have been receiving enquiries from the investing public keen on investing in Unit Trust funds, most of them as first time investors, according to Farai Gwaka, Chairman of the Association of Investment Managers of Zimbabwe (AIMZ).

The Survey provides basic information and returns data on all unit trust funds offered by various licensed investment managers in Zimbabwe. The unit trusts are also licensed by the Securities and Exchange Commission of Zimbabwe (SECZ), which gives investors comfort owing to the level of regulator surveillance and protection.

The fundamental goal of the GroWealth Unit Trust Survey, which is summarised in the Monthly Report, is to keep members abreast of the performance of different unit trust products. Investors can follow how each of the Unit Trust Funds is performing from time to time by examining these monthly reports. For those investors who are already invested in one, or more unit trusts, they would have been receiving regular performance reports from their respective fund managers. The GroWealth Report shows the performances of all the active funds across different time intervals and this gives investors the required perspective on the medium to long term investment performances of the various funds. This is the key element to decision-making for any investor.

The frequency of publication of the GroWealth Report is intended to increase to more than once a month in the medium term, and that should enhance the information flow and provide for better performance tracking to the benefit of the investing public.

Unit trusts are investment schemes that pool funds from different investors and invest according to pre-defined objectives set out in the Prospectus of the Fund (available upon request). The underlying investments can be in fixed income instruments, listed equities, property or other alternative investments.

Before making any investment into vehicles such as Unit Trusts, an investor must be clear as to their investment objectives. These objectives are determined by answering the following questions:

How much do I want to invest?

For how long do I want to invest?

What is my target return over that investment period?

Investor must be aware of their own risk profile as this determines which unit trust funds are suitable for them. The investor can then examine the track record of the various funds and use that as a guide to select their preferred one. Fund Managers from the different firms offering unit trusts funds can readily assist any investor identify the most suitable investment by asking them relevant questions relating to their objectives and risk profile.

This article was written as part of the Securities and Exchange Commission of Zimbabwe’s Investor Education Campaign in partnership with the Investor Protection Fund. -ebuisnessweekly.co.zw