Preference for multi-asset (balanced) portfolios seems to be unique to South African investors in collective investment schemes, because foreign investors tend to opt for pure equity portfolios, Leon Campher, the chief executive of the Association for Savings & Investment SA (Asisa), says.
When South African and global collective investment scheme statistics are compared, it is clear that South African investors have a different risk appetite to their international counterparts, Campher says.
Internationally, pure equity portfolios hold 42 percent of collective investment scheme assets, followed by bond portfolios, which hold 22 percent, multi-asset portfolios, with 14 percent, and money market portfolios, with 13 percent.
In South Africa, multi-asset portfolios hold 51 percent of assets, equity portfolios, including listed property, hold 25 percent, money market portfolios hold 16 percent and bond portfolios hold eight percent.
Multi-asset funds enable investors to invest across all the major asset classes (shares, bonds, listed property and cash), and the asset allocation decisions are made by a professional fund manager.
Campher says although most South African investors are wary of equities, portfolios with some equity exposure have, on average, produced annual returns of nine percent or more (net of fees) over five, 10 and 20 years to the end of December 2015.
“This proves that it is time in the market that delivers solid returns over the long term and not timing the market. The only way to beat volatility is with an appropriately diversified portfolio, provided you give it a chance over the longer term to help you achieve your investment goals,” he says.
Campher says multi-asset portfolios have become the investment vehicle of choice for investors and their financial advisers over the past five years.
“At the end of December 2010, almost half of all assets under management were held in South African interest-bearing portfolios. We now have 51 percent of assets invested in multi-asset portfolios.”
Campher says a possible reason for the move to multi-asset portfolios is the realisation by financial advisers that they should leave asset allocation decisions to professional asset managers.
In 2015, investors committed R58 billion to South African multi-asset portfolios, with the income sub-category proving the most popular (R17.5 billion), followed by the conservative low-equity sub-category (R16.9 billion).
The amount of money managed by South African collective investment schemes has doubled over the past five years – currently, savings to the value of R1.888 trillion are managed by 1 327 schemes, the Asisa says.
Collective investment schemes recorded a net inflow of R101 billion in 2015, of which R18.85 billion was invested in the last three months of the year.
Foreign portfolios that are registered with the Financial Services Board to accept investments from South Africans had R364 billion in assets under management at the end of December 2015, compared with R283 billion at the end of December 2014.
Foreign portfolios recorded net inflows of R2.4 billion over the 12 months to the end of 2015.