The Association for Savings and Investment SA said domestic Collective Investment Schemes (CIS) investors have taken a cautious approach. Freepik
JOHANNESBURG - The Association for Savings and Investment South Africa (Asisa) yesterday said domestic Collective Investment Schemes (CIS) investors have taken a cautious approach and invested their money on interest bearing portfolios over equities.

The CIS industry, which had assets under management of R2.4trillion by the end of June, saw South African interest bearing portfolios attract the bulk of the net annual inflows at R59billion, followed by money market portfolios at R43.8bn.

The industry saw total net inflows for the year to the end of June ofR143bn.

Sunette Mulder, senior policy adviser at Asisa, said statistics also show that investors had lost their appetite for general equities over the past year and as a result SA Equity - General recorded net annual outflows of R3.4bn.

“The statistics tell us that investors continue to favour the perceived safety of interest bearing portfolios, which is not surprising, given the market volatility and political uncertainty over the past year,” Mulder said.

“While interest bearing portfolios (including money market portfolios) on average delivered the best performances over the one and five year periods to the end of June 2019, over the 10 and 20 year periods SA General Equity and SA Multi Asset - High Equity still significantly outperformed interest bearing portfolios.”

Equities are regarded as risky assets due to the erratic swings in share prices that occur in financial markets, sometimes driven by fundamental factors, and sometimes by fleeting sentiment or speculation. The JSE last year had the worst year since the financial crisis. However, the local bourse began this year on the front foot, with the all share index having gained 7.1percent in the first three months of 2019, the best performance since the first quarter of 2007. A combination of financial woes of embattled state-owned entities, particularly Eskom and the never ending trade war between the US and China have since weighed on the JSE.

Dave Mohr and Izak Odendaal from Old Mutual Wealth in a note to clients said that high rates are just one of the reasons why local equities have struggled.

“Both short and long-term fixed income yields stand out like a sore thumb in the international context and offer very attractive real returns. However, the risk remains that in viewing the poor performance of the JSE as a South Africa-specific story, investors become so mired in pessimism that they assume it can never recover,” Mohr and Odendaal said.

“Domestic shares already price in a very gloomy medium-term outlook for the South African economy and can positively surprise on any evidence of a slightly improved outlook and a rebound on global equity markets.”