Unit trusts reach record mark of R2 trillion

Assets managed by the Collective Investment Schemes (CIS) announced that it had reached a record R2 trillion. That is double its total assets of R1 trillion from 2012, at the end of September 2016.

Sunette Mulder, senior policy adviser at the Association for Savings and Investment South Africa (ASISA), describes this as a considerable achievement given that it took the industry more than 40 years to reach the R1 trillion mark.

“The country’s first unit trust portfolio was launched in June 1965 with assets under management of R600 000,” added Mulder.

Despite a turbulent investment environment, Mulder, in assessing the the CIS industry statistics for the quarter and year ending September 2016, noted some of the highest quarterly net inflows in the last three years.

“Strong net inflows of R60 billion in the third quarter of this year pushed annual net inflows to a healthy R145 billion, indicating that investors are not too unsettled by recent political and economic events,” Mulder stated.

This, in direct contrast to the experience in the US, as well as the UK and France, where negative investor sentiment has resulted in net outflows, ASISA reported.

Mulder further highlighted, however, that the majority of investors and their advisers continue to place their faith in South African Multi Asset portfolios, which has contributed R66 billion towards  annual net inflows.  

“This is not surprising since Multi Asset portfolios were designed to offer investors a single diversified portfolio aimed at absorbing the highs and the lows of the markets,” Mulder explained.

The rise in popularity of Multi Asset portfolios have since resulted in a noteworthy shift in the asset composition of local portfolios recently.

“At the end of September 2011, SA Multi Asset portfolios held 29% of assets, Interest Bearing portfolios 47%, Equity portfolios 21%, and Real Estate 3%. Five years later, at the end of September 2016, SA Multi Asset portfolios held 51% of assets, Interest Bearing portfolios 24%, Equity portfolios 21%, and Real Estate 4%,” noted ASISA.

Reportedly by the end of third quarter, the South African investors had a choice of 1 461 portfolios, an increase of 57 from the end of June 2016.

Mulder says that 32% of the inflows into the CIS industry in the 12 months ending September 2016 came directly from investors. This does not mean, however, that these investors acted without advice. A number of direct investors pay for advice and then make their choice of portfolio, she explains.

Intermediaries contributed 22% of new inflows. Linked investment services providers (Lisps) generated 21% of sales and institutional investors like pension and provident funds contributed 25%.

“Foreign currency unit trust portfolios are denominated in currencies such as the dollar, pound, euro and yen and are offered by foreign unit trust companies. These portfolios can only be actively marketed to South African investors if they are registered with the Financial Services Board. Local investors wanting to invest in these portfolios must comply with Reserve Bank regulations and will be using their foreign capital allowance,” ASISA remarked.

There are currently 398 foreign currency denominated portfolios on sale in South Africa.

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