Right of Reply: Lies, damned lies and statistics – A nuanced response to Magnus Heystek

Key topics:

• Offshore vs SA equity returns need fairer comparison

• Global funds outperformed SA over 10 years, but not by much

• SA equities beat global markets over the past 5 years

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By Bernard Ross

The phrase that first came to mind when reading this article, published by BizNews several weeks ago, was the old adage: “There are three kinds of lies: lies, damned lies, and statistics.” Often attributed to Mark Twain, the phrase captures the persuasive power of statistics to bolster arguments, even when the evidence may not fully hold up under scrutiny.

Mr Heystek’s article sets out to argue the benefits of taking your money offshore and investing in global equities - a position I broadly support. However, the particular evidence he chose to support this view is, at best, misleading.

A Closer Look at the Comparisons

At first glance, the article seems to present a straightforward comparison between South African equity returns and global equity returns. But a deeper look reveals some flaws.

The returns quoted are consistent with the 10-year period ending 30 June 2025. Yet, the numbers themselves don’t add up. For example, R1 million invested in the Old Mutual Global Equity Fund 10 years ago at 14.9% growth would now be worth R4.0 million - not R3.2 million as claimed.

This fund currently ranks 6th out of 85 funds over 10 years, according to Citywire. The top five are all offshore funds accessible to South Africans.

By contrast, the Old Mutual Investors Fund used as the SA equity local comparator, ranks 125th out of 142 South African equity funds over the same period.

In short, the article compares one of the best-performing global equity funds with one of the worst-performing South African equity funds, leading to a conclusion that greatly exaggerates the superiority of global equities over the last 10 years.

A More Balanced Picture

To create a more comprehensive view, I’ve compared best-in-class South African equity funds such as Fairtree SA Equity, Prescient, and Ninety-One Value alongside the averages in each category:

Over 10 years, the average global equity fund would have grown R1 million to about R3.1 million, compared to R2.1 million in the average SA equity fund. That’s a meaningful difference - but far less than implied by Mr Heystek’s selective comparison.

In addition, his analysis ignores the forex costs of converting rands into pounds or dollars.

What happens if we zoom into the more recent 5-year period ending 30 June 2025? Here, the picture shifts:

The average global equity fund delivered 12.2% annual growth.

The average SA equity fund delivered 15.1% annual growth.

Over the last 5 years, South African equities have outperformed global equities.

Practical Implications

It’s for reasons like this that I’m cautious about blanket recommendations. Mr Heystek suggests South Africans should prioritise using their annual R1 million offshore allowance as their foremost investment strategy. While there are good reasons for making use of your R1m investment allowance, I do not believe it is the most important investment that most South Africans should make

Conclusion

I am a strong advocate for investing globally, and I fully support making use of South Africa’s annual offshore investment allowance where appropriate. But the case is far more nuanced than Mr Heystek’s article implies.

A fairer reading of the last 5- and 10-year data shows:

-        Investments in global equities have indeed outperformed investments in SA (local) equities over the last 10 years, though not nearly as dramatically as presented by Mr Heystek.

-        South African equities have, at times, outperformed global markets - including over the last five years.

-        Investors should consider both local and global equities as part of an investment strategy that meets their needs, rather than being swayed by selective comparisons.

Numbers don’t lie, but they can be used selectively to support a given agenda. Smart investors read between the lines.