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Healthy inflows into unit trusts and ETFs

Personal Finance

The local collective investment scheme industry attracted healthy net inflows of R30.4 billion in the first quarter of this year, pushing year-on-year net inflows to the end of March to R157.1bn, the highest for this period in three years, according to industry statistics released this week by the Association for Savings & Investment SA (Asisa).

The statistics show that investors in unit trusts and exchange traded funds (ETFs) continued to favour South African multi-asset funds, which attracted R56bn of the year-on-year inflows.

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Multi-asset portfolios are popular with investors and financial advisers, because they offer diversification within a single portfolio managed by an experienced manager, with the aim of smoothing out the highs and lows of the markets.

Sunette Mulder, the senior policy adviser at Asisa, says a surprisingly high proportion of the annual net inflows to the end of the first quarter went into South African money market funds (R45bn) and interest-bearing funds (R23bn).

“The high inflows into the interest-bearing sector were somewhat unusual. This is the first time in three years that these portfolios have seen positive inflows,” Mulder says.

A large portion of this money (R19.5bn of the R23bn) went into interest-bearing short-term funds.

The South African interest-bearing short-term sector was the best-performing sector in the year to the end of March, delivering an average return of 8.4%, followed by money market funds, with 7.5%.

Mulder points out, however, that over five, 10 and 20 years, the South African multi-asset high equity sector has consistently outperformed other major sectors. These portfolios, on average, outperformed South African equity general portfolios or delivered the same returns, while offering investors the added benefit of a more diversified risk profile.

Over five years, they returned 10.2% a year on average (South African equity general: 10.1%); over 10 years, the two sectors each returned 8.2% a year; and over 20 years South African multi-asset high-equity funds returned 13.2% a year (South African equity general: 12.7%). Average inflation for the 20-year period was 5.8%.

The collective investment industry managed assets of R2.07 trillion at the end of the first quarter. South African multi-asset portfolios held 51% of these assets, South African interest-bearing portfolios 25%, South African equity portfolios 20%, and South African real estate 4%.

Mulder says that 31% of the inflows in the 12 months to the end of March 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 choose funds.

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