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Unit trust assets reach record R2 trillion

Personal Finance

Assets managed by the South African unit trust industry reached a record R2 trillion at the end of September. This is double the assets that were under management just over four years ago, according to statistics released this week by the Association for Savings and Investment South Africa (Asisa).

Sunette Mulder, the senior policy adviser at Asisa, says this is a considerable achievement given that it took more than 40 years for assets under management to reach R1 trillion, at the end of the first quarter of 2012.

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

Mulder says local portfolios attracted the highest quarterly net inflows in three years, despite a turbulent investment environment.

“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 says. This is in direct contrast to the experience in the United States, the United Kingdom and France, where negative investor sentiment has resulted in net outflows.

Most investors and their financial advisers continue to place their faith in funds in the South African multi-asset sub-category, which contributed R66 billion towards the annual net inflows to the end of September.

Multi-asset, or balanced, funds can invest in equities, bonds, cash and listed property, to absorb the highs and lows of each asset class.

Mulder says the rise in popularity of multi-asset funds has resulted in a significant shift in the asset composition of local portfolios over the past five years.

At the end of September 2011, multi-asset portfolios held 29 percent of assets, interest-bearing portfolios 47 percent, equity portfolios 21 percent, and listed property three percent. Five years later, at the end of September 2016, multi-asset portfolios held 51 percent of assets, interest-bearing portfolios 24 percent, equity portfolios 21 percent, and listed property four percent.

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

Mulder says that 32 percent of the inflows in the 12 months to the end of September 2016 came directly from investors. This does not mean, however, that these investors acted without receiving financial advice. A number of direct investors pay for advice and then choose their portfolios, she says.

Intermediaries contributed 22 percent of new inflows. Linked-investment services providers generated 21 percent of sales, and institutional investors such as pension and provident funds contributed 25 percent.

Locally registered foreign portfolios grew their assets under management to R360 billion at the end of September 2016, from R348 billion at the end of June 2016. These foreign portfolios recorded net inflows of R11.8 billion in the third quarter of this year.

Foreign unit trust portfolios are denominated in currencies such as the US dollar, British pound, euro and yen. These portfolios may be marketed to South African investors only if they are registered with the Financial Services Board.

There are 398 foreign-currency-denominated portfolios available in South Africa.

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